Some foreign investors returned to Mexico in the second quarter...

Foreign direct investment (FDI) in the first half of this year totaled US$9.7 billion, slightly more than half the amount of portfolio investment and just a third of its level in the first six months of 2013. Europe supplanted the US as the principal sources of FDI in the first half of this year, with 26.1% of the total coming from Spain, 20.1% from the Netherlands, and 13.0% from Belgium. Only a tenth came from the US while Japan, Canada, and Germany were the sources, respectively, of 7.2%, 4.9% and 3.9% of the total. Most of FDI (71.8%) in the first six months of 2014 went into manufacturing. Financial services attracted a fifth of the total and the remaining 7.9%, into all other sectors. 

FDI totaled US$20.2 billion in the second quarter of last year; in this year's second quarter, FDI was just US$2.3 billion. Obviously the AB INBev/Modelo transaction swelled last year’s number. However, a very unusual occurrence also affected FDI in this year’s second quarter: new investments were negative. Reinvested profits totaled US$4.0 billion in Q2 2014 while net liabilities with parent companies rose US$1.4 billion, offsetting the US$3.2 billion reduction in new investments. (There is an outflow of the same amount registered in the current account for reinvested profits. Neither new investments nor changes in inter-company liabilities have a current account counterpart.)

Portfolio investment in the first half of this year was US$18.2 billion, nearly three times its level in the first half of 2013 when the “taper tantrum” hit portfolio investment in emerging markets in the second quarter. The big change was in foreign investment in equities, which constituted a whopping 35.9% of portfolio investment in the first half of the year. The US$6.6 billion of foreign investment in equities really occurred in the second quarter; only US$0.3 billion flowed in during the first. It’s a sea change from the first half of last year, when foreigners cut their investments in Mexican equities by US$4.9 billion. Foreign investment in money market instruments was US$11.7 billion, 5.5% above its level in the first half of 2013.