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News Article

Allying with LATAM Neighbors Would Create Powerful Trade Block

Wed, 05/09/2018 - 11:36

Amid the controversies and concerns in Mexico regarding the renegotiation of NAFTA, the main lesson learned is that the country needs to diversify its trade partners, panelists at the Mexico Business Forum 2018 said on Wednesday. Ezequiel Sabor, Ambassador of Argentina to Mexico emphasized the importance of the Mercosur trade block and stressed the South American country’s commitment to creating not only bilateral relationships with Mexico, but also new trade blocks involving the entire region.

“As Latin Americans we have similar roots and that is key for successful political and economic cooperation,” he told the audience at the Sheraton Maria Isabel Hotel in Mexico City. “The commercial association with Latin America is important, and mechanisms such as Mercosur and the Pacific Alliance will be key for the social, political and economic growth of Mexico.”

Moderator César Maillard, Partner at Maillard Abogados Laborales, opened the panel by providing some facts about Mexico’s trade agreements. “Mexico has 12 free trade agreements with 46 different countries,” he said. “Last year, Mexico had more than US$375 billion in exports, 81 percent of which went to the US.”

Each of the participating countries in the panel – India (US$3.34 billion), the UK (US$2.27 billion), the Netherlands (US$1.99 billion) and Argentina (US$1.5 billion) – account for less than 1 percent of Mexico’s exports, but each was vocal about their desire to change this. The UK finds itself in a similar position to Mexico, with uncertainty on the horizon given the Brexit negotiations, and Ambassador of the UK to Mexico Duncan Taylor said he expects to see growth in several key sectors in the coming years. “We have a relatively modest bilateral relationship with Mexico with a trade balance of roughly £5 billion pounds, but we are going to see changes,” he said.

With the Energy Reform, he said the UK’s expertise in the North Sea can be applied by many of the companies entering the country. Companies like Royal Dutch Shell and BP entered the deepwater rounds and farm-outs that are a result of Mexico’s Energy Reform, not to mention the supply chain they bring with them. “I trust that in the next 10 years, the UK-Mexico relationship will deepen,” he said.

Margriet Leemhuis, Ambassador of the Netherlands to Mexico also cited the oil and gas expertise of her home country as a complement for the Mexican energy sector. But it is not only oil and gas companies entering from the Netherlands. Unilever, Heineken and AkzoNobel are just a few examples of the many Dutch multinationals entering the country, and she said this is bound to open doors for smaller companies. “It is important that the bigger countries take the first step, and when SMEs see they can do business in Mexico, they will follow,” she said. “This is what we are beginning to see now.”

While not all countries on the panel have a longstanding relationship with Mexico, some have solidified much faster. Just 10 years ago, India was Mexico’s 22ndmost-important trade partner, but in 2017, it shot up the list to take 10th place. Mexico is India’s second-largest trade partner in the Americas and has even overtaken Canada and Brazil in recent years.

Muktesh Pardeshi, Ambassador of India to Mexico, said he expects India to advance to No. 9 this year. With more than 180 Indian firms based in Mexico and working across IT, pharmaceuticals and automotive, he predicted a flourishing relationship between the countries due to their similarities. “India is the largest democracy in the world and Mexico has an uninterrupted history of 100 years of elections,” he said. “In economic terms, both are emerging economies and part of the G20.” In addition, this year India will be guest country at the annual Cervantino festival in Guanajuato, which he said is a recognition of both countries’ cultural richness.

 

All countries identified Mexico’s agro-industrial success as one of the main sources of trade. For example, in 2017, India sold more than US$2 billion in cars and auto parts to Mexico. “While Mexico is producing and exporting large vehicles to North America, it is importing smaller vehicles from India for domestic consumption,” he said.

While Taylor also pinpointed financial services and education as priority trade sectors, he highlighted the importance of Mexico and the UK’s potentially complementary agricultural might. “We have very complementary economies in agriculture because, due to our differing climates, we are not competing directly,” he said. “In the UK, there exists great appetite for Mexican products like chilis and avocados.”

Leemhuis reinforced this approach, and stressed that, through the Netherlands, Mexico has access to 150 million European consumers that are eager for its produce. But she said that, before a successful economic exchange can take place, both countries first need an effective cultural exchange, involving everyone from the leaders of the countries to the nations’ youth. “What we are really lacking is the cultural ties between Europe and Mexico, and this will facilitate bilateral trade,” she said. “This is something we are working on.”

But Sabor said that it is not only Mexico that can benefit from these relationships; it can provide benefits to other countries. “Mexico imports 90 percent of its white corn and this is a need Argentina can meet,” he said. “We are also the first exporter globally of limes, which is a high-demand product in Mexico.” As the third-largest economy in Latin America, a founding member of Mercosur and a member of the Pacific Alliance, Sabor highlighted the inherent benefits an alliance between Argentina and Mexico could bring. “We have a great opportunity for collaboration,” he said. “Latin America is a place with great opportunities and if we work together to develop politically and economically, we can compete with powerful trade blocks on a global level.”