2 October 2008 219 views No Comment

In a survey released by KPMG this week, Mexico is the only Latin American economy that will increase its participation in the total amount of investment undertaken by multinational corporations in the region in the next five years. Increases are expected mostly in the services and manufacturing sectors.

The results were reported as part of KPMG’s Latin American Capital Flows Survey, which asked almost 140 executives from the most important multinational corporations in Latin America about their investment plans for the next twelve months as well as the next five years. The study focused on the economies of Mexico, Brazil, Argentina, Chile, Peru, Colombia and Venezuela.

Of all the investments by these corporations, Mexico will increase in direct investment in the country from 8 to 10%, while Brazil and Argentina will expect declines from 2 to 5%. Chile showed the greatest drop with a figure of 11% with Peru also showing signs of decreasing investment intentions from the surveyed executives.

A second survey survey published earlier this Summer, also from KPMG, showed that Mexico has the lowest costs of doing business when compared to G7 and other major economies. According to the survey, titled 2008 Competitive Alternatives, business costs run 20.5% lower than in the United States, largely due to lower labor, tax and transportation costs. This was the first time Mexico was included in the study, reflecting its status as an emerging industrial economy.

The study contains information for companies seeking advatnages in locating international business operations, measuring 27 key cost components that are most likely to vary by location, including labor, taxes, real estate and utilities as they are applied to 17 business operations over a 10-year planning horizon.

While international investors express confidence in Mexico, the currrent crisis in the United States has been taking its toll on the Mexican stock market. The Bolsa Index (or the BMV as it is known in Mexico) has fallen by 18.9% so far this year. Claudio Brocado, a specialist in emerging markets from the Batterymarch Financial Management firm in Boston commeted, however, that in the long term emerging markets like Mexico will be better able to withstand this type of crisis because this time they are not at the epicenter of the problem as was the case during the Mexican economic crisis of 1994.

KPMG is a network of professional firms providing advisory services operating in 145 countries. For complete versions of both studies, please refer to:
http://www.kpmg.com/SiteCollectionDocuments/Latin-America-Capital-Flows-survey-2008.pdf
http://www.kpmg.com/SiteCollectionDocuments/CompetitiveAlnternatives08.pdf