According to the Organization for Economic Cooperation and Development (OECD), Mexico ranks number nine among the top ten places in attracting foreign direct investment within (FDI) of OECD countries. In the first semester of 2023, the country received 29.041 million dollars of FDI, an increase of 41% (compared to the same period of the previous year). On the other hand, greenfield FDI projects in Latin America grew 13% in 2022, while capital spending also grew 50%, and job creation as a result of these projects increased 29% compared to 2021.
The results of nearshoring have made evident the growth of the manufacturing industry in Mexico in terms of increases in production, hiring of personnel, exports and investment in new technologies and production processes.
Nearshoring, beyond manufacturing
However, nearshoring has also benefited economic activities that do not directly depend on manufacturing, especially in sectors such as professional and financial services (digital transformation), transportation and logistics, hospitality, consumer retail, health, and real estate.
EY analysis indicates that the professional and financial services industry is thriving in Mexico. Investment in this sector grew 1.0% from 2015 to 2019 and the growth expectation from 2022 to 2028 is 7.4%, while China experiences a slowdown and India maintains a steady pace.
Jorge Lacayo, EY-Parthenon ‘s Lead Strategy Partner in Latin America, commented that the arrival of foreign investment in Mexico is boosting other industries due to urban growth, increased disposable income, domestic travel and economic proximity.
“For example, large hotel chains are now seeking to invest in industrial areas of Mexico and not in beach destinations; on the other hand, the health sector grows at an annual rate of 7%, driven by a growing demand for private services and the growth of out-of-pocket spending”.
Tax incentives, attractive point for nearshoring
In fiscal matters, Mexico is also attractive, not only because of the various Free Trade Agreements , but also because of the treaties to avoid double taxation, where Mexico has more than 60 agreements in general. In addition, various tax incentives have been announced, such as those related to those economic activities carried out in the Interoceanic Corridor of the Isthmus of Tehuantepec, with incentives in terms of ISR, VAT and deductions, as well as local taxes in Veracruz and Oaxaca.
“Adequate tax management is key for investors who want to enter Mexico, who must identify the advantages of tax incentives by zones or states, design a correct soft-landing strategy, including a compliance analysis in terms of transfer pricing and an efficient and long-term tax management that also contemplates the labor aspect”, concluded Óscar Ortiz, deputy lead partner of Taxes at EY Latin America.
Source: https://bitly.ws/TCN2
