Insecurity will barely affect Mexico's FDI potential

Outlook

The lack of correlation between FDI flows and peace level fluctuations indicates the risk appetite of foreign companies determined to work in states that present business opportunities, regardless of violence and crime rates. Businesses operating in less peaceful states will spend significant amounts on security, including protection payments to criminal groups.

A business culture in which extortion is normalised, effectively becoming a parallel tax, could see cartels benefit from President Enrique Pena Nieto's FDI drive. While that would likely create a perverse stability within cartel territories, it would also strengthen other criminal organisations and could trigger violence along cartel boundaries as rival groups fight for access to areas of heavy investment.

Impacts

• Foreign companies' willingness to invest in Mexico's least peaceful states suggests that FDI will not be a force for security reform.
• Crime groups will benefit from foreign companies based in their areas, making deals, and normalising their presence in the business culture.
• Fear of upsetting the status quo for foreign businesses could discourage Pena Nieto from tackling some criminal structures.