The governance framework is misaligned with the development challenge. Mexico’s FDI architecture — open, decentralised, and market-reliant — was calibrated for attracting investment volumes, not shaping investment quality. The dissolution of Proméxico in 2019 removed the only institution with a dedicated promotion mandate, and Plan México, whilst the most ambitious industrial strategy in a generation, has yet to introduce the conditionality, enforcement mechanisms, or institutional infrastructure required to convert FDI into durable upgrading.
The geopolitical window is real but narrowing. US–China decoupling has created a structural opening that Mexico is uniquely positioned to exploit, but the USMCA review in 2026 and intensifying competition from Vietnam, India, and other emerging economies mean that comparative advantages rooted in geography and trade agreements alone are not permanent. Capturing the moment requires institutional action, not passive availability.
Institutional design, not factor endowments, is the binding constraint. The Costa Rica and China comparisons demonstrate that deliberate sector targeting, legislatively anchored promotion institutions, and performance-conditioned incentives, not proximity or labour costs, determine whether FDI generates structural transformation. Mexico must adapt this logic within its own democratic and USMCA-constrained political economy.
Mexico needs to undertake four reforms for long-term industrial upgrading: a unified national investment promotion authority; performance-conditioned incentives; a structured domestic supplier upgrading architecture; and coordinated investment in skills and infrastructure as a prerequisite for geographic FDI diversification.