The impact of Transnational Corporations through their activities across Global Value Chains: New Evidence for Mexico

Abstract: This paper analyses the economic impact of Transnational Corporations through their activities across Global Value Chains (GVCs), using Mexico as baseline country. By exploiting the UNCTAD-Eora Global Value Chain database, we conduct an exploratory research methodology. We first unfold the relationship between GVC trade and economic development by disaggregating GVC trade into its two components (Foreign value-added and Indirect value-added). Further, we examine the actual volumes of value-added trade across GVCs in absolute terms by comparing Mexico to other Developed, Emerging and Developing Countries from Latin America. Lastly, we compute Mexico’s GVC participation and upstream position indexes in comparison to its major trading partners. Overall, our results suggest that TNCs’ activities in Mexico have a detrimental impact over Mexico’s economic role and level of economic integration across GVCs. The country’s economic role is restricted as a merely net importer of value-added trade, and while GVC participation remains high, its negative upstream position indicates high losses in their production length and a high risk to remain locked in lowvalue adding activities.