Published On: Thu, Jul 24th, 2014

Yucatan is not attracting foreign investment… Should we be concerned? 

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The June 2014 report from the Center for Competitiveness of Yucatán (CCY), which gathers data regarding foreign direct investment (FDI), has concluded that Yucatán’s economy is not a focus of interest abroad.  The numbers, all drawn from official reports, give an overview of a lethargic economy that in 2013 reached only $39 million USD, when during the same period Mexico captured a record high of $35.2 billion USD. 
“This represents only 0.17% of total foreign investment in the country,” says Gustavo Cisneros Buenfil, CCY Director.  “Yucatan’s participation in the national flow of FDI has never been significant, and has even been declining in recent years.” 
According to Nicolás Madáhuar Boehm, president of the Business Center of Merida (Coparmex), foreign investors see Mexico as a fertile ground for business, but most of these major companies do not even know that Yucatán exists, or if they do, they do not consider it worthy of investment, unlike the Northern and Midwest states of Mexico where foreign firms have been investing billions of dollars of late.
But why is Yucatan not attractive to foreign investors despite the great number of competitive advantages available, such as geographic location, maritime port services, safety, low crime rate, quality of life, and warm weather …? 
For Madáhuar and Cisneros, there are multiple factors that interact and play against us: poor infrastructure, lack of leadership, low quality of tourism promotion, ignorance, inefficiency, corruption … and in the end, it all comes down to two questions: What do we sell? And to whom can we sell it? 
Nicolás Madáhuar Boehm and Gustavo Cisneros Buenfil

Nicolás Madáhuar Boehm and Gustavo Cisneros Buenfil

“First of all, there is a connectivity issue,” the business leader continued; “It has been said time and again that the location of the Peninsula, a kind of strategic hinge, should be one of our main advantages, but a privileged geographic situation is useless without connectivity. And the reality is that our communications infrastructure is poor compared to the rest of the country.”
FDI is a capitalization factor Yucatan has refused or failed to exploit, although it could be key to transform our state into one of the most powerful in Mexico. “FDI and economy are interdependent: if you lack dynamism, no investment is generated and vice versa.  It is a vicious circle that will not be broken because we have spent too many years doing things the wrong way,” says Madáhuar. 
“In the past six years the idea of promoting Yucatán as a place to do business has been abandoned; it did not seem important to attract investors to generate wealth and create jobs,” he says. “Though government authorities are currently working on this, so far it is not clear what we are out to sell abroad. And as a result, nobody is buying.”
1. Foreign Investment in Yucatan.
How has Yucatán fared in foreign direct investment from 2000 to 2013?
“The annual rate has remained more or less steady, but the uptake has been poor, very poor,” says Buenfil. “You can see a peak in 2001, but after those $133 million USD, FDI has been virtually at ground level.
“During those years, we see no difference regarding which political party is in office; the marginal efforts at all levels of government have obviously failed to attract foreign capital,” he adds.
“The truth is that Yucatan, unfortunately, does not exist on the map of foreign investment,” said Nicholas Madáhuar Boehm, president of the Business Center of Merida.
“Probably the most exciting aspect of the percentage structure is that from 2007 to 2013, 70% of FDI came from new investments, even though compared to the 2000 to 2006 timeframe, there were $40 million USD less” Cisneros continued.  “However, the important thing is that there have been new investments.”

FDI Yucatan (1999 - 2013)

2. The origin. When we look at which major countries have invested in Yucatan from 2000 to 2013, we notice that, not surprisingly, 73% of the investment comes from the United States and then we have Singapore, Canada, Hong Kong and China.
These five nations account for 27% of FDI in Yucatan, “said Cisneros Buenfil.
“Like the rest of the indicators contained in the new report, we see very disappointing figures: for example, China’s investment in 13 years amounts only $13 million USD,” he adds.  “This chart also shows when the investments were made: U.S. and China invested from 2000 to 2006 and then their participation fell sharply.  On the other hand, investments from Singapore and Canada occurred mostly during the last administration.”
3. “Merida is an unknown.”  According to Buenfil, the reason behind the reluctance of foreign investment in Yucatan is the limited knowledge of our state beyond national borders.
“Nobody knows Mérida, and just a few know about Yucatán.  It’s a shame,” he says. “Many Yucatecans believe that only uneducated people are unaware of Yucatan’s geographical location, but that’s not true,” he says.  “Unfortunately, even experienced tourists believe that Merida is just a small town away from Cancun: ‘How long will it take me to come and go?  Can I leave and come back on the same day?  And when you tell them that they can stay for two or three days in the city, they look puzzled and ask: ‘Are there any decent hotels?’“.
“That’s the idea they have of us.  Mérida, the capital city of the state of Yucatan, built in the XVI Century where the sacred Mayan city of T’Ho used to stand, with the second largest Historic Center Area in the country, is not identified by anybody.  When foreign tourists hear the name “Yucatan”, they think only of Cancun, the Riviera Maya and Chichen Itza.  Mérida is just an unknown place.”
4. In the national context.  Buenfil:  “Most of the 32 states have received more FDI than Yucatán in recent years.  From 2000 to 2010 Yucatan was ranked 23rd, meaning that 68% of the states received more foreign capital.  And the situation has deteriorated since 2010, when Yucatan fell to 27th place: that means that 82% of the states of Mexico have received more FDI than Yucatán. I think at this point we are below the rest of the economy: Yucatán has 1.5% of GDP, but FDI is only at 0.17%. The concern is that although we have never been at the top, our decline has become more pronounced over the last three years.”
graphs - copia
5.-By state.  Last year, Yucatan attracted 39 million dollars of foreign direct investment, Buenfil Cisneros recalls.  “If we compare Yucatan’s FDI attraction with that of other states, we can see five states with a similar GDP: Quintana Roo, Durango, Guerrero, Oaxaca and Hidalgo. These states have an economy the same size as the Yucatan, but Hidalgo is the only state that received less FDI in 2013.  Quintana Roo, on the other hand, captured 12 times more FDI than Yucatan.”
“If the comparison is made with the three states with similar GDP per capita: San Luis Potosi, Sinaloa and Morelos, only the latter is below Yucatan,” he concluded.

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