The controversy about foreign direct investment as a source of growth for the Mexican economy

Abstract

This paper investigates the ways in which foreign direct investment (FDI) has really affected economic growth in Mexico. Considering that special efforts have been made to rely on an outward industrialisation strategy, we test the FDI-led growth and export-led growth hypotheses in Mexico with multivariate analysis using a Autoregressive Vector model. Results show that support for FDI-led growth is not as strong as for export-led growth. However, NAFTA has been conducive in improving the potential effect of foreign capital inflow. The estimates show that both private and foreign capitals have statistically significant effects on growth. They also show that manufacturing FDI, exports, labour force and human capital have significant positive effects on the economy.