The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including openness to investment, legal and regulatory systems, protection of real and intellectual property rights, financial sector, State-owned enterprises, responsible business conduct, and corruption.

Executive Summary

In 2021, Mexico was the United States’ second largest trading partner in goods and services. It remains one of our most important investment partners. Bilateral trade grew 624.7 percent from 1993-2021, and Mexico is the United States’ second largest export market. The United States is Mexico’s top source of foreign direct investment (FDI) with USD 110.7 billion (2021 total per the U.S. Bureau of Economic Analysis), or 46.6 percent of all inflows (stock) to Mexico, according to Mexico’s Secretariat of Economy.

The Mexican economy averaged 2.1 percent GDP growth from 1994-2021, but contracted 8.2 percent in 2020. The economic downturn due to the world-wide COVID-19 pandemic was the major reason behind the contraction, with FDI decreasing 18.3 percent.  The austere fiscal policy in Mexico resulted in primary surplus of 0.1 percent in 2020. The government has upheld the central bank’s (Bank of Mexico) independence. Inflation reached 7.4 on December 2021, above the Bank of Mexico’s target of 3 percent ± 1 percent. The administration maintained its commitment to reducing bureaucratic spending in order to fund an ambitious social spending agenda and priority infrastructure projects, including the Dos Bocas Refinery and Maya Train.  President Lopez Obrador leaned on these initiatives as it devised a government response to the economic crisis caused by COVID-19.

Mexico approved the amended United States-Mexico-Canada Agreement (USMCA) protocol in December 2019, the United States in December 2019, and Canada in March 2020, providing a boost in confidence to investors hoping for continued and deepening regional economic integration.  The USMCA entered into force July 1, 2020. President Lopez Obrador has expressed optimism it will buoy the Mexican economy.

Still, investors report sudden regulatory changes and policy reversals, the shaky financial health of the state oil company Pemex, and a perceived weak fiscal response to the COVID-19 economic crisis have contributed to ongoing uncertainties. In the third quarter revisions, the three major rating agencies (Fitch, Moody’s, and Standard and Poor’s) set Mexico’s sovereign credit rate at  BBB-, Baa2, and BBB, respectively. For Pemex, credit risk rating agencies Fitch Ratings (BB-) and Moody’s (B1) have the company with a speculative grade, while Standard & Poor’s (BBB) still has it at investment grade. The Bank of Mexico revised down Mexico’s GDP growth expectations for 2022, from 2.4 to 2.2 percent on June 1. While the International Monetary Fund (IMF) adjusted upward its forecast to 2.4 percent from the previous 2 percent estimate in April.  Still, IMF cited higher-than-expected worldwide inflation, tighter financial conditions, a slowdown in China growth, and the ongoing Russian invasion of Ukraine as having potentially negative spillover effects on Mexico’s economy. It also warned of an increased probability of a worldwide recession. Moreover, uncertainty about contract enforcement, insecurity, informality, and corruption continue to hinder sustained Mexican economic growth. Recent efforts to reverse the 2014 energy reforms, including the March 2021 electricity reform law prioritizing generation from the state-owned electric utility CFE, further increase uncertainty.  These factors raise the cost of doing business in Mexico.For more information go to the 2022 Mexico Investment Climate Statement.