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Latin American startups view Mexico as the top expansion market, but the country is still excluded from the Kearney FDI Confidence Index . Here capital Mexico City. (Photo: Clinker)
Wednesday, April 27, 2022
Trade Talk

Kearney FDI Index: Brazil Improves, Mexico Still Out


Mexico top destination for expansion for Latin America startups.

BY LATINVEX STAFF

Brazil moved up two places on the latest Kearney FDI Confidence Index, while Mexico was excluded for the third year in a row.

The improvement for Brazil was likely a reflection of the global economic recovery fueling broader levels of optimism overall, Kearney said.

Although it did improve two spots compared to last year, Brazil ranks last when it comes to its net score on optimism. Overall, 29 percent of investors were optimistic about Brazil, while 18 percent were less so.

Mexico’s exclusion was in part caused by the energy reform President Andres Manuel Lopez Obrador has been planning.

“The expectations of institutional changes, reforms such as energy; as well as investments in infrastructure by the federal government are the issues that counteract Mexico's position with global investors," Ricardo Heneine Haua, managing partner of Kearney Mexico, said at a press conference quoted by Expansion.

The Kearney FDI Confidence Index is an annual survey of global business executives that ranks the markets likely to attract the most investment in the next three years. 

The Index is constructed using primary data from a proprietary survey of 500 senior executives of the world’s leading corporations. The rankings are calculated based on questions about the respondents’ companies’ likelihood of making a direct investment in a market over the next three years. 

STARTUPS: MEXICO TOP DESTINATION FOR EXPANSION

Mexico is the top destination market for expansion by startups in Latin America, according to a new report from Endeavor, “Soft Landing in Latin America.”

Out of the 271 identified companies in Latin America, 145 expanded to Mexico.

“Mexico hosts the second largest population, thus market, in the region, after Brazil,” the report points out. “It also provides an entryway to the US, and shares a common language with [most of] the rest of the region.”

Because of its size, Brazil & Mexico are the only countries that have a market large enough to have companies that have achieved a unicorn status without the need to expand regionally.

Argentina and Chile are the home countries of the largest proportion of startups that have expanded internationally, with 57 and 53 companies, respectively.

The most active VC funds in the region are Valor Capital Group, Tiger Global Management, SoftBank, Kaszek, Monashees and Canary.

Despite geopolitical and macroeconomic headwinds, the global landscape for entrepreneurship remains highly dynamic, especially in Latin America,” Ajay Banga, Vice Chairman of General Atlantic and former Mastercard CEO, said in a statement.

DOMINICAN FREE TRADE ZONES BOOM, DIVERSIFY

Free trade zones in the Dominican Republic are expected to hit $8 billion in exports this, up from the $7.1 billion they generated last year, Hoy reports.

The Dominican Association of Free Zones (Adozona) point out that much of the recent growth has been from other sectors than textile.  While textiles previously accounted for more than half of all free zone exports, it now accounts for 10.9 percent of the total. Other sectors such as medical products (27 percent of the total), cigars (16.8 percent), electronics (16.2 percent) ad jewelry (10.9 percent) have helped boost free zone exports as well. 


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