Mexico's Foreign Direct Investment Up in First Quarter

By Anthony Harrup Features Dow Jones Newswires

Mexico received a record amount of foreign direct investment in the first quarter of the year, defying fears the administration of U.S. President Donald Trump would discourage companies from risking capital south of the border.

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Preliminary foreign direct investment was $7.95 billion in the January-March period, up 0.6% from the preliminary amount reported for the same period a year before and the most ever for a first quarter, according to the Economy Ministry. Investment numbers tend to rise as more transactions are recorded.

Half of the investment came from the U.S., and included $620 million from Delta Air Lines Inc.'s increased stake in local carrier Grupo Aeromexico SAB, the ministry said. Other countries making significant investments included Spain, Germany, Canada and Japan.

Manufacturing was the main receiving sector with 43% of the total, followed by financial services, transport, and mining.

Concerns that investment in Mexico would slow to a trickle following the U.S. election in November helped send the peso to record lows against the dollar, given President Trump's railing against companies that move production abroad and threats to slap them with a big border tax.

Those fears grew worse in January when Ford Motor Co. canceled a planned $1.6 billion plant in Mexico, saying that it would invest $700 million in a Michigan plant expansion.

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The peso has since recovered to pre-election levels, however, and the economy has maintained a steady pace of growth, expanding at an annualized rate of 2.7% in the first quarter. Talk of a border tax has faded as the U.S. prepares to renegotiate the North American Free Trade Agreement with Mexico and Canada.

"The perception has gradually been changing, and fears of a rupture in bilateral relations have diminished," said Rafael Camarena, an economist at Banco Santander.

Foreign direct investment in Mexico was $26.7 billion in 2016, down from $33.2 billion the previous year.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

May 24, 2017 13:19 ET (17:19 GMT)