By Paul Kiernan 
Of DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)--Mexico has moved back into the world's top-10 most attractive countries for foreign direct investment as U.S. companies seek low-cost production closer to home, consulting firm A.T. Kearney said Monday.

Mexico's attractiveness for investment ranks 8th worldwide this year, up from 19th at the end of 2007, according to A.T. Kearney's FDI Confidence Index for 2010, which is based on a survey of global business executives.

"One of the principal reasons this happened is the high preference of U.S. investors to invest in Mexico," said Ricardo Haneine, A.T. Kearney's local director. "There is a tendency to invest in nearby countries and also to consolidate and deepen the supply chain."

Among North American investors, Mexico ranked as the fifth most-favored destination for investment in the firm's 2010 index, behind the U.S., China, India and Brazil. It was ranked 10th in 2007.

Of the estimated $13 billion Mexico received in foreign direct investment in 2009, A.T. Kearney said 53% came from the U.S. and 6% came from Canada. The firm doesn't have an estimate for foreign direct investment in 2010.

U.S. companies establish operations in Mexico because of its location and relatively cheap labor costs.

Manufacturing, the sector traditionally targeted by foreign investors in Mexico, was a key driver in Mexico's ranking this year. The index placed Mexico at No. 3 for investment in light manufacturing--which includes goods such as electronics, furniture and textiles--and No. 10 for heavy manufacturing of products such as autos and chemicals.

On the other hand, Mexico ranked as the 24th most-attractive country for investment in financial services, 27th in non-financial services and 21st in telecommunications.

"The implication we see for Mexico is to focus on attracting investment mainly from the U.S., in traditional sectors, taking advantage of the restructuring of different industries," Haneine said.

A.T. Kearney's index placed Mexico among the top-10 most-attractive countries for foreign direct investment in from 2001 through 2003, at one point ranking as high as No. 3 globally.

Mexico then fell out of favor with international investors, falling to No. 22 in 2004 and No. 16 in 2005.

"Mexico was the most attractive country in Latin America to make investments, after the change in government," Haneine said, referring to the 2000 presidential election in which the Institutional Revolutionary Party was ousted from power after 71 years.

"Afterwards, a lot of changes didn't materialize, structural reforms that the country needed weren't made...and Mexico fell on the agenda of global investors," he added.

-By Paul Kiernan, Dow Jones Newswires; (5255)5980-5178, This e-mail address is being protected from spambots. You need JavaScript enabled to view it