Global Value Chains, Foreign Trade and Foreign Direct Investment - Mexico Case Study

Lopez Patino Eduardo (2022) Global Value Chains, Foreign Trade and Foreign Direct Investment - Mexico Case Study. Külkereskedelmi Kar.

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Absztrakt (kivonat)

It is well-known that Mexico is an immense recipient country with a large amount of Foreign Direct Investment, its role in Global value Chains is fundamental for neighboring countries, hence, this country’s activities account for an important part of the revenue obtained from exports, with the finality of boosting the economy. Although, the fact that it is heavily dependent with its northern neighbor United States might result controversial. It is relevant to understand the importance of Mexico in the selected areas, and how they affect the economy. Also, to analyze those factors that might affect its economic activities, so as the possible threats and to identify the reasons throughout time that have helped developing the economy. The following research seeks to evaluate the development of Mexico in Global value chains, foreign trade and foreign direct investment, analyzing its evolution through time in order to identify the sectors that have contributed more to its progression, its importance to the economy and what kind of transformation has been present.The alliance that brought the North American Free Trade Agreement in 1994, resulted in a beneficial integration for all parties, due to the fact that trade liberalization spurred the economy and attracted FDI to Mexico. Moreover, there was creation of jobs and increment of exports in sectors such as agriculture and manufactures (Chatzky, McBride, & Aly Sergie, 2020). However, it is known that Mexico’s number one trade partner is its northern neighbor, with a share of almost 77.85% of the total exports (World Bank, 2020). This shows a high degree of exposure to possible rise on tariffs, as the previous president from USA threatened with. Hence, although it might not be easy and it would take time, identifying the opportunities that diversification would bring for this country may be a good option. The present research seeks to answer the following questions: 1. What does it mean for Mexican international trade and foreign investment to be heavily dependent on a country like United States? 2. What is the importance of Mexico in Global Value Chains? 3. What are the key sectors of the economy that play an important role in Mexico’s exports? 4. How convenient it is for foreigners to invest money in Mexico? The long term objective of the current research is to understand the actual role of Mexico´s global value chains, foreign trade and foreign direct investment, in order to identify what are the strongest sectors in the economy that are causing more benefits, which ones are in need of more attention, or what are the ones in which they have to be specialized; Also, to analyze the current relations with United States, what are the benefits or disadvantages for the local economy, and what are the opportunities of diversifying trade relations with other countries;  All this, with the finality of creating a detailed body of knowledge that will showcase the advantages of becoming an investor in this country. Mexico is a member of the OECD, this means that relevant and accurate information is possible to obtain from there. For example, in 2014 and in value added-terms, the exports of the country accounted for 20% of total GDP, which was one of the highest values recorded in that period. However, comparing it with OECD countries, it is below the median of 30%. Moreover, in those exports there is a high content of domestic value added. (OECD, 2017). The determinants of participation in global value chains are market size, level of development, industrial structure and graphical location. When it comes to policy determinants, it is possible to mention low import tariffs, engagement in preferential trade agreements and openness to inward FDI. Mexico´s backward integration is high and over-performing; the non-policy determinants are also high and can be explained by Mexico´s proximity with United States. (Dougherty & Reynaud, 2017). This country is open to FDI in the vast majority of economic sectors and it is considered as one of the largest emerging markets recipients of foreign direct investment. Due to the proximity with the United States and preferential access to its market, plus the skilled and cheap labor force and several other factors Mexico has to offer, makes it an attractive country for foreign investors. (U.S. Department of State, 2021). USA has been one of the largest sources of FDI in Mexico. According to Mexico´s Secretariat of Economy, comparing the total of FDI flows in 2020 that accounted for a total of $29.1 USD billion represented a decrease of 14.7% in comparison with the previous year. Nevertheless, the secretariat appointed to COVID´s impact on global economic activity as the principal reason of decrease. Moreover, the new investment in 2020 was 20% (6.4 USD billion), which was approximately only half of the investment received the previous year, and 55.4% came from reinvestments, whereas 24% from parent companies. The sectors that receive larger quantity of FDI are: automotive, telecommunications, financial services, electronics and aerospace. (U.S. Department of State, 2021). The largest amount of foreign direct investment is located on the northern states near the border with United States, where most manufacturing and assembly plants are based, also in Mexico City and “el Bajio” that is the region around Guanajuato and Queretaro. Commonly, investors do not pay attention to the southern states. However, the administration is putting efforts on developing large infrastructure projects such as: Dos Bocas refinery, the Maya Train and the trans-isthmus rail project, in order to attract foreign direct investment to that area in the country. (U.S. Department of State, 2021).

Intézmény

Budapesti Gazdasági Egyetem

Kar

Külkereskedelmi Kar

Tanszék

Nemzetközi Gazdaságtan Tanszék

Tudományterület/tudományág

NEM RÉSZLETEZETT

Szak

Nemzetközi Gazdaság és Gazdálkodás (angol)

Mű típusa:	diplomadolgozat (NEM RÉSZLETEZETT)
Kulcsszavak:	analysis, business enterprises, economic development, export-import, investment, Mexico, trade
SWORD Depositor:	Archive User
Felhasználói azonosító szám (ID):	Archive User
Rekord készítés dátuma:	2022. Okt. 11. 09:50
Utolsó módosítás:	2022. Okt. 14. 10:23
URI:	http://dolgozattar.uni-bge.hu/id/eprint/41491

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