The Hindu Business Line : Mexico: A billion dollar proposition

INDIA'S exports to Mexico reached a record $871 million in 2004 from $288 in 2000. It will cross a billion dollars in 2005. Mexico has surpassed Brazil, which accounted for $556 million in 2004, becoming the largest importer of Indian goods in Latin America.

But $871 million is a mere 0.44 per cent of Mexico's global imports which was $197 billion in 2004. With a total trade of $386 billion in 2004, Mexico is the Latin American giant, accounting for almost 40 per cent of the total trade in the region. Mexico has overtaken Brazil as the largest economy, in terms of GDP ($687 billion) and trade.

After having gone through various crises, Mexico's economy has stabilised and is now healthy with strong fundamentals. It recorded a growth of 4.4 per cent in 2004 and is expected to grow at 4 per cent in 2005. Foreign direct investment (FDI) was $17 billion in 2004. Remittances from Mexicans abroad accounted for $17 billion, equalling FDI.

Inflation and primary lending rates are in single-digit. The Government has been following fiscal discipline and has kept current account deficit below 2 per cent.

It succeeded in reducing external debt to $78 billion in 2004, the lowest in 32 years. Foreign exchange reserves have reached a record high of $65 billion.

Mexico is a member of the Organisation for Economic Cooperation and Development (OECD). That means its investment practices and business regulations are generally the same as those of the developed OECD countries.

Mexico is an energy-surplus country; it is one of the largest producers and exporters of crude oil. Mexico produces 3.25 million bpd (barrels per day) and is among the top four oil exporters to the US. Mexico also has rich deposits of gold, silver, copper, iron and zinc.

Manufactured products account for 89 per cent of total exports, petroleum 8 per cent and agro-products 2.4 per cent. This makes Mexico different from the rest of Latin American countries, which mainly export raw materials and commodities. Mexico exports more than one million vehicles annually. It is the main maker of television sets in North America with an annual production of 25 million units. It is a major supplier of textiles to the US.

After Canada, Mexico is the largest trading partner of the US. The US-Mexico bilateral trade reached $266 billion in 2004, accounting for 11.6 per cent of the US' global trade. US accounts for 91 per cent of Mexico's exports and 62 per cent of its imports.

Mexico has signed the maximum number of free trade agreements (FTAs). It has FTAs with 33 countries and has preferential market access to 850 million consumers. These include the US and Canada (North American Free Trade Agreement), the European Union, Latin American countries, Israel and Japan.

India exports engineering products, pharmaceuticals, chemicals, gem and jewellery and textiles to Mexico. It is interesting that engineering products are the major exports ($300 million) to Mexico, while chemicals and pharmaceuticals dominate exports to the rest of Latin America.

In addition to its large domestic market, Mexico is the gateway to North America and Central America. Keeping this larger market in mind, Indian business should consider investment and joint ventures in Mexico.

Mr L. N. Mittal has invested in a steel plant in Mexico. Indian pharma companies, such as Ranbaxy and Wokhardt, are establishing joint ventures. The Birla group is exploring the possibility of investing in the manufacturing sector. Surprisingly, Indian IT companies are yet to explore the Mexican market. They have so far only done business as sub-contractors for American IT companies. It is time that the Indian IT companies looked at Mexico seriously and as an independent market, not an adjunct to their business in the US.

India's imports from Mexico have zoomed to $454 million from $60 million in 2000. Crude oil accounts for 90 per cent of the imports; Reliance is the sole importer. Other imports include metals, minerals and chemicals, and machinery.

The Engineering Export Promotion Council of India is planning an `IndiaTech' exhibition of about 200 Indian companies in Mexico this October. The Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry, and the India Brand Equity Foundation plan to take high-level business delegations.

Indian exporters should draw inspiration from their Chinese counterparts who despatched goods worth $14.5 billion in 2004! The Chinese have invested over $60 million and established some 200 joint ventures in Mexico.

sMexican businessmen have started looking at India more seriously as an emerging economic power. This is evident from the increase in the number of Mexican delegations coming to India. In February, a large team representing the pharmaceutical industry was in India.

Earlier, Indian exporters were discouraged by the delay and the uncertainty of getting visas to Mexico. This problem has now been resolved. The Mexican embassy has started issuing visas promptly to executives of reputed companies who have US visas or are part of a business delegation.

There has never been a better time for Indian business to target Mexico. Businessmen should take advantage of the support being given by the Government through its `Economic Diplomacy' and "Focus-LAC Programme".

(The author is with the Ministry of External Affairs. The views are personal. Feedback may be sent to rv@rviswanathan.com)

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