Trump, protectionism to cause big FDI impact in Mexico - IIF

A report from the Institute of International Finance (IIF) sees a 40% drop this year in foreign direct investment in Mexico, down from earlier projections, as global FDI shrinks on growing tensions surrounding emerging US trade policy.

IIF, an international organization representing 500 financial institutions in 70 countries, expects Mexico's FDI to be US$13bn in 2017.

The report's new forecast for global FDI in 2017 has decreased by 30% (US$55bn) to US$386bn, following the November 2016 election of Donald Trump, a fierce nationalist and protectionist, as US president.

The IIF did also considered other international tendencies towards protectionism.

"The discussions underway with Brexit, a year filled with controversial elections on the European continent and a general increase in economic nationalism around the world present many challenges as firms rethink their investment strategies in exceptionally uncertain times," reads the IIF report, as quoted in Mexican daily El Financiero.

In addition to lower FDI in Mexico, the IIF projects GDP growth below 1% in 2017 for Latin America's second largest economy, as a result of tighter monetary policy, deteriorating trade with the US and low consumer confidence.

A recent Citibanamex poll of private sector analysts puts 2017 GDP growth at 1.5%.

Mexico is among the most exposed nations to such a shift in US trade policy with investment plans already beginning to fold.

Ahead of his inauguration, Trump initiated a Twitter-driven campaign to dissuade investment in Mexico, resulting in the cancellation of projects by US air-conditioner manufacturer Carrier and US automaker Ford, which scrapped a US$1.6bn plant in Mexico in January.

Most recently, Japanese auto parts maker Nisshinbo decided to cancel plans for a new US$89mn facility in Mexico over concerns about Trump. In defiance, other firms such Nissan and BMW have opted to confirm plans for production facilities in the country despite the new US government.