Foreign Direct Investment in the Primary Sector of Mexico

Abstract

Historically, foreign direct investment (FDI) in Mexico’s primary sector (agriculture, forestry, fisheries and minerals (including petroleum)) was constrained and discouraged due to constitutional, legislative and procedural restrictions which prohibited or limited foreign ownership of natural resources and engagement in economic activities that involved the use of such resources. This was due, in part, to Mexican distrust of and apprehension about the economic power of the USA, its much larger and economically more advanced northern neighbour. However, after the debt crisis and default in 1982, the government of Mexico began to shed autarkic policies, turn away from statism and open its economy to international economic forces. The reforms undertaken have included reinterpretations of legal requirements, the passage of new laws, negotiation of treaties and a constitutional amendment, all of which made FDI easier and more attractive. As a consequence, foreign investments in the economy and the primary sector grew rapidly in the late 1980s and early 1990s, although the economic crisis that erupted in December 1994 dampened some of the enthusiasm and slowed investment activities. Mexico joined the General Agreement on Trade and Tariffs (GATT) in 1986 and the Organization for Economic Cooperation and Development (OECD) in 1994.