Population (2018): 126, 190, 788
GDP (2018): US$1.22 trillion
World Bank “Ease of Doing Business” Rank (2018): 54th
Bilateral Trade with India (2018): US$ 830 million
Mexico is revitalised by reforms and a capable but low cost workforce. Now the world’s 12th largest economy, it is expected to become the 7th largest by 2050.
Mexico is an open economy that embraces trade, with an extensive FTA network covering 45 countries. The North American Free Trade Agreement (NAFTA), signed in 1994, provides businesses in Mexico with direct access to the neighbouring major markets of the United States and Canada.
Growth of the Mexican economy in 2017 has exceeded expectations despite the sluggish performance of extractive industries (oil and gas and mining) and the potential risks of NAFTA renegotiation. In fact, the government’s latest forecast (August 2017) is for the economy to grow by 3% in 2018. As Mexico rapidly develops, the country recognises the need to modernise and improve its existing infrastructure, which will have a significant impact on trade and industrial activities.
This is an opportune time for Indian companies to seriously consider Mexico as a place to do business. There are ample opportunities to invest in areas such as infrastructure and support the country’s growth.
Mexico is also part of the Pacific Alliance, an important engine of regional growth and trade. The Pacific Alliance aims to reduce and eventually eliminate trade barriers between Mexico, Colombia, Peru and Chile – four countries with a clear orientation to the Asian market.
Mexico has emerged as one of the most promising economies in Latin America. President Enrique Peña Nieto has made sweeping reforms since being elected in 2012, including energy reforms which opened up the oil and gas industry to foreign participation, ending state monopolies in oil and gas and electricity generation.
Oil and Gas:
Energy reforms in 2014 ended state monopolies in electricity generation as well as oil & gas sectors, encouraging private investment and foreign participation in exploration, production and transportation activities.
More than 60 onshore and offshore blocks have already been assigned to a wide range of Mexican and international companies, entailing an estimated investment of more than US$57 billion. Further bidding rounds in onshore, offshore (shallow and deepwater) and unconventional fields are planned for the next 4 years from 2016.
Among the firms that have won rights to explore and/or produce in Mexican fields are important multinationals such as ExxonMobil, BP, BHP Billiton, China Offshore, Petronas, ENI and Chevron, as well as Mexican companies like Carso Oil and Gas, Sierra Oil and Gas, Petrobal, and PEMEX. Upstream E&P equipment companies can benefit by supplying rigs, vessels and equipment, as well as sophisticated technology and engineering integrated solutions.
The manufacturing sector is a key growth driver of the Mexican economy, accounting for half of the US$30.3 billion in foreign direct investments in 20151.
Over the past decade, Mexico has become an attractive manufacturing location relative to other large economies. With the nearshoring of US companies back to North America, rising consumption as a result of the US’ economic recovery, and a skilled and affordable Mexican workforce, more and more companies are leveraging Mexico’s infrastructure and logistics support to manufacture for the US market.
There are opportunities to improve Mexico’s infrastructure in areas such as roads, ports, airports and urban transport. Improving port infrastructure was a major focus of Mexico’s 2014-2018 National Investment Program, and there will be a continued need to improve port facilities to support increased trade and industrial activities.
There are also plans to develop intelligent urban transportation systems. Indian companies can secure such urban transportation projects through early and comprehensive engagement of authorities and operators.
The development of four Special Economic Zones in the south of Mexico is expected to spur massive economic activity over the next decade. Indian companies with expertise in industrialisation, master-planning, management of ports and airports, provision of intelligent transport systems, management of water, waste treatment plants, e-government solutions, hospitality and tourism infrastructure can benefit from these plans.
Trade and Connectivity
Mexico’s total trade with the world reached US$761.7 billion in 2016, representing a CAGR of 8.87% since 1993 (pre-NAFTA times). The US currently receives over 80% of Mexico’s exports. However, threats posed by the ongoing renegotiation of NAFTA have led to important diversification efforts by the Mexican government, both politically and in foreign trade.
