Economy

Brazil is back to Kearney's ranking of best countries for foreign direct investment; Mexico is out

Mexico left this 2020 edition, due to regulatory and governance factors

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This week, the consultancy firm Kearney has disclosed the newest edition of its foreign direct investment ranking of countries. Created in 1998, Kearney’s Foreign Direct Investment Confidence Index (FDI) is an annual survey that polls executives from the world’s 500 largest companies.

The ratings are calculated based on questions about the likelihood of these companies investing directly in a market over the next three years. The score varies on a scale of 1 to 3. In the case of Brazil, the score was 1.65, which made the country occupy the 22nd position, and be the only Latin American country on the list. Mexico, in its turn, is out.

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For the eighth consecutive year, the United States is the most attractive country for foreign investment. The other nine are all developed countries: Canada, Germany, Japan, France, United Kingdom, Australia, China, Italy and Switzerland.

In addition to Brazil, China and the United Arab Emirates are the only emerging markets on the Index.

According to the report, Brazil’s good reclassification is due to factors such as the approval of the Pension and Social Security reform in 2019, and the government’s efforts to expand privatizations–the survey was carried out between January 27 and March 3, before the outbreak of the pandemic, which put all those expectations on hold. “And doing business in Brazil is still not easy according to the World Bank’s Doing Business 2020 report, which ranked the country 124th—down from 109th the previous year. The fires that swept the Amazon in the middle of 2019 also caused some investor jitters and put pressure on Brazilian companies to focus more heavily on environmental, societal, and governance standards,” Kearney stresses in its report.

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Why Mexico is out?

In 2019, Mexico was in the last position, 25, “and there were certain considerations that investors took into account to the country be there, and that they expected to be resolved,” said Kearney’s CEO Ricardo Haneine Haua, during the videoconference for the presentation of the 2020 Foreign Direct Investment Confidence Index, as reported by Milenio.

He explained that the elements that left Mexico out are the country’s low historical growth; changes in the rules that have slowed down the dynamics of the energy reform, such as stopping the exploration and production rounds, as well as new clean electricity generation projects.

Haua also said that the decisions of high-cost and low-impact federal government infrastructure investments affected Kearney’s assessment, including the cancellation of the New Mexico City International Airport and the prioritization of low social impact investments, such as the Dos Bocas refinery, the airport from Santa Lucia and the Maya Train.