Industry Trend Analysis - Trump Protectionism Poses Risks For Pharmaceutical FDI - APR 2017

BMI View: Mexico's position as one of the most attractive pharmaceutical markets for foreign direct investment (FDI) in the Latin America region is under threat from the protectionist policies of US President Donald Trump. The dominance of US companies in Mexican pharmaceutical FDI creates risk for market growth , and could negatively impact the investment strategies of multinational drugmakers. T he implementation of corporate incentives and protectionist tariffs by the Trump administration will weigh on investmen t flows over the medium term, although Mexico will still remain one of the leading Latin American pharmaceutical investment opportunities.

The Mexican pharmaceutical sector has benefitted from significant foreign direct investment (FDI) from US companies; however, this trend may be stemmed by Trump's protectionism, which poses downside risks for market growth and could negatively impact the investment strategies of multinational drugmakers. Mexico has been an attractive destination for pharmaceutical FDI due the country's strategic geographic location, diverse industrial base, limited investment barriers, increased quality certifications and improved regulatory framework. As a recent example, in 2016 Mexico's Federal Commission for Sanitary Risk Protection (COFEPRIS) began accepting English-written documentation for the registration of innovative drugs ( see ' Administrative Streamlining Will Strengthen Multinational Drugmaker Dominance ' , August 19 2016).

The increasing attractiveness of the Mexican pharmaceutical market has been matched by the growing presence of multinationals. According to ProMexico, the Mexican investment agency, 20 of the 25 'most important' pharmaceutical companies worldwide have an operational presence in the country (including manufacturing sites). Our own analysis has identified the following companies as having formal Mexican operations: Merck & Co, Boehringer Ingelheim, Schering Plough, Bayer, AstraZeneca, Pfizer, GlaxoSmithKline, Bristol-Myers Squibb, Eli Lilly, Roche and Sanofi. The FDI data reflects the burgeoning multinational presence. Between 2005 and 2014, the Mexican pharmaceutical sector received USD3,172mn of FDI. The US was by far the largest contributor, with US-based companies investing approximately USD1,154mn (36% of total) over the 10-year period.

Reliance On US FDI Creates Risk
Mexico - Pharmaceutical FDI By Country (USDmn), 2005-2014
Source: ProMexico, BMI

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