Mexico is the 10th largest food producer in the world. The agri-food industry is the country’s most dynamic export sector and the third largest, only behind manufacturing and automotive. Mexico’s agri-food trade amounted US$54.8 billion in 2016. However, Asian markets accounted for less than 5% of the total exchange.
There are many opportunities to source premium items from Mexico, such as avocados, berries, and meat. There is also immense potential to export Asian food items to Mexico.
Enhanced integration between Pacific Alliance countries and the need to diversify Mexican exports both translate into a clear opportunity for Mexico to become a consolidator for food products which are exported from the Pacific Alliance markets to Asia – and for India to play a role in this new trade corridor. India can be a regional hub, helping products from Mexico reach South Asia and Middle East markets. To do this, governments must improve digital and physical connectivity (air and sea) and logistics, strengthening the cold chain for perishables in particular.
India and Mexico have striking similarities in geo-climatic conditions, biodiversity, physiognomy and people, cultural and family values, as well as European connections of the colonial era. Both are heirs to a great civilizational heritage and contacts between them indicatively go back centuries. Legend has it that an Indian princess ‘Meera’ landed in Mexico in the 17th century and is well-known here as ‘Santa Catarina.’ Mexico was the first Latin American country to recognize India after Independence and establish diplomatic relations with India in 1950. Mexican wheat varieties used in Indo-Mexican hybrids were the backbone of India´s Green Revolution in the sixties.
Among common Mexicans, there is wide general awareness, high interest and regard for Indian culture, social values and her pluralistic democracy. India’s achievements in the economic, educational, scientific & technological fields, especially in recent years, are greatly admired. Mahatma Gandhi, Pandit Nehru, Tagore, and Mother Teresa are widely admired. Gandhiji’s statues and busts adorn four major Mexican cities: roads and several schools are also named after him. The writings of Nobel-laureate and Indophile Octavio Paz, who was Mexican Ambassador to India in the sixties, on his long experiences in India have had a profound impact in Mexico.
Bilateral trade is growing tremendously in recent years. In 2017-18, the bilateral trade between India and Mexico grew at the rate of 20.4% to US$ 7.71 billion from US$ 6.4 billion in the same period in 2016-17. The two-way trade during 2018 (CY) was US$ 10.155 billion (Exports US$ 5.231 billion and imports US$ 4.923 billion). The trade balance remains in favour of India [Source: Ministry of Economy of Mexico]. Amongst the Mexico’s global trade partners, India’s rank rose from 10 to 9 in a year. In 2018, Mexico has emerged as the biggest trade partner of India in Latin America and the Caribbean region and 2nd in all Americas after the USA. India’s exports comprised mainly of vehicles and auto parts, organic chemicals, aluminium products, electrical machinery & electronic equipment, products of iron and steel and gems, ceramic products and jewellery. Our imports mainly consisted of crude oil (75% of the imports), electrical goods and machinery, electronic equipment, vehicles and auto parts. India is also the third largest buyer of Mexico’s crude oil. Potential areas for bilateral trade include software and IT, pharmaceuticals, chemicals, engineering goods, renewable energy, biotechnology, auto parts and minerals. In 2018, India-Mexico bilateral trade has also surpassed the bilateral trade with Brazil.
One of the major reasons for rising trade is the visit of businessmen from India to Mexico. Almost 300 businessmen visit Mexico every year from India. There is regular participation in biggest Expos like InterModa (Fashion sector), Expo Ferreterra and CIHAC (Construction sector), and Plastimagen (plastics sector). Besides, the hosted buyers programme of MoC has been consistently supported by sending nominations of Mexican buyers from the Embassy. Events held outside the Mexico City take the outreach effort to various states as well.
