China Sees Mexico as an Excellent Trading PlatformBy María Fernanda Barría | Wed, 05/05/2021 - 16:46
China has set its eyes on Mexico to develop its international trade, strengthen investments and divert its supply chain for its products into North America. The World Trade Organization (WTO) reports that Mexico is becoming an important international trading hub, as transport costs, tariffs, regulation differences and information play crucial roles among the determinants of trade costs.
The organization recently published a new indicator, "Trade Cost Index," signaling that Mexico has lower tariff costs than China in international trade. As a consequence, Mexico benefits from these indicators as it operates as a global platform for China to introduce its products into North America. As previously reported by MBN, The Mexican Association of Private Industrial Parks (AMPIP) indicated that China represents nearly 37 percent of Mexico´s new project initiatives in industrial parks during 2020; this pattern signals the increment of interest of Asian companies in the country.
This behavior is denominated "nearshoring", when economies bring their productions closer to where demand is concentrated in order to take advantage of the opportunities of their neighboring developing economies and reduce all sorts of costs. Imports into Mexico from China reached almost US$14 billion ; in that sense, the number has increased almost 6 percent when compared during the first two months of 2020, reported El Financiero.
"Mexico is starting to become very attractive again because high tariff levels reduce competitiveness in certain areas and increase competitiveness in others," stated Ernesto Acevedo, Undersecretary of Industry, Commerce and Competitiveness of the Ministry of Economy.
Tariffs and regulations represent approximately 14 percent of trade costs and different factors influence the ease of international trade, ranging from geography to policies and regulations. "Some of the collateral benefits that the country has received from the public policy that the US has enforced against China have proven that Mexico is an option that can operate as a platform for the international trade market," stated Samuel Peña, vice president of Hisense to Expansión.
In addition, both countries have strengthened trading relationships as foreign direct investment (FDI) from China and other Asian countries has increased in Mexico. Several Asian companies have started to influence Mexico´s national market in in regards to infrastructure projects. An example is the US$1.86 billion investment to rehabilitate a subway line led by Chinese company Innovación Tecnológica Cinotec. In addition, the group Mota-Engil Mexico Consortium in association with China Communications Construction Company (CCCC), obtained the bidding for constructing the first section of the Maya Train, reported El País. As previously reported by MBN, Asian companies have analyzed costs and supply chain routes to determine what is more profitable in terms of production. "The approach has been a strategy of China to have a better supply balance, production processes and presence in the region, mainly in Mexico," explained Ernesto Acevedo to Expasión.