Mexico Pitches Tax Breaks to Boost Investments

• Mexico on Wednesday, October 13, 2023, issued a decree to grant tax breaks for companies that relocate operations to Mexico, targeting major export industries such as car-making 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.
• 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 favouring fossil fuels.
• Overall, Mexico could lure annual foreign direct investment flows of between $55Bn to $60Bn if it takes better advantage of nearshoring, up from $36Bn in 2022 according to economists. The new incentives include accelerated investment deductions of 89%-56% in 2023 and 2024; and additional deductions of 25% during three years for worker training, Yorio said.

(Source: Reuters)