Mexico - Foreign investment

Old federal law was aimed at attracting foreign investment without placing the nation "at the mercy of interests that are not those of Mexico and its citizens." Under the Foreign Investment Law of 1973, capital profits and dividends could be transferred to and from Mexico and the inflow of foreign funds was encouraged by allowing foreigners to make bank deposits without revealing the identity of the depositors. The current Foreign Investment Law of 1973 preceded the launch of the first phases of the implementation of the NAFTA agreement in January 1994 and opened the economy to further foreign investment. Investment in high technology and export-oriented industries is particularly welcome. About 95% of foreign investment transactions do not require official approval. The National Foreign Investment Commission rules on cases requiring government approval.

Mexico's Foreign Investment Law identifies 704 activities, 606 of which allow 100% foreign ownership. Ten activities are reserved for the Mexican State (including petroleum, petrochemicals, electric power generation, telegraphic services, nuclear energy, radioactive materials, coinage, and postal services), 16 activities are reserved for Mexican nationals (certain professional and technical services; gasoline retail; credit unions, savings and loans, and development banks; non-cable TV and radio; and non-rail land transportation), 37 activities require approval by the National Foreign Investment Commission for 100% foreign ownership, and 35 activities have ceilings of 49% for foreign investment. Land and water within 100 km (62 mi) of Mexico's borders or 50 km (31 mi) of the coastline may not be foreign owned.

Annual foreign direct investment (FDI) in Mexico ranged from $12 billion to $14.7 billion from 1997 to 2000 and then soared to $24.7 billion in 2001. In 2002, FDI inflow fell to $13.6 billion and in the first quarter of 2003 was 2.7% below the first quarter of 2002, at $2.6 billion.

The United States is the leading source of direct foreign investment in Mexico, reaching 86.3% in 2000, up from 55% to 66% in previous years. In 2002, FDI from the United States was 26.7% of the total, at $3.6 billion. The European Union and EU countries account for most of the rest.

Foreign portfolio investment as indicated by the total market capitalization of companies listed on the Mexican Stock Market reached a peak in 1993 at $200.7 billion. By 2001, market capitalization had fallen to $126 billion. In 2002, Mexican securities held by US investors totaled $47.6 billion, with $26.4 billion in equity shares, $21.2 billion, in long-term debt, and about $132 million in short-term debt.