STORY INLINE POST
Q: How have Mexico-Indonesia relations evolved over their 70 years of history?
A: Our diplomatic ties began in 1953 and Mexico has remained a crucial partner since. Indonesia was the first Southeast Asian country with which Mexico established diplomatic relations. Indonesia’s first president, President Soekarno, visited Mexico in, 1959, 1960 and 1961, while Mexican President Adolfo López Mateos reciprocated by visiting Indonesia in the 1960s.
Mexico’s diplomatic relations expanded rapidly in Southeast Asia shortly after establishing ties with Indonesia, with the Philippines being the next in line. Mexico recognized Indonesia as strategically vital, a sentiment reciprocated by Indonesia due to its key location. This mutual recognition was essential during the geopolitical complexities of the time, marked by the divide between the Western and Eastern blocs. Both Mexico and Indonesia played a role in establishing the non-alignment bloc, laying the foundation for strong communication and relations, particularly in politics up until the 1970s. Post that era, our collaboration extended into various economic sectors, signifying continued growth in our bilateral ties.
Q: In which specific areas have both countries successfully collaborated?
A: Importing raw materials from Indonesia has been a significant aspect of the economic ties between our countries. Over the last three decades, there has been a consistent growth in our exports to Mexico. And in the past five years, there has been a noticeable upturn.
Q: In which business sectors can both countries foster constructive synergies?
A: Global companies play a crucial role in fostering synergies between Mexico and Indonesia. Indonesia, a significant exporter, benefits from connections with these companies, some of which have established manufacturing operations in Mexico. Multinational corporations enjoy tax exemptions after building manufacturing plants in Mexico, while those without local manufacturing plants face substantial taxes.
Mexico continues to import significantly, drawn by the competitiveness of products from countries like Indonesia, Thailand and Vietnam. Mexico's economic strategy focuses on manufacturing for the lucrative US market, while products for domestic consumption are often imported for cost considerations.
Q: Which business sectors is Indonesia most interested in promoting in Mexico?
A: Indonesia exports a wide range of products to Mexico, including cars, spare parts and supporting components for automobiles, including rubber materials. This sector represents a substantial part of our export portfolio. Another major export is crude palm oil (CPO), wherein Indonesia stands out as the world's largest producer. CPO has become a cornerstone of our export activities. We have expanded our exports to include food, beverages and pharmaceuticals, which have emerged as some of our most successful products. Indonesia also exports agricultural products, although they are not extensively accessed in Mexico.
Q: What are the main limits to the further development of Mexico-Indonesia trade?
A: Mexico is more of an export destination rather than a source of imports. The challenge is convincing Mexican businesspeople to view Indonesia not just as an individual entity but as a part of the larger ASEAN market. Changing this mindset is a gradual process, particularly considering their long-standing collaboration with the US. Shifting their focus from the US to ASEAN is not an overnight transformation, as Asia is perceived as distant and concerns about language barriers persist.
Our primary challenge lies in overcoming these perceptions but the benefits become evident when Mexican businesses start importing Indonesian products. They observe substantial profit margins and added value, even when compared to imports from Latin American countries or China. For example, importing food, beverages and coal from Indonesia results in considerable profit margins when selling in the Mexican market.
Q: Which were the main drivers for organizing Expo Indonesia Mexico 2023? What were the results of organizing the expo?
A: The Indonesian Embassy and the Indonesian Trade Promotion Center (ITPC) began planning this event about three years ago. Unfortunately, COVID-19 led us to postpone it. Despite the initial challenges, the initiative was highly successful. We achieved transactions exceeding US$20 million within a span of just four days, bringing together nearly 60 companies from Indonesia.
Overall, the event was a success, generating significant transactions and fostering numerous opportunities for collaboration. The engagement between the Mexican market and all Indonesian participants, especially business professionals, has led to increased communication and collaboration. This has been instrumental in expanding the understanding of Indonesian products among Mexican businesspeople.
Q: What are the main objectives of the Indonesian Trade Promotion Center in Mexico?
