Nearshore Americas
AMLO government

Global Companies Operating in Mexico are Reducing Investment: Here’s Why

2019 wasn’t great for the Mexican economy. The GDP stagnated, the country become far more inward-looking than anytime in recent history, and violence reached an historic peak. In that context, international companies operating in Mexico also hesitated to make investments locally, which they attribute to the uncertainty caused by the rhetoric of President Andrés Manuel López Obrador’s (AMLO) government.

Claudia Jañez
Claudia Jañez, President of the Executive Council of Global Companies (CEEG) in Mexico.

Claudia Jáñez, President of the Executive Council of Global Companies (CEEG) in Mexico, spoke to Nearshore Americas about this issue, emphasizing that in 2020 business leaders have decided to be proactive in demanding certainty in the government’s discourse and in its actions.

“We are requesting an irrevocable compromise with the rule of law because it is imperative to create an environment of certainty and trust. We also need stability in the rules and complete respect to previously established contracts and future public tenders,” Jáñez said.

The companies grouped in the CEEG complain about the government’s decision to completely stop public tenders and sharply reduce other public expenditures in an attempt to fight against corruption. Business leaders argue that this is hurting Mexico’s economy. This week, the IMF reduced Mexico’s GPD growth projection to 1%, which is concerning after a year of economic stagnation.

The government’s decision to raise the minimum wage also seemed to have had a negative impact, with the country reporting the loss of as many as 382,210 jobs in December last year alone.

Furthermore, last week’s leakage of a draft of a criminal justice reform sparked alerts because of possible reductions of autonomy for the judiciary. The outsourcing reform approved last year -despite being considered necessary by the CEEG- is also causing uncertainty, since its implementation can lead to criminalizing labor outsourcing under a wide range of circumstances.

But beyond these issues, Jáñez points out that the main concern of the private sector continues to be violence and security, which increase operating costs by as much as 30%.

Conversations With the Government

Jáñez confirmed with Nearshore Americas that AMLO’s office has already reached out to them to discuss the issues that they have publicly denounced. A meeting should be occurring in the next few days. “We expect the government will reactivate public expenditures and tenders while fighting against corruption at the same time. We need to land rapidly and clearly on executive public policies to implement the new USMCA treaty, once it is approved by Canada,” she said.

Last year, Nearshore players had different opinions on whether the uncertain AMLO era would damage the industry. A decision that had a direct impact on investment attraction was shutting down the ProMexico platform, which eliminated hundreds of overseas positions where government representatives had been tasked with facilitating FDI.

The Trust in Mexico Remains

Despite the problems, Jáñez and the group of businesses she represents say that they continue to believe that Mexico has all the right elements to succeed as an investment destination. “We have over 40 free trade agreements and a young motivated workforce. The trust in the country, for global companies, is there. We just need to adjust and improve the coordination between the three levels of government, private initiative, and civil society,” Jáñez said.

The CEEG groups 52 international companies with operations in Mexico, and it was founded in 2004. All of them are public companies listed in the stock market in the Americas, Asia or Europe, and for most of them, Mexico is the second or third most important market worldwide.

Diego Pérez-Damasco

Diego Pérez-Damasco is a writer and managing editor at Nearshore Americas. He has more than six years of experience covering politics and business in Latin America. He has been published in media outlets throughout the Americas and holds an MA in International Journalism from the University of Sussex, United Kingdom. Diego is based in Costa Rica.

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