4 minute read 18 Mar 2021
Curvature of planet earth

Geopolitical issues delay investment and M&A intentions in Mexico

Investment priorities focus more on managing the long-term impact of the pandemic and digitization, less on M&A.

In brief
  • The vast majority of Mexican executives say that they accelerated their strategic and portfolio reviews in response to the pandemic.
  • Digital transformation is top-of-mind, as Mexican companies look for ways to drive revenue growth and scale their businesses.
  • M&A appetite wanes in the shadow of mid-term elections and geopolitical challenges.

The COVID-19 pandemic has had a significant negative impact on Mexico’s economy — something that is reflected in the results of the latest EY Global Capital Confidence Barometer (pdf). Although four-fifths (81%) of Mexican executives say they performed the same or better relative to their competitors during the pandemic in terms of operational stability, approximately two-thirds say they expect it will take until 2022 and beyond for revenues and profits to return to pre-pandemic levels.

In an effort to build resilience into their businesses, almost every Mexican executive surveyed (97%) says that their company conducted a comprehensive strategic and portfolio review in 2020. In fact, 87% acknowledge that they accelerated this assessment in direct response to the pandemic.

Mexican companies are predominantly looking at ways to manage the longer-term impact of the pandemic on their business and sector. Strategic considerations also include assessing opportunities for investment to boost technology and digital capabilities. Specifically, Mexican companies are looking to accelerate the digitization of the customer journey and to attract and retain new customers.

Digital transformation propels strategic decision-making

In response to the pandemic crisis, an overwhelming majority (89%) say that their company is undertaking a significant business and technology transformation program. Although 32% say they believe their digital transformation programs overperformed during the pandemic relative to their competitors, 27% admit their programs underperformed. In elevating investment in digital transformation, technology and digital capabilities, Mexican executives indicate that their priorities are to drive revenue growth and create a more scalable operating model.



of Mexican respondents say that their company is undertaking a significant business and technology transformation program.

However, Mexican companies face headwinds in their digital transformation efforts, and strategic initiatives more broadly, with Mexican executives indicating that their biggest internal challenges include a culture of inertia and the tension between the need to transform versus the predictability of current operations.

Prior to the pandemic, Mexican companies were slower to adopt digital technologies than global companies because consumer adoption rates were lower than other parts of the world. Access to digital technologies remains an issue. However, the pandemic has made clear that the fastest route to competitive advantage is through digital transformation and the accelerated adoption of digital tools and technology.

M&A appetite wanes as Mexican companies wait for more certainty across the geopolitical landscape

Given the emphasis on digital transformation, it is unsurprising that digital strategy and technology alignment are also the top drivers of M&A strategy. Overall, however, M&A intentions among Mexican executives are significantly lower than their global peers, with 37% of Mexican executives expecting their company to pursue M&A in the next 12 months. That compares with 47% of global executives and is below the 10-year 52% average for Mexican executives. Further, 63% of Mexican executives anticipate a slowdown in M&A activity over the coming year. In part, Mexican companies may be taking a wait-and-see approach in the lead up to Mexico’s mid-term elections later in 2021.

Geopolitical challenges may also be playing a role in M&A activity, with 79% of Mexican executives saying they have held back or deferred planned investment until they have a clearer and picture of the geopolitical landscape. Lower M&A intentions within Mexico create opportunities for international investors looking to enter Mexican markets. Although new regulatory policies may limit investment in utilities, markets across most sectors in Mexico are ripe for foreign investment. Mexican companies anticipate growth and opportunities over the next three years closer to home (77%), with four of the top five investment destinations being in Latin America.

Mexican companies build resilience in an uncertain world

Although the COVID-19 pandemic arguably has created the greatest disruption for companies over the past year, disruptive forces will continue to challenge businesses and economies long after the pandemic has faded. Through their strategy and portfolio reviews, and in ramping up investment in digital transformation, technology and digital capabilities, Mexican companies can build resilience and agility to compete in an uncertain world.


The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article