Mexico Draws Investor Interest

Aug.12.11 | About: iShares MSCI (EWW)

Drug cartel related violence in Mexico has caused thousands of deaths and dampened economic growth. Nevertheless, a new study found that foreign investment into Mexico’s economy seems to be on the rise.

According to the Mexico’s Economy Ministry, foreign direct investment (FDI) totaled $31 billion between December 2006 and December 2010, up $1 billion from the previous four year, according to Financial Times.

The six northern states, which have experienced the brunt of the drug cartel’s violence, make up a greater proportion of foreign investments into the country, accounting for 28.5% during the four years. Efficient export production and the North American Free Trade Agreement (NAFTA), which allowed for cheaper labor, are the two major contributing factors that backed the northern region of Mexico.

The Cartels extorted businesses in Mexico’s cities along the border region. However, large corporations were rarely affected.

“The big corporations manage everything in checks and international transfers, they don’t work with cash,” Juan Benavente, deputy secretary of the economy for northern Chihuahua state. “Here the local businesses manage everything in cash, depositing in banks here in the city, so they’re more vulnerable.”

International tourism to Mexico jumped 2.1% for the first five months of 2011 year-over-year, reports Girish Gupta for Minyanville.

Mexico’s Finance Minister projected that the country’s second-quarter GDP expanded 3.5% year-over-year, according to Reuters. The Minister also forecasts economic growth of 4.3% this year.

iShares MSCI Mexico Index ETF (NYSEARCA:EWW)

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Max Chen contributed to this article.

Disclosure: None