Mexico draws over $7 billion in foreign investment at Davos

DAVOS, Switzerland Fri Jan 24, 2014 1:28pm EST

Mexico's Finance Minister Luis Videgaray looks on after handing in the fiscal reforms to congressmen at the Congress building in Mexico City September 8, 2013. REUTERS/Tomas Bravo

Mexico's Finance Minister Luis Videgaray looks on after handing in the fiscal reforms to congressmen at the Congress building in Mexico City September 8, 2013.

Credit: Reuters/Tomas Bravo

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DAVOS, Switzerland (Reuters) - Pepsico, Nestle and Cisco on Friday announced major investments that together totaled more than $7 billion in Mexico, where the government has pushed through a series of economic reforms that aim to boost foreign investment and growth.

Mexico has embraced free trade policies in recent decades, and has drawn growing investment interest after President Enrique Pena Nieto made a landmark reform drive in his first year in office, pushing major telecommunications, energy, banking and tax legislation through a divided Congress.

"It is very encouraging to see the enthusiasm that has been awoken by our country due to the structural changes that are happening," Pena Nieto said at the World Economic Forum (WEF) in Davos.

Pepsico (PEP.N) 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 Pena Nieto's tax overhaul.

Nestle (NESN.VX) 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.

In the third major investment announcement at Davos, Network equipment maker Cisco Systems Inc (CSCO.O) said it would direct $1.35 billion into Mexican manufacturing operations and a support center this year.

Pena Nieto has said that foreign direct investment (FDI) in Mexico totaled $28 billion during the first 9 months of 2013.

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

OIL PROSPECTS

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

Lozoya said that Pemex and Lukoil would share information on the deep water and shale deposits that Mexico currently lacks the expertise to tap.

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.

Lozoya said he met with various companies in Davos that expressed interest in exploration and production projects in Mexico as well as refining, petrochemicals and transportation businesses that are now open to private investment.

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.

(Reporting by Martinne Geller and Dmitry Zhdannikov in Davos and Lizbeth Diaz in Mexico City; Editing by Simon Gardner, Stephen Powell and Meredith Mazzilli)

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