Mexico Considers Tax Credits to Attract Foreign Investment

By Cassandra Garrison and Anthony Esposito

MEXICO CITY (Reuters) – Mexico is considering tax credits to attract foreign firms to invest and produce domestically, aimed at the electric vehicle (EV), semiconductor, rare earth minerals, battery, and electronics sectors, a top trade official said in an interview.

These comments arise as Mexico’s new government seeks to boost investment, with firms looking to move supply chains closer to their main markets while navigating a more protectionist U.S. environment ahead of presidential elections.

Deputy Foreign Trade Minister Luis Rosendo Gutierrez mentioned, “We are seriously analyzing 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.” He noted the incentives would apply to firms from any interested country, including China, but emphasized Mexico would not become a “springboard” for Chinese entry into the U.S.

An internal document reviewed by Reuters indicated that Mexico has begun collaborating with companies like Taiwanese manufacturer Foxconn, chipmaker Intel, U.S. automaker General Motors, logistics firm DHL, and carmaker Stellantis to identify products for domestic manufacturing instead of imports from Asia.

The country aims to substitute imports from China, Malaysia, Vietnam, and Taiwan. Gutierrez did not provide further details on the firms involved.

Gutierrez's approach towards Chinese auto-makers signals a potential change from previous administration policies, as earlier representatives stated they would not offer local incentives for Chinese automakers due to U.S. pressures.

The current administration, under President Claudia Sheinbaum, is carefully reviewing U.S. and Canadian policies toward China to align in addressing unfair trade practices ahead of the USMCA trade pact revision. Gutierrez highlighted, “The pressure that we have… the question is what are we going to do with China regarding some practices that sometimes seem unfair.”

He referred to steel imports, emphasizing cooperation with trade partners to combat circumvention of U.S. tariffs on steel by products shipped through Mexico, amidst concerns about China’s industrial capacity saturating global markets.

While prioritizing relations with the U.S. and Canada under USMCA, Gutierrez clarified that Mexico would not break ties with China or deny them investments. He mentioned Republican candidate Donald Trump’s warnings about imposing new tariffs on Chinese automakers exporting cars from Mexico to the U.S. in a tight election race with Democratic nominee Kamala Harris.

Mexico is prepared to work with whichever candidate wins the election, seeing no significant difference in the trade relationship with Trump or Harris. Gutierrez stated, “We understand that there is an issue of national security and the United States will have to understand that our discussions are also about maintaining Mexican sovereignty.”

Sheinbaum and her cabinet are assuring international investors about Mexico remaining a safe destination for new business, even after recent judicial reforms led to market jitters and impacted the peso currency. Despite financial uncertainties, Gutierrez stated that no companies have pulled investments from Mexico, asserting, “I sincerely have not heard of a company leaving because it is afraid to invest here, not a single one.”