Mexico reverses foreign investment flows

Published February 26, 2013

The ''Lolair'' drilling platform from state oil monopoly Petroleos Mexicanos (PEMEX) is seen off the port of Veracruz, Mexico. —Photo (File) Reuters
The ''Lolair'' drilling platform from state oil monopoly Petroleos Mexicanos (PEMEX) is seen off the port of Veracruz, Mexico. —Photo (File) Reuters

MEXICO CITY: After decades of depending on inflows of foreign capital to develop its economy, Mexico turned a corner and become a net exporter of direct investment capital in 2012, according to a report released on Monday.

Mexico's central bank said that Mexican corporations invested about $25.6 billion last year in buying up foreign plants and companies, more than twice the $12.6 foreigners invested directly in Mexican firms. An official confirmed that was the first time in recent memory that outflows exceeded inflows.

For a country that still has one foot planted firmly in the developing world, that news worried some analysts and delighted others.

''Mexico is in no position to become a net exporter of capital,'' said economist Ernesto Piedras of the Mexico City-based Competitive Intelligence Unit. ''Financing capital is a scarce resource in Mexico.''

''Mexico is still a country with a strong need for capital, for investment in highways, dams, in telecommunications networks,'' said Piedras. ''It's regrettable that we have more money going out than coming in.''

The turnaround was in part due to a steep drop in foreign investment in Mexico, from $21.5 billion in 2011 to $12.6 billion, accentuated by the decision by a Spanish bank to sell off about $4.1 billion in shares in its Mexican operations.

But the numbers also show that Mexican firms more than doubled the amount they invested in buying assets abroad, up from $12.1 billion in 2011.

Mexican magnate Carlos Slim. —Photo (File) AP
Mexican magnate Carlos Slim. —Photo (File) AP

Part of the increase was due to big purchases of European telecom and foreign oil assets by Mexican magnate Carlos Slim, considered the world's richest man.

In 2012, Slim's companies announced deals to purchase an 8.4 per cent stake in Argentina's state-controlled oil and gas producer, YPF S.A., about a quarter of Austrian phone carrier Telekom Austria AG, and a $3.4 billion deal for a 28 per cent stake in Dutch carrier Royal KPN NV.

That kind of off-shore investment is no cause for mourning, said Mexico City economist Ramiro Tovar.

''These big companies ... shouldn't be satanized for taking capital abroad. This should be seen as a sign of the growth of Mexican companies,'' said Tovar. ''This is a positive sign.''

''Mexico, like any other country, has a right to have multinationals,'' Tovar said, noting that if the trend continues, Mexico could start getting more income from dividend, profit and royalty payments from abroad as a result of the investments.

Few, however, think the trend will become permanent. The foreign buying spree by Mexican magnates is unlikely to keep up at this pace, and foreigners, who are currently favoring portfolio investments in Mexican stocks and bonds, may return to sending more direct investment into Mexican factories and building projects.

That would be for the better, Piedras says.

''Just look around at the infrastructure we have, the quality of services and (telecom) coverage we have,'' he said. ''We are in no position to share excess capital with the rest of the world, because we don't have it.''

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Police Lines bombing
Updated 31 Jan, 2023

Police Lines bombing

Where the menace of terrorism is concerned, the government and opposition need to close ranks and put up a united front.
Oil price hike
31 Jan, 2023

Oil price hike

THE record single-day increase in petrol prices, preceded by massive currency depreciation, signifies the ...
Babar Azam’s award
31 Jan, 2023

Babar Azam’s award

BABAR Azam might not have lifted many trophies as Pakistan’s all-format captain in the last year but the star...
Blatant Islamophobia
Updated 30 Jan, 2023

Blatant Islamophobia

Muslim extremists and terrorist outfits are emboldened by hateful acts.
Modern slavery
30 Jan, 2023

Modern slavery

MODERN slavery is a wide-ranging term that can encompass a multitude of scenarios. Common to all of them, however, ...
Remarkable Sania
30 Jan, 2023

Remarkable Sania

BRINGING to a close a career in which she smashed stereotypes, Sania Mirza delivered almost the perfect ending in ...