Mexico pitches tax breaks to lure foreign investment, infrastructure doubts persist
By Valentine Hilaire
MEXICO CITY (Reuters) — Mexico on Wednesday issued a decree to grant tax breaks for companies that relocate operations to Mexico, targeting major export industries such as carmaking and semiconductors, a move that won cautious praise from economists.
The incentives are designed to attract companies that want to shift their offshore operations closer to their customers, called nearshoring, in the wake of supply chain disruptions in Asia during the COVID pandemic.
Deputy finance minister Gabriel Yorio said in a post on X the incentives would apply to 10 sectors of the economy, including the manufacture of batteries, engines, fertilizers, pharmaceuticals, medical instruments and agribusiness.
President Andres Manuel Lopez Obrador has said Mexico should benefit from moves by industry to reduce dependence on China, but critics argue that his administration has been slow to set out clear-cut incentives to encourage investment.
Though welcomed, the measures failed to dispel concerns the government is obstructing investment by failing to provide essential infrastructure for companies, especially because of its nationalist energy policies favoring fossil fuels.
«These incentives are a good step in efforts to attract companies to the country», said Gabriela Siller, an economist at Banco Base who is often critical of government policy.
But Mexican authorities need to spend more to guarantee power and water supply for industry and provide companies with a stable policy environment to encourage investment, Siller said.
Mexico could lure annual foreign direct investment flows of $55 billion to $60 billion if it takes better advantage of nearshoring, up from $36 billion in 2022, she said.
The new incentives include
Read more on investing.com
