Capital investment flows to Mexico are anticipated neutral for this year, which means that the outputs observed between 2021 and 2023 will be interrupted, and there is no significant improvement, the economist for Latin America of the Institute of International Finance projects from the Institute of International Finance (IIF, for its acronym in English), Martín Castellano.
While considering that the context will remain uncertain and even hostile to attract portfolio investments to the markets of Latin America, in general, he warned that pragmatism with which the Mexican government is being conducted can improve the feeling of investors for Mexico.
By participating in a webinar organized by the Latin American Reserve Fund (FLAR, formerly Andean Reservations Fund), observed that its central scenario on possible US tariffs, is that they will apply as a temporary and non -generalized measure.
And “given the response of the Government of Mexico, which has not spoken of retaliation, or attempting against the commercial agreement, it can be foresee that an escalation or a greater conflict will not be presented.”
The expert stressed that in the region, Mexico and Argentina remain as the most attractive countries to receive direct foreign investment, so it suggested maintaining consistent and solid macro policies that guarantee the operation of a reliable institutional framework.
Although he clarified that they do not anticipate a significant improvement in the process of relocation of companies that seek to take advantage of Mexico’s closeness to the United States and the lowest transport and production cost that Nearshoring represents.
IIF information shows that between 2020 and 2021 consistent capital exits of Mexico were presented that reduced the position of foreign investors in Mexican titles.
By 2023 there was an entrance of 2,334 million dollars and in 2024 it was moderated until a $ 245 million entry into the debt market was registered.
This balance resulted from the divestment observed in six months of last year (January, February, April, July, October and November) and from the entry recorded the rest of the months that could not compensate for the new liquidation.
Geopolitical fragmentation Pause capital flows
The director of Macropinancieros Risk Analysis in Banco de México, Martín Tovar, who explained that with the pandemic ended the golden age of capital flows to emerging flows participated in the same seminar.
It is a decade and a half, from the mid -90s to the pandemic, where commercial integration resulted in greater global growth, lower inflationary pressure, low rates and an increase in global savings that was channeled towards emerging markets.
After the pandemic, with geopolitical and commercial fragmentation, the efficiency of disintermediation and discouraging savings available for emerging markets is being reduced.
And since volatility is becoming more frequent and large, the Old School’s textbook recommendation for emerging economies is Defense, to arm the volatility.
He added that before global fragmentation, it is also recommended that emerging evidence, for better differentiation, that they do not have geopolitical internal risks.
Tovar warned that their observations do not represent in any way the diagnosis of the Central Bank, or any position of its Government Board.
Moderate dynamism: IIF
According to the IIF expert, Mexico will be the economy with less growth in Latin America, with an expansion of just 0.8% in this year’s GDP.
This prognosis results from the impact that will have a lower dynamism in the United States as well as the slightest margin of maneuver that fiscal and monetary policies have to apply countercyclical strategies.
For the set of countries in the region, they foresee a growth of 2.1% that incorporates a recovery from 1.8% observed in 2024.
The strategist said that the great Achilles heel of the Latin American countries remains the fiscal position, which is a risk factor if the geopolitical fragmentation that will lead to greater inflationary pressure and a new hardening of financing conditions continue to progress.
