During a three-day visit to Mexico, U.S. Treasury Secretary Janet Yellen discussed various topics, including the long-standing issue of combating fentanyl. However, a significant agreement reached between the U.S. and Mexico on foreign investment review also garnered attention.
According to a U.S. Treasury Department announcement, the U.S. and Mexico plan to establish a bilateral working group for foreign investment review. Both countries' finance ministers have signed a Memorandum of Intent (MOI). The U.S. Treasury Department stated that the new agreement addresses national security risks posed by certain foreign investments, especially in areas like technology, critical infrastructure, and sensitive data.
On Thursday, Yellen, during a joint press conference, mentioned that the working group aims to address threats to national security posed by certain foreign investments. By sharing and exchanging knowledge and experience from the U.S. Committee on Foreign Investment (CFIUS), the U.S. will assist Mexico in strengthening its screening of foreign investments.
CFIUS, established nearly 50 years ago, encompasses almost all U.S. government departments and agencies, primarily reviewing foreign investments in U.S. companies. The U.S. Treasury Department's press release mentioned that over the past decade, more than 20 countries have implemented or strengthened investment review systems, with many more in the process of developing such systems. In an evolving and interconnected threat environment, CFIUS is collaborating with governments worldwide to promote more robust foreign investment review tools.
While no specific country was named, considering the tense U.S.-China relations and China's growing role as a fast-increasing source of foreign investment in Mexico, there is widespread speculation that the U.S. initiative might be targeting China. At Thursday's press conference, Yellen seemed to deny this, stating that as long as there is proper national security review and these investments do not pose security concerns for Mexico or the U.S., they absolutely do not oppose Chinese investments in Mexico and exports to the U.S.
Although China's overall share is not high, it is becoming one of the fastest-growing sources of foreign investment in Mexico. According to a report by the Federal Reserve Bank of Dallas in April this year, Chinese foreign direct investment (FDI) into Mexico increased to $386 million in 2021, significantly higher than the $38 million in 2011. Even with a decline to $282 million in 2022, the scale remains much higher than the historical average. The report also showed that Chinese capital mainly flows into manufacturing plants and regions that are key exporters to the U.S.
The U.S., Mexico, and Canada agreed to update the North American Free Trade Agreement in 2018. The U.S. has always been Mexico's largest source of foreign investment, accounting for nearly half. In 2022, U.S. FDI into Mexico was $15 billion. Other major sources of foreign investment in Mexico are European countries, totaling $4.3 billion, followed by Canada with $3.8 billion, Argentina with $2.3 billion, and Japan with $1.8 billion.
In addition to strengthening cooperation in foreign investment review, Yellen also revealed in her latest speech that the two countries have begun discussions on cross-border payments. Yellen stated that as economic integration between the U.S. and Mexico deepens, strengthening investment security reviews is crucial. She cited data indicating that last year's bilateral trade between the U.S. and Mexico likely exceeded $850 billion, and this year, Mexico has become the U.S.'s largest goods trading partner.
Another important topic of Yellen's visit was promoting cooperation with Mexico to combat the cross-border flow of fentanyl. Convincing the Mexican government to cooperate on this issue is a significant task for U.S. politicians.
Fentanyl, a potent opioid, has become the most lethal drug in the U.S., being the leading cause of death among Americans aged 18 to 49.
However, the U.S. blames Mexico and China for the crisis. The U.S. accuses a large amount of fentanyl of being produced in Mexico and illegally entering the U.S., with Mexico importing the chemical components for pharmaceutical production from China. The U.S. has requested the Mexican government to share data on imports of drug components from China and reduce imports.
The Mexican government has refused to take the blame. Mexican President Andrés Manuel López Obrador has described the U.S. drug crisis as a "social decay issue" and stated that U.S. politicians should not use Mexico as a scapegoat for their country's drug abuse problems. On the fentanyl issue, López Obrador's government has not cooperated as vigorously as the U.S. would like.
As the U.S. election heats up, U.S. officials have become increasingly aggressive in their remarks about Mexico. In late August's Republican primary debate, almost all presidential candidates supported bombing fentanyl labs along Mexico's southern border. Florida Governor Ron DeSantis even threatened to send special forces to Mexico on his first day as president.
Currently, the U.S. mainly pressures drug cartels and suppliers through its own sanctions, announcing new sanctions during Yellen's visit this week. On Wednesday, the U.S. Treasury Department sanctioned 15 individuals in Mexico suspected of exporting fentanyl to the U.S., as well as two Mexican companies directly or indirectly linked to the Beltrán Leyva Organization (BLO).
Earlier, the U.S. Treasury Department established a new "Anti-Fentanyl Task Force" aimed at more actively scrutinizing the financial status of suspected drug dealers.
