Keyword

Foreign Direct Investment (FDI), Competitiveness, Perception of Insecurity, Investment Attractiveness, State Competitiveness Index.

Abstract

State competitiveness is a key factor influencing a country's capacity to attract foreign direct investment (FDI), as it reflects the efficiency of institutions, infrastructure, macroeconomic stability, and innovation capacity, among others. In Mexico, the Mexican Institute for Competitiveness (IMCO) is responsible for measuring and analyzing state competitiveness through its State Competitiveness Index, which evaluates factors such as economic stability, governance, innovation, and security conditions.This study explores how state competitiveness and perceived insecurity impact the attraction of Foreign Direct Investment (FDI) across Mexican states, using a comprehensive model that incorporates key variables such as state competitiveness, perception of insecurity, political party in power, and GDP. Based on data from 2019 to 2023, the analysis reveals that the State Competitiveness Index is the most significant predictor of FDI, exhibiting a positive relationship with new investments. This indicates that higher state competitiveness tends to attract more foreign investments. Additionally, the Perception of Insecurity Index demonstrates a significant, albeit smaller, effect on FDI, suggesting that increased insecurity perception can still influence investment flows, though to a lesser extent. These findings underscore the complex dynamics between security perceptions, competitiveness, and foreign investment, providing valuable insights for policymakers aiming to enhance investment attraction strategies.


Full Text : PDF
References
  • Armas Arévalos, E. & Ayvar Campos, F.J., 2017. “Determinants of foreign direct investment in Mexico: A parametric analysis of the manufacturing industry”. Proceedings of the XI Congress of the International Network of Researchers in Competitiveness, November 2017, pp. 1717-1737. ISBN 978-607-96203-0-6.
  • Bengoa, M. y Sanchez-Robles, B. (2005). “Foreign Direct Investment as a Source of Endogenous Growth”. Journal of Policy Modeling , 27, 2, 249-261.
  • Botello, J.C. and Davila, M. (2023). “Insecurity and political uncertainty: Factors that influence the fall of foreign direct investment in Mexico”, The Business and Management Review, 14(02). doi:10.24052/bmr/v14nu02/art-07.
  • Brooks, D. y Sumulong, L. (2003). “Foreign Direct Investment: The Role of Policy”. Asian Development Bank. Serie: ERD Policy Brief No. 23. Filipinas
  • Economic Commission for the Latin America and the Caribbean (ECLAC) and United Nations (UN) (2024) Foreign Direct Investment in Latin America and the Caribbean, 2024, Repository ECLAC. Available at:
  • https://repositorio.cepal.org/server/api/core/bitstreams/a32c78a9-9833-4a2a-8d8a-b6ea50e6c63d/content (Accessed: 12 March 2025).
  • Guizar, M. (2020). “Ability to attract foreign direct investment in Mexico in the manufacturing sector and its impact on the automotive industry”, CIMEXUS, 15(2), pp. 15-38
  • Mazari, I. (2024). “Security, The Challenge of Our Cities”, IMCO Center for Public Policy Research. Available at: https://imco.org.mx/seguridad-el-desafio-de-nuestras-ciudades/ (Accessed: 12 March 2025).
  • Mexican Institute for Competitiveness (IMCO) (2019-2023). “State Competitiveness Index (2019-2023)”, IMCO. Available at: https://imco.org.mx/indice-de-competitividad-estatal-2024/#tablero (Accessed: 12 March 2025).
  • Miranda, P., Tack, N., and Pinto De Gracia, A. (2023). “Competitiveness of Panama in the period 2013-2018 for the attraction of foreign direct investment”, EKTENOS, 1(1), pp. 27-44
  • Mogrovejo, J. (2005). “Determinants of foreign direct investment in selected Latin American countries”. Latin American Journal of Economic Development, [online] 5, pp.51–82. Available at:
  • http://www.scielo.org.bo/scielo.php?script=sci_arttext&pid=S2074-47062005000200003#:~:text=Los%20resultados%20obtenidos%20corroboran%20que,y%20a%20grandes%20emprendimientos%20empresariales%20privados. [Accessed 10 Oct. 2024].
  • National Institute of Statistics and Geography (INEGI) (n.d.). “Perception of Insecurity INDEX (2019-2023), Perception of Public Safety”. Available at: https://www.inegi.org.mx/temas/percepcion/ (Accessed: 12 March 2025).
  • Ortíz, S. (2022). “Foreign Direct Investment in Mexico: Analysis of its determinants according to industry characteristics.”. Economic Research, 81(321), pp. 120-155
  • Saavedra Leyva, R.E. and Flores Orona, C.H. (2017). “Governance As A Determinant of Foreign Direct Investment in Latin America, Essays”. Economic magazine. Available at:
  • https://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S2448-84022017000200123#B6 (Accessed: 18 March 2025).
  • Simmons J, Hicken A, Kollman K, et al. (2018). “Party System Structure and Its Consequences for Foreign Direct Investment. Party Politics. Party politics, 24 (2), pp. 141–153.
  • Soria-Romo, R. (2017) ‘Impact of violence and insecurity on the competitiveness of Mexican states', Economy, Society and Territory., pp. 279–307. doi:10.22136/est002017802.
  • Volpe Martincus, C. and Sztajerowska, M. (2019). How to Solve the Investment Promotion Puzzle: A Mapping of Investment Promotion Agencies in Latin America and the Caribbean and OECD Countries. doi:https://doi.org/10.18235/0001767.