A: Mexico is a promising market for Indonesian products as it is our third-largest trade partner in Latin America, following Argentina and Brazil. Over the past four years, trade has surged from under US$1 billion to close to US$2.8 billion. Even during the COVID-19 pandemic, we experienced a windfall as Mexico sought alternatives to Chinese exports. This prompted numerous meetings with associations to promote Indonesia, resulting in significant growth.
Q: What services do you offer to both Mexican and Indonesian companies?
A: Our strategy primarily encompasses three key steps. First, we aim to familiarize parties from both countries with the products produced by the other. Second, we connect and facilitate inquiries between both parties, acting as a bridge for seamless communication. Finally, we guide businesses in navigating the complexities of international trade. Many entrepreneurs lack awareness of specific regulations. For example, in Mexico businesses need a customs agent to release a product from customs, which is not the case in Indonesia. Providing insight into these regulations is a key service we offer to facilitate trade.
Furthermore, we actively troubleshoot price-related challenges. For example, if a discrepancy arises and the price seems too high, we mediate discussions between the Indonesian and Mexican parties to find common ground. To enhance support for Mexico, we provide alternatives, such as a list of customs brokers associated with the Indonesian Embassy.
Q: How can the center help food and beverage companies to comply with halal standards?
A: One significant initiative is the Government-to-Government Memorandum of Understanding (G2G MOU). In Indonesia, exporting a food product requires a halal certificate and the absence of an international agreement between Mexico and Indonesia led to complications. Over the past three years, the Embassy has collaborated with Mexico’s Ministry of Agriculture and Rural Development (SADER) and the Ministry of Religions in Indonesia. We anticipate the official signing of the MOU in October.
This process is especially crucial for the food and beverage industry. For example, Mexican companies seeking to export meat to Indonesia must comply with halal regulations and 14 companies have expressed interest in this opportunity. We have been in contact with them, anticipating the signing of the MOU. Once signed, the appointed halal agencies will play a vital role in certifying auditors and ensuring that products meet the necessary halal standards. This initiative represents a significant step forward in facilitating trade between the two countries.
Q: What are the communication strategies the Embassy is implementing to create country awareness among the Mexican population?
A: We are leaning more toward state-level communication rather than at the federal level. The federal government appears to be interested in strengthening partnerships primarily with the US. This sentiment is not unique to Indonesia; many embassies think alike. This prioritization is evident in the absence of trade agreements between Mexico and Asian countries, except for Japan. Even countries like South Korea, which has a substantial investment in Mexico exceeding US$40 billion, have no formal trade agreements with Mexico.
When discussing potential solutions, suggestions such as joining multilateral agreements like the Trans-Pacific Partnership (TPP) or maintaining involvement in the Pacific Alliance are often raised. However, convincing Mexico to pursue bilateral agreements is a considerable challenge. The hope is that Mexico will recognize the value and opportunities in diversifying its international partnerships beyond a singular focus on the US.
The state governments we are actively involved with are Tamaulipas, Jalisco, Chiapas, Baja California, Mexico City and Nuevo Leon. These governments actively engage their business communities, exemplified by our upcoming events, such as the Trade Expo Indonesia (TEI) in October and the Indonesia-Latin America and the Caribbean (INA-LAC) Business Forum.
We are facilitating a trade mission from Chihuahua, bringing together 20 companies, along with participants from Jalisco, Mexico City and Nuevo Leon. About 40 companies are expressing interest in visiting Indonesia, despite a substantial travel time of over 20 hours. During the upcoming events, we anticipate signing agreements, including one with the Mexican Council of Foreign Trade of the Northeast (COMCE) and another with the Indonesian Chamber of Commerce and Industry (KADIN). An agreement is also poised to be signed with the US-Mexico Chamber of Commerce, which plans to bring 21 companies to participate in TEI.
The Embassy of Indonesia in Mexico serves as a diplomatic hub, fostering bilateral relations between the two countries. With a focus on enhancing trade, cultural exchanges and cooperation, the embassy plays a vital role in promoting mutual understanding and collaboration across diverse sectors.