The US Treasury Department on Thursday signed an agreement with Mexico’s Treasury Department to work together to improve foreign investment screening to improve national security, including sharing information on best practices.
The Biden administration has been promoting Mexico as a major investment destination for U.S. supply chains and wants to ensure the country has a strong screening system to handle infiltration.
The initiative aims to help Mexico create a screening body similar to the Committee on Foreign Investments (CFIUS), led by the Treasury Department, to review purchases of US companies by foreign-owned companies and other inward investments.
“Like our own investment screening regime, CFIUS’ greater engagement with Mexico will help maintain an open investment climate while monitoring and addressing security risks, and make both our countries more secure,” announced the memorandum of understanding with Mexican Finance Minister Rogelio Ramirez. De La O.
Yellen is on a three-day visit to Mexico City to improve economic ties and increase cooperation to stem the flow of the deadly opioid fentanyl into the United States through Mexico, a frequented route by pioneers from China.
The “near-shore” boom
Mexico has been attracting more manufacturing investment to supply the U.S. market, raising concerns that China or other countries could use it as a backdoor to avoid restrictions on U.S. export controls on sensitive technologies such as semiconductors.
It brought $32.2 billion in foreign direct investment to Mexico in the first three quarters of 2023.
A $5 billion Tesla electric car factory is one of the most high-profile projects, prompting Chinese suppliers to announce plans to invest close to $1 billion.
While increased scrutiny from CFIUS in recent years has sharply curtailed Chinese investment in the U.S., Yellen told reporters that China does not want to block payments into Mexico or the U.S. where there are no national security concerns.
Chinese investments are welcome
If Chinese companies want to manufacture in Mexico for the U.S. electric vehicle battery market, they must comply with the Treasury Department’s new “foreign company of concern” rules, which limit Chinese control of a manufacturing subsidiary to 25%.
“If Chinese involvement triggers these rules designed to prevent overdependence on China, it doesn’t,” Yellen said.
Private Chinese companies are also taking advantage of domestic tax incentives to invest in U.S. production of other clean energy products, and “they can play a role” in creating a diverse supply base in the sector, he said.
The Treasury Department and other members of CFIUS continue to work with governments to improve their investment investigations, including the U.S. Departments of State, Defense, Homeland Security, and Commerce. More than 20 countries, including Mexico, have introduced or updated their regulations in the past decade.
Cooperation in the field of payments
Yellen said Treasury officials and Mexico’s Treasury Department discussed cross-border payment systems on Thursday, including the possibility of further integrating them, which could increase trade and investment benefits.
“I see real potential here, and I welcome more research into connectivity and other ways to improve connectivity between the U.S. and Mexican payment systems,” Yellen added in prepared remarks.