Mexico lures $6 billion in fresh foreign investment at Davos

DAVOS Fri Jan 24, 2014 10:13am EST

DAVOS Jan 24 (Reuters) - Pepsico and Nestle on Friday announced major investments worth a combined $6 billion in Mexico, where the government has just pushed through a series of economic reforms that aim to boost foreign investment and growth.

Separately, Mexican state-run company Pemex will sign a cooperation memorandum with Russia's No.2 oil producer Lukoil on Friday, Pemex chief executive Emilio Lozoya told Reuters as the country is opening up its energy sector in a move to boost production.

Pepsico said it would spend $5 billion in Mexico over five years to strengthen its food and beverage business, adding it planned to expand its production capacity by adding new manufacturing lines and expand delivery routes.

The company said the investment was expected to create 4,000 new jobs.

The Pepsico investment comes despite a new levy on soft drinks and junk foods included in President Enrique Pena Nieto's economic reform drive, which spans telecoms to energy and taxes.

Nestle said it planned to invest $1 billion in Mexico over five years, building two new factories and expanding a third in its sixth-biggest market.

The world's No. 1 food maker said it would build an infant nutrition factory in Jalisco and a pet-food factory in Guanajuato, as well as expanding an existing cereal factory.

The investment would create 700 direct jobs, Nestle said.

The Mexican factories will produce goods for the wider region. For example, about 40 percent of the output from the baby food factory will be exported to Latin America and the Caribbean.

Pena Nieto said at Davos on Thursday that foreign direct investment (FDI) in Mexico totaled $28 billion during the first 9 months of last year.

FDI was boosted last year by the Belgian-based beer giant Anheuser-Busch InBev's acquisition of Grupo Modelo , which went through at the end of May and brought in about $13 billion.

The planned cooperation between Lukoil and Pemex comes after Pena Nieto last month signed a bill into law that ended the country's 75-year-old oil and gas monopoly.

Under the legislation, which is still being mapped out, foreign companies will be able to enter the sector as Pemex is seeking to bring in expertise and boost efficiency.

"There are dozens of new players who now come and look at the opportunities that are opening up in Mexico," Pemex CEO Lozoya said.

As a private company, Lukoil is struggling to get large new deposits in Russia, including offshore, and is actively pursuing a foreign expansion to maintain its production levels.

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