During the past two decades, foreign direct investment (FDI) in Mexico has largely been dominated by the United States, with China slowly increasing its presence, resulting in tensions amid the U.S.-China trade conflict. U.S. investments have consistently exceeded $6 billion annually, peaking at over $22 billion. Meanwhile, China's investments, previously minimal, reached $570 million on occasion, indicating significant growth.
The implementation of the United States-Mexico-Canada Agreement (USMCA) has fortified American investment. Simultaneously, the trade war between the U.S. and China has prompted Chinese companies to establish operations in Mexico as part of "nearshoring" strategies, aiming to position themselves nearer to the U.S. market to avoid tariffs.
Analyzing the statistics, U.S. investment from 2000 fluctuated between $7.5 billion and $22.1 billion annually, with significant volumes sustained even during downturns attributed to the productive integration provided by the North American Free Trade Agreement (NAFTA), which was updated as T-MEC. For the first three quarters of 2024, Mexico attracted $14.4 billion from the U.S., accounting for 40% of the total foreign investment.
On the other hand, the trend for Chinese investment tells its own story. Starting from just $10.3 million at the turn of the century, this figure surged drastically, highlighted by an important jump of 336% from $10.7 million to $47 million between 2010 and 2011. By 2022, Chinese investments reached $570 million, but saw almost 72% decline the following year. Notably, 2024 has shown signs of resurgence, with Chinese investments rebounding nearly 200% to $477 million due to the nearshoring phenomenon.
Recent insights from CBRE Group, Inc. indicate tremendous growth within Mexico’s industrial real estate due to increased nearshoring activities, clocking over 2 million square meters of demand as of 2024. The automotive sector remains pivotal, constituting 39% of total nearshoring demand. Alongside, the overall absorption of industrial real estate grew by 5% from the prior year, underscoring the buoyancy of the sector amid changing geopolitical landscapes.
Mexico has also significantly enhanced its position as the primary source of automotive parts and vehicles, with over 4 million light vehicles produced and 3.5 million exported to the U.S. last year. This highlights Mexico's capacity to meet the growing demands of the American market, evidenced by 43% of all auto-part imports to the U.S. coming from Mexico.
Looking toward the future, the consolidation of supply chain relocations could bolster Chinese investment even more—assuming political stability and favorable relations between the U.S. and China. Analysts suggest U.S. FDI will play a central role, particularly in advanced manufacturing, energy, and telecommunications sectors, should diplomatic relations remain favorable.
Nevertheless, uncertainties loom, particularly with the potential return of Donald Trump, who may bring aggressive trade policies impacting overall perceptions of Mexico as a destination for foreign investment. The negotiation of T-MEC's review slated for 2026 also stands to affect bilateral investments, cementing the importance of nuanced diplomatic relations.
By examining these trends over the past two decades, it reveals how the intertwining of U.S. and Chinese investments fosters complexity within Mexico's growing economy. The dynamic interplay of these factors shapes not only the investment perspectives but also influences broader economic health and stability in Mexico as it continuously adapts to the changing winds of global commerce.