Armando Ortega
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Bilateral Relationships Strengthened by Regional Cooperation

By Gabriela Mastache | Fri, 12/27/2019 - 09:14

Q: Given the degree of existing integration and cooperation between Mexico and Canada, how does CANCHAM remain relevant in the current context?

A: After its creation in 1982, CANCHAM held only a modest presence in Mexico. The main trigger for a true bilateral relationship between Mexico and Canada was NAFTA. That agreement changed the paradigm that considered North America as only the US. CANCHAM has helped advance commercial and economic integration by acting as the liaison between Canadian investors and Mexico. The chamber’s work might not be visible to the general public but it is significant, especially given the inter-relation between the productive chains in Mexico and Canada.

The uncertainty generated by the mixed signals from the current administration has resulted in member companies asking us to modify our primary calling of investment promotion to investment protection. However, we hope to soon be able to return to our promotion agenda.

Q: Besides mining and energy, in which other sectors is CANCHAM focusing its development efforts?

A: We have significant presence in the manufacturing sector, especially in the aerospace and railcar construction industries, as well as the auto parts industry. The Canadian company Magna, for example, has 30 plants in Mexico and employs over 100,000 people, which means it has a significant presence in the local industry. Having said that, the investment coming from the mining industry is larger, as well as its impact in Chihuahua, Sonora, Durango, Zacatecas, San Luis Potosi, Guerrero and Sinaloa, among others. The relevance of Canadian investment in mining is particularly strong in gold and silver, the latter of which Mexico is the No. 1 producer in the world.

Canadian companies also hold a significant presence in different services sectors, including financial, creative industries and investment funds. Our bilateral relationship is extremely relevant and has become a source of business and commercial opportunities.

Q: How can Canadian companies help Mexico overcome its energy vulnerability?

A: Mexico’s overall energy position deteriorated because of a public policy that for many years has not focused sufficient investment in the exploration segment. Just as in the mining sector, exploitation cannot happen without exploration despite the known existence of resources. The least developed regions in the country are missing natural gas supply. If the government’s social development programs are not accompanied by gas supply, it is not realistic to believe they will succeed in the long term.

While Mexico is rich in energy resources, it lacks sustainable policies to develop the country’s energy potential. Investment in electric energy, including that in renewables, has happened thanks to the private sector. Overall, the country has self-inflicted energy vulnerability that can only be compensated through the participation of private capital, including Canadian investment. Still, Canadian companies have had a modest participation in the electric sector and have kept a prudent distance considering their energy capabilities.

Q: How can Mexico and Canada complement their agro-industrial capabilities?

A: Mexican products are in many Canadian homes, either in perishable or more industrialized products. The agricultural and agro-industrial sectors have enormous growth potential and for Canada, it is easier to obtain products from Mexico than from other places. It is important to establish direct connectivity between the Saint John’s port near Halifax to Altamira and Veracruz. This would lead to connectivity without crossing the US, thus boosting trade results.

Q: How do you see the trilateral relationship between Mexico, Canada and the US changing with USMCA?

A: The best example of the existing trilateral relationship in North America is that, despite the efforts made by the US federal administration, Mexico and Canada confirmed that beyond specific issues, they would work together in favor of achieving a successful renegotiation of NAFTA that maintained the trilateral essence of the agreement.

USMCA’s ratification is on hold in the US and Canada. Although Mexico has ratified the agreement, this does not guarantee there will not be external pressures to make further changes. In an ideal world, the agreement would be ratified in 2019 by the US and Canada, but it is likely that the process is dragged into 2020. This could create a significant window of uncertainty due to the US presidential elections.

Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst