Let´s Talk About Nearshoring 8.0 | Quarterly Newsletter

FDI Figures Remain Positive Despite a Complex Landscape

In Mexico, Foreign Direct Investment (FDI) totaled $21.373 billion dollars during the first quarter of 2025, according to the most recent balance of payments figures published by the Central Bank of Mexico. Although the amount set below what was recorded in the same period of 2024 ($27.055 billion dollars based on final figures), it still signals a high level of foreign capital attraction, based on revised data from the Central Bank of Mexico. Additionally, it’s worth noting that preliminary figures are generally revised upward, so the decline in the total amount observed in 1Q25 could be reversed in the coming months. Compared to the first quarter of 2024, preliminary data for Q1 2025 reflects a 5.4% increase.

It’s important to highlight that during the first months of 2025, global uncertainty intensified due to growing trade tensions between the United States and several of its main partners, which has led to adjustments in expectations around supply chain configurations and episodes of heightened financial volatility. In this context, it’s reasonable to expect that FDI could show some moderation, particularly in sectors sensitive to tariff changes or to the reconfiguration of trade agreements. Nevertheless, flows into Mexico have remained robust, signaling its strategic position and the progress of projects linked to Nearshoring.

By FDI component and for the January–March 2025 period, the country received $16.647 billion dollars in profit reinvestments, signaling a moderation compared to the $27.838 billion dollars recorded in the same period of 2024, although it remains the main driver of FDI. New investments totaled $1.586 billion dollars, a significant annual increase compared to the $881 million dollars recorded in the first quarter of the previous year. Lastly, intercompany accounts recorded inflows worth $3.140 billion dollars, reversing the negative flow seen in the same period of 2024 (-$1.664 billion dollars), which suggests greater willingness from foreign parent companies to capitalize their subsidiaries in Mexico.

According to supplementary data from the Ministry of Economy, 43% of the Foreign Direct Investment captured in the first quarter of 2025 went to the manufacturing industry, with a particular focus on the transportation equipment, beverage and tobacco, food, chemical, plastics and rubber, computing equipment, and electric power generation sectors. Financial services, mining, commerce, and construction also stood out as key recipients.

Regarding the origin of flows, the United States remained the main investor with a 38.7% share, followed by Spain (15.0%), the Netherlands (8.3%), Australia (5.7%), and Germany (3.7%). At the regional level, Mexico City received 55% of total FDI, followed by Nuevo León (13%), the State of Mexico (9%), Baja California (4%), and Guanajuato (3%), signaling a high regional concentration of incoming capital.

Despite the decline, the figures are positive—especially considering the context in which Mexico was at the center of trade tensions between January and March, due to the tariff measures imposed by the United States and the resulting adjustment in global investment flows. Despite this challenging landscape, Mexico managed to maintain a high level of capital inflows, with clear signals of confidence from established foreign firms and a budding recovery in new investments. The market consensus estimates that by the end of 2025, the country could attract around $33.850 billion dollars in foreign direct investment, consolidating Mexico as one of the most attractive destinations for productive investment in Latin America, particularly in sectors linked to regional trade, advanced manufacturing, and the global relocation process.

Foreign Direct Investment – Central Bank of Mexico and Ministry of Economy

Given the questions that may arise regarding the different figures reported by the Central Bank of Mexico and the Ministry of Economy, we believe it´s relevant to conduct the following analysis, which aims to highlight two key points: 1) the Ministry of Economy only compares preliminary figures as of the end of each quarter, and 2) the Central Bank of Mexico updates and then compares the data. However, it’s important to note that in aggregate terms, both institutions report the same observed figure for the quarter, even if the comparable bases differ.

Within each report, it’s common for the information not to be broken down in the same way, as the Ministry of Economy uses directional flow accounting—that is, how much money entered and how much exited—using the familiar categories of profit reinvestments, new investments, and intercompany accounts. While the Central Bank of Mexico uses a very similar breakdown, its view is structured around the economy’s assets and liabilities. Thus, any outward payment is recorded as an asset, and any inflow as a liability. But ultimately, when the figure for the relevant quarter is released, the total amount received by the country is identical under both methodologies.

Additionally, we calculated the revisions made by the Central Bank of Mexico to demonstrate their magnitude and to offer insight into what may happen with future figures. The first point that stands out is that since 1999, there have been no downward revisions. Second, there are cases in which the revision exceeds the Ministry of Economy’s preliminary figure—meaning that nothing is set in stone when it comes to Foreign Direct Investment data. Furthermore, we found that between 2001 and 2024, first-quarter figures have been revised upward by an average of approximately $4.5 billion dollars—a significant amount. While the specific components behind these adjustments aren’t disclosed, it’s reasonable to anticipate further upward revisions in future releases.

The Central Bank of Mexico´s Quarterly Report

In its most recent report, the Central Bank of Mexico included two relevant analyses to better understand the productive integration between Mexico and the United States. The first broke down bilateral exports to identify how much added value comes from each country, highlighting the high share of U.S. inputs in Mexican exports. The second examined how Mexican companies are leveraging the USMCA to export, showing that amidst rising tariffs, more firms are turning to the agreement to benefit from preferential conditions. Together, both analyses are essential for understanding the opportunities and challenges presented by the Nearshoring trend.

A Breakdown of Added Value in Mexico–U.S. Trade

In this analysis, the Central Bank of Mexico set out to examine the real structure of bilateral trade between Mexico and the United States in greater detail, focusing not only on gross trade flows but on the added-value content generated in each country. To achieve this, it relied on data from the Asian Development Bank’s interregional input–output database, which allows for tracking how exported goods incorporate inputs from multiple sources across global value chains.

The study’s results show that a significant share of the value of Mexican exports to the United States actually originates in the U.S. itself. For example, in sectors such as automobiles, metal products, or machinery, U.S. added value contained in Mexican exports can account for between 20% and 40% of the total. Conversely, U.S. exports also include Mexican inputs, albeit in smaller proportions. This signals a deep productive interdependence between both economies, where trade is increasingly less about simple cross-border transactions and more about collaboration in shared industrial processes.

This finding is especially relevant in the context of Nearshoring, as it confirms that Mexico is not starting from scratch in its integration into North American supply chains. In fact, many sectors are already partially or fully embedded in regional production processes. This reinforces the idea that companies can leverage that existing framework to scale operations, replace more distant imports, and strengthen the resilience of their production chains through investment in Mexican territory.

How Mexican Exporters Are Using the USMCA

The second figure in the Quarterly Report focused on examining how extensively Mexican companies are using the provisions of the USMCA to export to the United States, amidst rising trade tensions and the announcement of new U.S. tariffs on a wide range of imported goods.

The Central Bank of Mexico found that USMCA usage varies significantly across sectors. Traditional industries such as automobiles, trucks, auto parts, and certain agri-food products already make extensive use of the treaty’s tariff benefits, exporting under preferential treatment in over 90% of their shipments. However, other industries—such as electronics, medical devices, and specialized machinery—show a low degree of utilization, which implies that many Mexican companies may be paying tariffs that could be avoided.

Through a survey conducted by the Central Bank itself, it was found that firms with prior experience using trade agreements have been quicker to adapt to recent changes, while those with no history of complying with rules of origin face greater administrative hurdles or lack the knowledge needed to benefit from the agreement.

In the context of Nearshoring, this analysis is particularly relevant: effective use of the USMCA not only boosts the competitiveness of Mexican exports, but can also be a decisive factor in attracting new foreign investment. As companies look to relocate their supply chains closer to the U.S., choosing Mexico as a destination will also depend on how easy it is to meet the treaty’s requirements and access tariff benefits. For this reason, reducing administrative barriers, training local firms, and promoting awareness of the USMCA will be key elements in maximizing Nearshoring’s potential.

How´s The Trade Balance Doing? – April 2025

A trade deficit (exports minus imports) worth $88 million dollars was recorded in April, contrasting with the $3.442 billion dollar surplus reported in March.

In April, total exports amounted to $54.296 billion dollars, signaling a 5.8% annual increase, driven by a 6.6% rise in non-oil exports, while oil exports declined 13.2%. Within the non-oil category, manufacturing exports increased 6.6%, with notable increases in machinery and specialized equipment for various industries (62.5%), domestic metal products (18.8%), professional and scientific equipment (18.5%), electrical and electronic devices (6.4%), and mining-metallurgy products (2.5%). In contrast, automotive exports contracted 7.1% year over year, due to an 8.0% drop in shipments to the United States and a 1.3% decline to the rest of the world. Meanwhile, agricultural exports decreased 7.1% annually, dragged down by declines in products such as onions and garlic (-39.3%), fresh legumes and vegetables (-36.2%), cucumbers (-35.3%), tomatoes (-18.9%), and peppers (-18.2%). However, there were increases in avocado (27.8%) and edible fruit exports (7.5%).

As for imports, these totaled $54.384 billion dollars, signaling a 1.2% annual decline, resulting from a 47.0% increase in oil-related imports and a 4.2% drop in non-oil imports. By clasification, consumer goods imports fell 4.2%, driven by a 14.3% decrease in non-oil consumer goods, partially offset by a 75.5% surge in oil-related goods, boosted by higher gasoline and butane/propane purchases. Imports of intermediate goods, which make up the bulk of total imports, rose 1.9%, partly due to a 35.4% rebound in oil inputs, although non-oil intermediate goods declined slightly by 0.1%. Meanwhile, capital goods imports dropped sharply by 18.8%, which may signal increased caution regarding investment in machinery and equipment.

Overall, April’s trade balance figures signal sustained expansion in non-automotive and extractive manufacturing exports, but also persistent weakness in key sectors such as automotive, agri-food, and machinery investment. This divergence suggests a fragmented trade environment, where some sectors are managing to capitalize on foreign demand, while others face structural or cyclical constraints. The decline in agricultural and automotive exports, coupled with the sharp drop in capital goods imports, could be foreshadowing a slowdown in productive activity if not reversed in the coming months.

How´s the U.S. Trade Balance Doing? – April 2025

In April, preliminary trade balance data revealed a trade deficit worth -$87.624 billion dollars, a 46% contraction compared to March 2025 based on seasonally adjusted figures. Compared to the deficit recorded in April 2024, a 9.7% decline was also recorded.

Within the breakdown, exports increased 3.4% month over month and 9.6% in April, while imports dropped 19.8% month over month and rose 2.6% year over year.

Export figures logged sharply contrasting trends—for example, industrial goods surged 15.5%, while food and beverages fell 4.0%, and automobiles plummeted 21.0%. On the imports front, there was a broad-based decline, with notable contractions in consumer goods (-32.3%), industrial goods (-31.0%), automobiles (-19.1%), and capital goods (-3.1%).

As a result, in the first four months of 2025, the trade deficit stood at $522.442 billion dollars—still 48% larger than the $372.408 billion dollar deficit recorded in the same period of 2024.

Conclusions

The most recent FDI figures could cast doubt on Nearshoring. At first glance, it may seem that the tariff war has acted as a handbrake on foreign investment, as uncertainty around tariff imposition has led to a pause in projects amidst a lack of clarity regarding the new rules of the game.

However, despite Donald Trump’s volatile and hardline trade stance, the first four months of 2025 have shown that while he often issues threats, they tend to serve as negotiating tools—only to be reversed a few days later to make room for differing trade positions. We’ve moved from protectionism to a strategic truce. Since the beginning of his second term as U.S. president, Trump has altered his global tariff policy roughly every three to four days on average, demonstrating that tariffs are more of a Damoclean sword used to strengthen his negotiating leverage.

Given the current environment and context—along with the expected revisions to FDI figures—we believe that, even if on pause, there’s still a clear preference for investing in Mexico, especially over a long-term period. Mexico’s integration with North America is a reality, regardless of the immediate noise surrounding Trump and tariffs. Competitive advantages, production efficiencies, skilled and affordable labor, and the USMCA itself are inescapable factors that, over time, will strengthen Mexico’s trade position—particularly considering that productive projects typically carry a 20- to 30-year investment timeline.

With that being said, and beyond the international backdrop, Mexico must do its part and address all the pending tasks needed to make the country the preferred destination for commercial integration with the United States.