Mexico's New Government Mulls Tax Incentives to Lure Foreign Companies

• Mexico is considering tax credits to attract foreign firms to invest and produce domestically, targeted at electric vehicle (EV), semiconductor, rare earth minerals, battery and electronics sectors, a top Mexican trade official said in an interview.
• The comments come as Mexico's new government assesses how to spark more investment as companies look to move supply chains closer to their main market, while simultaneously navigating a turbulent and more protectionist period in the U.S. ahead of presidential elections.
• "We are seriously analysing creating tax credit incentive programs very similar to those in the United States and Canada ... and we believe that would allow us to attract many companies to Mexico," Deputy Foreign Trade Minister Luis Rosendo told Reuters last Friday, October 18. Rosendo said the incentives would apply to companies from any country interested in investing in Mexico, including China.
• An internal government document seen by Reuters said Mexico had started working with companies such as Taiwanese electronics manufacturer Foxconn, chipmaker Intel, U.S. automaker General Motors, logistics firm DHL, and carmaker Stellantis, to identify products that can be manufactured in Mexico instead of being imported from Asia.
• Additionally, the administration of Mexico's new President Claudia Sheinbaum is carefully considering Washington and Ottawa's policies towards China, in order to be more aligned in addressing potential unfair Chinese trade practices ahead of a scheduled revision of the USMCA North American trade pact.
• "The pressure that we have... the question is what are we going to do with China in the face of some practices that sometimes seem to be unfair," Rosendo said. Mexico would continue to prioritise the U.S. and Canada due to their strategic alliance through USMCA, but that didn't imply Mexico would "break with China" or "deny them investments in Mexico," Rosendo said.

(Source: Reuters)