Geopolitical Risk and Uncertainty in Mexico's Foreign Direct Investment

Geopolitical risk, the strength and direction of association with uncertainty factors, and new foreign direct investment (FDI) investments by country of origin as a measure of nearshoring in Mexico led to the objective of this chapter: to analyze the relationship between new FDI investments in Mexico by country of origin and Mexico’s geopolitical risk, the United States’ trade policy uncertainty, and Mexico’s economic policy uncertainty, during the period from the first quarter of 2006 to the second quarter of 2024. The methodology was based on an analysis of Pearson and Spearman correlation coefficients, selected using the Shapiro- Wilk normality test. The main results establish that changes in Mexico´s new FDI investments by country of origin are associated with changes in Mexico’s geopolitical risk index, the United States’ trade policy uncertainty index, and Mexico´s economic policy uncertainty index. Consequently, by reducing risk and uncertainty, it is possible to establish public policies that increase new FDI investments and, therefore, nearshoring in Mexico.