The 'New Regionalism' and Foreign Direct Investment: The Case of Mexico
Posted: 20 Sep 2004
The recent increase in foreign capital flows into developing countries has coincided with a new wave of regional trade agreements involving both developed and developing countries. This paper investigates the effect of the North American Free Trade Agreement (NAFTA), a prime example of this new regionalism, on foreign direct investment in Mexico. Using data from the Mexican Ministry for Trade and Industrial Development (SECOFI), the major finding is that NAFTA has raised investment from the partner countries, the United States and Canada, but not from the rest of the world. The increasing use of outsourcing and a commitment effect conveyed by the agreement are candidate explanations for a change in investors' sensitivity to the determinants of foreign direct investment.
Keywords: Foreign Direct Investment, Economic Integration, Mexico, NAFTA
JEL Classification: F15, F21, F23
Suggested Citation: Suggested Citation