Headline: Mexico Contemplates Tax Credits to Woo Foreign Companies
Mexico is considering offering tax credits to encourage foreign companies to invest and establish manufacturing facilities in the country. According to a senior Mexican trade official, the proposed incentives will focus on sectors such as electric vehicles (EVs), semiconductors, rare earth elements, batteries, and electronics.
This move by Mexico's new government is part of efforts to stimulate investment at a time when companies are trying to position their supply chains closer to key markets. This strategy comes amidst an increasing protectionist environment in the lead-up to presidential elections in the United States.
Luis Rosendo, Deputy Minister of Foreign Trade, recently stated in an interview that Mexico is "seriously analyzing the creation of tax credit incentive programs very similar to those in the U.S. and Canada." Rosendo believes that such programs could be a significant factor in attracting companies to Mexico. He also noted that the incentives would be open to companies from any country, including China.
An internal government document revealed that Mexico has initiated discussions with various international corporations like Foxconn, Intel (NASDAQ: INTC), General Motors, DHL, and Stellantis to explore opportunities for manufacturing products in Mexico that are currently imported from Asia. However, Rosendo did not provide additional details about the companies mentioned in the document.
The approach towards Chinese automakers indicates a potential departure from the stance of the previous administration, which reportedly decided against offering local incentives to Chinese car manufacturers under U.S. pressure. The U.S. Embassy in Mexico declined to comment on the matter.
The administration of Mexico's new President Claudia Sheinbaum is also reviewing Washington and Ottawa's policies towards China and aims to align responses with them against what are perceived as unfair Chinese trade practices. This alignment occurs ahead of the upcoming review of the USMCA North American trade pact. Rosendo referred to the efforts to combat the circumvention of U.S. tariffs on Chinese steel, which is rerouted through Mexico, as an example.
According to Rosendo, while Mexico prioritizes its strategic alliance with the U.S. and Canada through the USMCA, it does not intend to "cut ties with China" or reject Chinese investments. This balanced stance comes at a time when U.S. Republican presidential candidate Donald Trump has threatened tariffs to prevent Chinese automakers from exporting vehicles from Mexico to the U.S. The presidential race, where Trump and Democratic candidate Kamala Harris are neck and neck, is expected to affect future trade dynamics.
Rosendo emphasized Mexico's readiness to cooperate with either a Trump or Harris administration, highlighting the importance of Mexico's sovereignty in trade discussions. President Sheinbaum and her cabinet are working to reassure international investors of Mexico's stability, especially following a controversial judicial reform that unsettled markets and impacted the peso.
Despite economic uncertainties, Rosendo confirmed that no company has withdrawn its investments from Mexico, stating, "Frankly, I have not heard of a single company leaving because it fears investing here." This indicates the continued confidence in Mexico as a business destination on the international stage.