Photo: UNCTAD

By THE PULSE NEWS MEXICO STAFF

Private investment in Mexico sank 19.89 percent in 2020, its biggest decline in 25 years. 

The decrease in fresh investment, measured as the Gross Formation of Private Fixed Capital (GFCF), represents the deepest slide since the 1995 financial crisis, when investment dropped by 38.51 percent, according to seasonally adjusted figures from the National Institute of Statistics and Geography (Inegi).

The main reason for the decline was the covid-19 pandemic, the Inegi said, although political and fiscal insecurity also played a crucial role in stalling investor interest.

In fact, the plunge in private investment in the second quarter of 2020 (when the pandemic first began) was preceded by four quarterly falls.

The performance of investment in the country has been weakening continually since the start of 2018, after leftist Mexican President Andrés Manuel López Obrador (AMLO) came to power.

In the second quarter of that year, investment began to register negative quarterly rates, according to an analysis by the multi-focused economic analyses group México ¿Cómo Vamos?

And in 2019, new investment declined by 3.38 percent.

Although the pandemic clearly affected economic activity in almost everyone, the poor performance of private investment in Mexico is due to structural factors, ¿Cómo Vamos? said.

As a point of comparison, the group noted that in the United States, private investment only fell 3.9 percent in 2020, and in the last quarter of that year, the level of investment was already above the 2019 quarterly average.

Alfredo Coutiño, director for Latin America at the Moody’s Analytics international rating agency, said that the chronic problem of the Mexican economy continues to be investment anemia, as governments have focused on exploring the wrong sources of growth, seeking productivity instead of investment.

In addition, the AMLO administration has created a more hostile environment for private investment.

Coutiño said that the reluctance of private investment was accentuated by a lack of government support to face the debacle caused by the confinement and some legislative decisions that put various business projects at risk.

The government’s disinterest in supporting investors has been the main reason for the poor investment performance in both 2020 and 2021, he said.

 

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