| | |  Business News | March 2009 
Mexico's Weak Peso Lures Foreign Investment Despite Downturn
 Peter Millard - Dow Jones
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Mexico City - The sharp fall in Mexico's peso has fueled inflation and eroded consumer confidence in Latin America's second largest economy, but there are two sides to every coin.
A number of companies have accelerated spending this year to take advantage of the cheap local currency, easing the negative impact of the global downturn, according to a government agency dedicated to attracting foreign investment.
"It costs them less to invest in Mexico," said ProMexico Director Bruno Ferrari on Tuesday.
Ferrari acknowledged foreign investment will decline this year amid the credit crisis and economic slump, but said he still expects Mexico to meet its 2009 target of $15 billion, down from $18.6 billion in 2008.
If Mexico meets the 2009 target it will help lessen the blow the global downturn has dealt the country. Mexico's economy is expected to contract 1.9% this year and unemployment is on the rise, largely due to the recession in the U.S. where Mexico sends over 80% of its exports.
Foreign companies in the aerospace, chemical, medical and renewable energy industries are among those spending in Mexico this year.
"They are taking advantage of this [cheap local currency] as much as they can, " Ferrari said during a press conference.
He even said a handful of companies that relocated from Mexico to Asia to cut operating costs are now thinking about returning.
Mexico's peso was trading at MXN15.35 to the U.S. dollar Tuesday, down 35% from peak levels last summer. For a foreign company, this means it gets a third more value out of each dollar it spends in Mexico compared with mid-2008.
Ferrari said Danish toy company Lego Group, Japanese electronics company Kyocera Corp. (KYO), U.S. soft drinks giant PepsiCo Inc. (PEP) and Grupo Aernnova, a Spanish aviation parts company, have recently opened plants in Mexico in spite of the global economic woes.
peter.millard(at)dowjones.com |
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