Since the first month of his presidential term, Andrés Manuel López Obrador has regularly received bad, and sometimes very bad, economic news on his desk. Especially during the past year, as a result of the effects that the pandemic brought with it. It is therefore understandable, fully understandable, that any news about the national economy that seems to be something good is immediately presumed in that show called the morning.
This happened several days ago when the Ministry of Economy, out of ignorance, in an effort to look good with the boss or for both reasons, announced with great fanfare that Foreign Direct Investment (FDI) received in the first quarter of 2021 was, according to it, 14% higher than that of the same period of 2020 and the highest received in a quarter since 1999. Nothing, unfortunately, could be further from the truth.
FDI, contrary to foreign portfolio investment (highly speculative), is originally registered with the Ministry of Economy, once a company with foreign capital, already established or to be established in Mexico, “notifies” it of the amounts of the investments you will make. These amounts do not necessarily have to be funds that will enter from abroad for new investments, but can be, which is more common, reinvestments of profits or accounts between companies that belong to the same corporate group.
Soup falls from the plate to the mouth, the saying goes, and this happens frequently in the registry made by the Secretariat of these “notifications”, so that in the course of the weeks the preliminary figures may move away from the actual ones. For the official accounts as a whole, this is not really a problem, since it is the Bank of Mexico that is legally in charge of the precise accounting of investment flows that enter and leave the country; in particular, how much cash actually sounds due to foreign investment.
The central bank publishes these figures as a part of the so-called balance of payments, which contains the record of all commercial operations and capital movements that occur, each quarter, between Mexico and the rest of the world.
Well, the balance of payments for the first quarter of 2021 is already public and it turns out that, instead of throwing the bells, we must worry about what is happening in terms of FDI.
According to the figures of the Bank of Mexico, in the first quarter of 2021 there was a Direct Foreign Investment of the order of 11,864 million dollars. This compares very unfavorably with the 16,751 million that were had in the first quarter of 2020. And also with the 14,508 million received in the first quarter of 2019. And so on with other years ago. In fact, the amount of the last quarter is even lower, in real terms, than it was in 2013.
As one can imagine, both private investment, whether national or foreign, as well as public investment are key determinants of the economic growth of any country. We are wrong, very wrong when today the sum of private and public investment in Mexico is similar, in terms of gross domestic product, to that of a quarter of a century ago (1996).
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