Armando Ortega
View from the Top

Nafta Uncertainty to Pose No Risk to Canada-Mexico Relationship

Mon, 10/22/2018 - 13:02

Q: How can Mexico and Canada strengthen their direct commercial relationship, given the current reliance on the US a middleman?
A: Both countries are aware of the need to find direct connectivity between each other to foster bilateral trade and investment, avoiding the US as a springboard. For example, to better serve the services sector, both Canadian and Mexican airlines, such as West Jet, Volaris, Interjet and Aeroméxico, have increased direct and even daily nonstop flights to and from various cities. The biggest challenge for trade in goods is maritime connection, and the East Coast can trigger the first results: a route from Halifax to the Altamira and Veracruz ports is on the radar. However, geography matters and the US will always be the filling in the bilateral sandwich.
Q: In which areas of the Mexican economy do Canadian companies have the largest participation?
A: Mining is the sector where Canadian investments have flourished the most, measured by the number of companies devoted to this activity. Manufacturing in general and auto parts in particular are the leaders of employment and exports. Pharmaceutical, financial services and a big rainbow of other services illustrate the vibrant bilateral trade and investment landscape. Canadian investments have created more than 100,000 jobs in Mexico since NAFTA’s launch. For the near future, AI and the creative industry will take the lead in our relationship. Furthermore, Mexico will become a vital supplier of professional services to Canada, from doctors, engineers, designers and nurses.
Q: Should NAFTA be canceled, what is Mexico’s value without the treaty?
A: Mexico has made enormous economic and institutional changes since the signing of NAFTA, including through other FTAs with the main world economies, such as the EU, Japan and Israel and 32 agreements to promote and protect foreign investment with 33 countries. Were NAFTA to be canceled, Mexico would keep it alive with Canada, keep its economy unilaterally open and provide US investors with equivalent instruments to protect their investments. NAFTA made Mexico a very appealing case for investment but most importantly, it has been an anchor of economic and financial responsibility and of modernization through the creation of new independent institutions such as the COFECE, Federal Telecommunications Institute and Unit of International Trade Practices (UPCI).
Q: How are Mexico and Canada connected through their mining activities and what impact, if any, will NAFTA have on this sector?
A: The bilateral relationship has been enriched by mining activity. Canada has brought to each mining operation in Mexico the effective application of both its national and corporate labor, safety and environmental standards in addition to abiding by Mexican regulations. Canadian companies have hired and trained Mexican executives and workers and greatly improved salaries and working conditions. In short, Canada has raised the mining-business bar in Mexico for good. NAFTA has had little impact, since this sector was opened to foreign investment by Mexico in 1992. Nevertheless, the overall impact of NAFTA has been very important, in particular regarding the protection of investments.
Q: How are Canada and Mexico working toward creating a stronger relationship in light of new trade diversification strategies?
A: Both countries have intensified high-level governmental contacts, including with the newly elected López Obrador team. They have also reinforced business networking and new academic research projects, with all Canadian universities having already committed to more than 200 projects with more than 100 peer Mexican institutions. The new Canadian academic contacts have reached out to Mexican companies for specific business partnerships.