Akira Yamada
Embassy of Japan in Mexico
View from the Top

Japanese Expansion Has Not Fallen Shy in Mexican Partnership

Thu, 09/01/2016 - 15:48

Q: How prosperous is the economic relationship between Mexico and Japan, and how is it transforming the automotive industry?

A: The commercial relationship that Japanese OEMs have with Mexico is fundamental to their global operations. In five years, the number of Japanese companies in Mexico has more than doubled, hitting 814 by 2014 from 399 in 2009. At the same time, the total number of Japanese citizens in Mexico has grown at a steady 10 percent per year. There is no other country in the world where Japanese investment has increased to this level, mostly in the Bajio region, and Japanese ventures are expected to diversify into other industries.

Mexico’s economic stability, coupled with an increasing understanding of Mexican culture, has made the country extremely attractive to Japanese companies. Mexico’s light vehicle production and exports have reached historic proportions, as has domestic consumption. Furthermore, the country’s goods routes allow easy logistics due to its competent infrastructure and geographical position, adding to its reputations as an investment powerhouse.

Mexico and Japan’s Economic Partnership Agreement (EPA) came into force in 2005, and after its 10-year anniversary the outlook of the commercial relationship between both countries seems favorable. Honda and Mazda’s car production here is a taste of what is yet to come. There are multiple suppliers following major OEMs into the Mexican market, not only in the Bajio region but also in neighboring states. Toyota is the largest car company in the world and has not been shy in its expansion efforts in Mexico. In addition to its Tijuana truck factory, Toyota’s new project in Guanajuato will see at least 50 additional suppliers come into the Mexican market.

Q: How will the Trans-Pacific Partnership (TPP) deal impact Japanese companies that are establishing operations in Mexico?

A: Beyond the benefits that a TPP agreement may generate for its members, Japan’s relationship with Mexico will not see many changes since our EPA has allowed us to create strong ties for several years. The TPP agreement will bring new advantages, as entry barriers to the US market will loosen up and other export opportunities will arise for countries on the other side of the Pacific. This will also facilitate human capital movement between TPP countries, strengthening the global value chain.

These added benefits have created an upsurge in interest from many countries in the Asian and Latin American region. The TPP will most likely trace new standards for international trade, investment and business among countries. We expect investments to increase amid reduced risk, given that signatory countries must adapt to common standards and rules. Beyond establishing commercial tariffs, one of the TPP’s main goals is to define rules in terms of transparency.

Q: What specific plans exist to broaden the influence that Japanese advancements have on Mexico’s automotive industry?

A: From an academic standpoint, Japan has governmental scholarship programs to promote foreign inclusion, regardless of industry and specialization. However, we are trying to strengthen the parts and material industry in the Mexican market to stimulate the local economy, as Mexico has fallen short in the amount of local content it provides to manufacturing processes. To address this issue, the Japan International Cooperation Agency (JICA) and the Japan External Trade Organization (JETRO) have created a Mexican supplier database to identify which players match Japanese suppliers and OEMs, creating an additional stream of commercial relations.

Following our commercial and academic exchange, a KOSEN technical school program was established in Guanajuato, which serves as a mixture of high school and university courses with a five-year specialization program. This approach is mostly used in Japan but its expansion into Mexico is the clearest example of the cultural integration that both countries are undergoing.