Investments from India in Mexico are estimated close to 3 billion USD. Most of the leading Indian companies in IT/software (TCS, Infosys, Wipro, NIIT, BirlaSoft, HCL, Aptech, Hexaware, Patni, etc.) and pharmaceutical (Hetero labs, Sun Pharma, Dr.Reddy’s Laboratories, Torrent Pharmaceuticals, etc.) sectors have set up joint ventures in Mexico taking advantage of its strategic location, large market and investment friendly policies. Major investments in the steel and mining sector have also been made by the Arcelor Mittal Group. In 2008, JK Tyres of India bought Mexican tyre company Tornel and in 2009 Uflex set up a greenfield packaging products project with an eye on the US market. Samvardhana Motherson Group has set up 15 plants all over northern and central Mexico employing over 23000 Mexicans. Pharma company Zydus commenced operations in 2013. In September 2014, Lupin acquired a pharma company in Mexico. In May 2014, Tech Mahindra has established office in Mexico City to provide IT & other related services and in 2018, added 2nd campus in Aguascalientes. Presently, over 180 Indian companies have presence in Mexico. Parle started its first manufacturing facility in western hemisphere in Mexico in 2018 and also became first India food processing company to start its business in Mexico.
From Mexican side, 17 major companies have presence in India. Leading Mexican companies like Nemak, Metalsa, Mexichem, Tremec, Great Foods & Beverages, RuhrPumpen, Cinepolis and Kidzania have invested in India in recent times. Mexican IT company Softtek became the first Latin American company to have a presence in India as service provider. Recently Bimbo Group made investment acquiring a major stake in Harvest Gold brand. Cinepolis has opened over 350 screens all over India penetrating into tier 2 cities as well. In total, the investment is estimated to be around 1 billion USD.
The HLG, which has been set up to devise ways to promote trade and investments and focus on identified areas and is co-chaired by the Commerce Secretary and his Mexican counterpart, covers tourism, chemicals, infrastructure, pharmaceuticals, textiles and bio-fuels through relevant working groups and had its 4th Meeting in Mexico City in July 2016. During the HLG, the two countries decided to sign MOUs for investment promotion and for SMEs in the near future. India and Mexico also signed an Agreement on Mutual Administrative Assistance in Customs Matters on 15 October 2012. In July 2013, Mexico supported India’s proposal at the Codex Alimentarius Commission to create a Committee on Spices and Culinary Herbs.
Vehicles, organic chemicals, aluminium, machinery, plastics, iron & steel, apparel.
|Product Code||Product Label||India’s exports to Mexico in 2018 (Value in US$ millions)|
|’87||Vehicles other than railway or tramway rolling stock, and parts and accessories thereof||1713|
|’76||Aluminium and articles thereof||266.5|
|’84||Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof||203.3|
|’85||Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television …||187.2|
|’39||Plastics and articles thereof||114.5|
|’72||Iron and steel||104.7|
|’73||Articles of iron or steel||87.4|
|’32||Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring …||75.5|
|’62||Articles of apparel and clothing accessories, not knitted or crocheted||66.8|
India has an untapped export potential for tapping motor vehicles, medicaments, aluminium, diamonds & rice.
|Product code||Description||Export potential|
|8708XX||Parts & accessories of motor vehicles, nes||US$ 302.3 mn|
|3004Xb||Medicaments consisting of mixed or unmixed products, for retail sale||US $ 321.7 mn|
|760110||Aluminium, not alloyed, unwrought||US $ 38.8 mn|
|721049||Flat-rolled products of iron or non-alloy steel||US $ 117.4 mn|
|871120||Motorcycles, piston engine >50cm3 but <=250cm3||US $ 63.6 mn|
|29XXXX||Other organic chemicals||US $ 30.7 mn|
|710239||Diamonds, worked||US $ 66.0 mn|
|100630||Semi-milled or wholly milled rice||US $ 79.2 mn|
Mineral fuels, electrical machinery, vehicles, organic chemicals, ores, iron & steel.
|Product Code||Product Label||India’s imports from Mexico in 2018 (Value in US$ million)|
|’27||Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral …||3730.1|
|’85||Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television …||589.9|
|’84||Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof||174.6|
|’87||Vehicles other than railway or tramway rolling stock, and parts and accessories thereof||116.5|
|’32||Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring …||87.2|
|’26||Ores, slag and ash||35.2|
|’90||Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical …||33.5|
|’72||Iron and steel||23.4|
|’28||Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, …||22.8|
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