Economics: Regional differences in economic activity and FDI flows

MEXICO - Report 23 Jan 2023 by Mauricio Gonzalez and Francisco González

It is well known at this point that economic growth in the third quarter of 2022 and during October was much stronger than anticipated thanks to greater dynamism in services and sustained rates of growth in manufacturing. But this week we turn our attention to the disparities in regional behavior in both aggregate economic growth and the sectors in the various states that managed to recover in the wake of the 2020 pandemic crisis.

The regions and specific states that have been outperforming pre-pandemic levels are those most geared toward export manufacturing, followed by those in which a major recovery in tourism has reanimated related services. Manufacturing in some states with a high export focus have seen robust growth and have already surpassed 2019 production levels, while some continue to lag, such as those most affected by semiconductor shortages. Looking further ahead, such states have also tended to be the main beneficiaries of the nearshoring trend and the Foreign Direct Investment flows that accompany it, while the southern states have benefited comparatively much less from the demand triggered by this phenomenon.

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