Relationship between South Korea’s foreign direct investment in Mexico and its impact on bilateral trade and technology transfer

Abstract

This study analyzed the relationship and effect of South Korean Foreign Direct Investment (FDI) in Mexico, Korea's high-technology trade balance, and the peso-dollar exchange rate, in order to determine if these variables maintain a long-term relationship and how this relationship might influence the economic and industrial dynamics between the two countries. Using a quantitative approach based on cointegration regression of time series data from 1990 to 2023, a cointegration relationship between the analyzed variables was confirmed. Historical investment patterns were identified, the behavior of technology trade was analyzed, and the impact of the exchange rate was evaluated. Although no significant short-term effects were observed, the long-term link shows that these variables tend to move together, adjusting toward a structural equilibrium relationship. The study concludes that South Korean FDI in Mexico is influenced by the performance of its technology trade balance and by exchange rate conditions, thus validating the proposed hypothesis. The study provides a solid basis for understanding how the economic and strategic decisions of an Asian country with high technological capacity can find in Mexico a key partner for productive diversification and international expansion.