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Mexico is the third-largest host country for U.S. direct
investment in global processed-food and beverage industries,
and it also has attracted foreign
direct investment (FDI) in production agriculture. Many of these investments
were initiated following implementation of the North
American Free Trade Agreement (NAFTA) in 1994. The agreement contains many provisions designed to facilitate
foreign investment, including equal treatment of foreign and domestic investors
and prohibition of certain performance standards—such as a minimum amount
of domestic content in production—for foreign investments. However, Mexico
really began to open up to foreign investment in the 1980s, when the country
first relaxed and then eliminated rules limiting foreign ownership of Mexican
businesses to a 49-percent share.
U.S. and Mexican government data provide different pictures of the size of
U.S. direct investment in Mexico's processed-food and beverage industries.
According to the U.S. Department of Commerce, the stock of these investments
equaled $8.2 billion in 2004—twice its 1996 level and 20 times its 1984 level
(in nominal terms). U.S. authorities do not report similar statistics for production
agriculture, mainly to protect the confidentiality of individual companies,
but the stock of U.S. direct investment in Mexican crop and livestock production
may run in the hundreds of millions of dollars.
Data from Mexico's Secretariat of the Economy describe the net inflow
of FDI from all countries into the Mexican food, beverage, and tobacco industries.
During the first 11 years of NAFTA (1994-2004), these industries received net
inflows of FDI in excess of $13 billion. Annual net inflows exceeded $1 billion
in 1994, 1997, 2001, 2002, and 2004. Production agriculture in Mexico received
net inflows of FDI totaling $268 million from 1994 to 2004. These figures do
not account for depreciation, exchange rate fluctuations, or income generated
from existing investments.
Mexican statistics for 1999-2004 also provide insights into the composition
of these investments. The soft-drink, cigarette-manufacturing, brewing, and
dairy-product subsectors received the largest net inflows of FDI. Investments
in excess of $100 million were also made in mixed feeds for livestock, fruit
and vegetable processing, chewing gum, tequila, candy manufacturing, and
corn milling. During this period, the United States accounted for 49 percent
of net inflows of FDI in Mexico's food, beverage, and tobacco industries,
while the European Union was responsible for 33 percent.
Author: Chris Bolling
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