Mexico: Ebrard Prepares to Launch New FDI Promotion Unit

By February 2020Mexico

Led by the influential Marcelo Ebrard, the Ministry of Foreign Affairs (SRE) is preparing to hold its annual meeting of ambassadors and consuls general (REC 2020) on 7 January. Senior Mexican diplomats will gather in Mexico City for the three-day event to set the country’s 2020 agenda on foreign affairs. Horizon’s contacts report that the upcoming REC is particularly relevant for foreign investors and operators, as Ebrard’s team will introduce the ministry’s new foreign investment unit to the assembled diplomats. Replacing the Ministry of Economy (SE)-led ProMexico, which had been mandated to promote FDI until its disbandment last year, this new unit will build on Mexican embassies’ infrastructure and personnel to implement the administration’s FDI strategy.

The emergence of the new unit highlights Ebrard’s increasing sway over policies affecting the business environment for foreign companies in the country. It also consolidates his influence on the cabinet as a business-friendly, moderate leader. Of note, Horizon’s contacts at the foreign ministry report that the new unit will champion private investment in the energy sector, with Ebrard’s deputy and right-hand woman Martha Delgado actively getting involved in such issues and meeting company representatives. The new FDI unit intends for ambassadors and senior diplomats to take the lead in economic promotion abroad, relegating other agendas to secondary importance. This will be a major shift of Mexican Foreign Service (SEM) members’ traditional roles regarding FDI, which have focused on administrative and logistical tasks rather than meaningful promotion activities.

This shift is a positive development for IOCs in the country, as SRE’s growing influence on FDI will enable new, safe channels of communication for companies to effectively engage the administration. Investors will be able to raise their concerns and convey key messages to SRE appointees directly coordinated by Ebrard. Horizon’s contacts report that the unit is expected to kick off operations in March, following amendments to SRE’s internal regulations. Ebrard’s mandate will thus be expanded to facilitate energy projects, despite potential reluctance from key energy appointees. His ultimate goal is to increase FDI in order to boost economic development. This would help overcome negative spillover effects from the administration’s decisions to cancel major infrastructure plans and put public-private partnerships on hold in various sectors.

The creation of the new FDI unit under Delgado’s direct supervision has drawn some criticism, though. Horizon’s contacts report that SE is growing frustrated with SRE’s increased meddling with FDI promotion policies. Indeed, SE has lost traction in the cabinet following Economy Minister Graciela Marquez’s inability to retain the lead on FDI activities despite nominally being responsible for coordinating actions in this area. SE is mandated to analyze technical data regarding foreign investment promotion, yet Marquez and her deputies resent the fact that SRE has taken over implementing actual policies to attract new FDI. Similarly, a group of SEM diplomats have reacted coldly to the looming shifts to their traditional roles abroad; the Foreign Service is well-known for inertia and strong bureaucratic resistance to changes.

SEM politics and cabinet tensions risk undermining the FDI unit’s operations, which by extension could block the emerging backchannels in the administration available for IOCs. However, we assess this development as unlikely, since Ebrard will use his strong leverage in the cabinet to overcome opposition to his project. His team has already drawn on his successful record as a problem-solver to assuage concerns about SRE’s growing overlap with SE in regard to FDI activities. At the same time, they are capitalizing on Marquez’s lack of political acumen to move forward with their plans. Well-positioned in the administration and respected among ambassadors, Ebrard also has enough influence to align most SEM diplomats with his economic promotion agenda, in our view.