Mexico: FDI Fell, Not Grew, in First Quarter

Mexico's central bank contradicts Finance Ministry as its governor will not get his mandate renewed in a break from tradition. (Photo: Alfonso21)

Updated 6/3/21


Central bank data contradicts finance ministry statement.

BY LATINVEX STAFF

Foreign direct investment in Mexico fell 29.2 percent in the first quarter, according to new Central Bank data that contradicts a statement from Mexico’s finance ministry that claimed it grew 14.8 percent and was the highest first quarter amount since 1999. That news was widely quoted by Mexican media, including Milenio.

Even more worrisome is that the total figure - $11.9 billion – sees new investments and re-investments falling.

New investments fell 15.5 percent to $2.2 billion, while re-investments plunged 51 percent to $7 billion.

The re-investment decline was the worst since the 2009 global crisis, according to Mexican economist Gabriela Siller.

After the central bank data was released, the finance ministry released a new statement claiming that the discrepancy was due to different methodology, but the end figure of $11.9 billion was the same.

The seeming contradiction comes as Mexico’s central bank has been repeatedly attacked by Mexico’s President Andres Manuel Lopez Obrador (popularly known as AMLO). Last week, AMLO said that he will not propose a new term for the current central bank governor Alejandro Díaz de León , who he has publicly criticized, and will instead nominate an economist with a “social dimension," Reuters reports. 

This will be the first time in 39 years that a Central Bank governor won’t get his mandate extended. Díaz de León‘s predecessor Agustin Carstens, served for two periods, while Guillermo Ortiz served as governor for 11 years. Both Carstens and Ortiz were nominated by presidents from one party and saw their mandates extended by a president from another party.

AMLO has often criticized the central bank for only focusing on fighting inflation and not helping to boost economic growth.

The day before he announced he would not renew Díaz de León‘s mandate, he criticized that the central bank did not generate an operating surplus in 2020 after a year in which the peso dropped sharply against the dollar at the start of the coronavirus pandemic and recovered during the final months and laid the blame with the current central bank Governor.

"In the past administration there were surpluses and now there wasn't, only that the head of the Bank of Mexico, with all due respect, worked in the finance ministry ... very close to (former finance minister Jose Antonio) Meade and (former finance minister Luis) Videgaray, and so now things aren't the same," AMLO told reporters at a regular news conference.

Many economists and insiders expect Finance Minister Arturo Herrera to be named as successor for Diaz de Leon, Bloomberg reports.

ECUADOR: NEW GOVERNMENT

Former banker Guillermo Lasso assumed Ecuador’s presidency and has named a cabinet full of well respected economists and business people.

Simón Cueva Armijos, Economy and Finance Minister, holds degrees from top French universities École Polytechnique (engineering) and Pantheon-Sorbonne (economics) and has worked as a consultant for The World Bank, IDB, CAF, USAID and more.

Juan Carlos Bermeo, Energy and Mines Minister, is a former vice minister of hydrocarbons and former exective at state oil company Petroamazonas. Lasso's first choice for the post, Nobis CEO Roberto Salas, withdrew from consideration, citing difficulty resolving “private affairs” that would be necessary before assuming a public role.

Julio José Prado, Foreign Trade Minister, was president of Ecuador’s banking association since 2015. He holds a PhD in management from Lancaster University in the United Kingdom as well as economics and engineering degrees from local universities.

Vianna Maino, Telecoms Minister, is a lawyer who has specialized in privatizations, concessions and other forms of PPP (public private partnerships) in the areas of infrastructure and public services (ports, airports, transportation, energy, foreign trade, logistics).

Niels Olsen, Tourism Minister, has been operating popular eco-hotel Hacienda la Danesa the past six years. He studies business and marketing at Louisiana State University and has a degree in sustainable tourism from Australia. His appointment was welcomed by tourism sector officials frustrated with the previous government’s lack of a clear strategy for the sector.

COSTA RICA JOINS OECD

Costa Rica has officially joined the Organization for Economic Co-operation and Development (OECD), a Paris-based group of mostly developed countries. Of the 38 member countries, only four are from Latin America The other three are Mexico, Chile and Colombia.

“We are delighted to welcome Costa Rica into the OECD family at a time when multilateralism is more important than ever,” OECD Secretary-General Angel Gurría said in a statement. “We have been impressed that the cross-party commitment to OECD accession that we witnessed during the accession process continued into the ratification phase, despite the pandemic. This reflects the importance of working together for designing and implementing better policies, and Costa Rica will no doubt represent a new beacon for the OECD in the region.”

Due to a combination of factors, further expansion in Latin America is increasingly uncertain, argues Benjamin Gedan, deputy director of the Wilson Center’s Latin American Program and the director of its Argentina Project.

“OECD is a lodestar for market liberalization and transparency, and for members, helps lock in reforms,” he wrote on Twitter.

“Regrettably, Costa Rica might be the last new Latin America member for a long time.”

Argentina's new government is uninterested, Brazil's climate policies jeopardize its candidacy and pro-expansion Secretary General Angel Gurría retires in June, Gedan points out.


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