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A profile of inward and outward direct investment to/from Mexico - Essay Example

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Date Part A Overview of Mexico inward and outward FDI Mexico is a highly populated Latin American nation. It has an open trade regime due to the North American Free Trade Agreement (NAFTA). Foreign direct investment in Mexico is reported to have recorded a 21% increase in the year 2007…
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Download file to see previous pages FDI inflow within September 2007 for Mexico amounted to $18.4 billion; this was 30.3% higher in comparison to figures for the same time in the year 2006 ((2005, September 1). Latin America Telecom, pp. 12-19.). Half of the capital investment in the form of FDI was directed towards the manufacturing sector. The net impact of this implied an increased availability of remunerative jobs for the Mexican populace. Economic Analysts have considered 2008 to be an irregular year with the US economy suffering from multiple effects of recession in its mortgage and financial sectors (http://www.vcc.columbia.edu). It is important to note that, Mexico is highly dependent and interlinked with the US economy through various trade and financial relations. Mexico's expected foreign direct investment stands to a reduced amount of $20 billion for 2008. The FDI and ODI rankings of Mexico in the world are moderated but continue to grow (see below). FDI net flows(% of GDP) 3.02 2.46 1.81 1.95 1.68 FDI net outflows (% of GDP) 0.80 0.11 0.80 1.31 0.83 Part B 1. GDP variation in the last 10 years In the third quarter of 2012, the GDP of Mexico expanded by 45%. As reported by the relevant agency, GDP growth in Mexico has averaged at 7% from the year 1993-2012 with a record high of 2.9% in the year 1996. This is because Mexico has a free market economy, which contains both the modern and outdated industries highly dominated by the private sector. Competitions have though been expanded in the field of seaports, railroads, telecommunication, electricity generation, natural gas distributions and airports. Most of the Mexican trade as an export-oriented country is under free trade agreements; this is in fact over 90% with the agreements existing between Mexico and more than 40 other countries. As the second largest economy in the Latin America, their GDP has not varied much (UNCTAD 2012). 2. Inward direct investment to Mexico As shown from the data by the World Bank data, the inward direct investment in to Mexico has witnessed a systematic fluctuation for the last 10 years starting from January 2002 to January 2012. The figures from the FDI years are as follows; 3.69 in 2002 followed by 2.65, 3.27, 2.87, 2.1, 3.02, 2.46, 1.81, 1.95 and 1.68 in the year 2012 (http://www.economywatch.com/foreign-direct-investment/countries/mexico.html). The fluctuations may be attributed to the nature of the economy and the economies of the countries surrounding Mexico. In the year 2009 for example, the economic profile for Mexico took a turn for the worse given that the economy of the countries around was from a recession. Widespread disease in the form of a flu outbreak added to the failing economy in 2009. Policy stimulus packages by the government proved inadequate against the background of limited fiscal stimulus and monetary relaxation (unctadstat.unctad.org/TableViewer/tableView.aspx). From an all-time low rate of annual inflation of 3.3% in 2005, this rate has only recently displayed signs of reducing from 6.4% in 2008 to 5.4% (Source: World Bank 2012). These fluctuations are largely caused by the economy of Mexico’s close association with US business and trade through bilateral agreements ((2011, June 8). Defense & Aerospace Week, 1, 33-8.) The main countries undertaking FDI in Mexico are the USA and the European Union (MEXICO: FDI RISES IN MEXICO). This is partly because Mexico is a free market economy with close trade ties with US and Canada. The other reason is that ...Download file to see next pagesRead More
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