“Trade with Mexico is a big opportunity for India”
Financial Express | Monday, May 28, 2007
“Trade with Mexico is a big opportunity for India”
India and Mexico, whose bilateral trade shot up from $251 million in 1991 to $1.6 billion in 2006, recently inked a pact to boost investment flow. The Bilateral Investment Promotion and Protection Agreement (BIPPA), which will remain in force for 10 years, will also provide for free repatriation of funds by an investor of either country.
In an exclusive interview to FE’s P Vaidyanathan Iyer and Arun S, Mexican minister of economy Eduardo Sojo said Indian companies should use Mexico as a gateway to enter the US and the Latin American market. He also said Mexico would work closely with India on the services negotiations at the WTO as both countries have great ambitions in the sector. Later, Sojo also assured that in three months Mexico will sort out the problems faced by Indian businessmen regarding getting long-term visas to Mexico. Excerpts.
Can you give us some details about the purpose of your visit?
The purpose of my visit is to sell the Mexican case. Our selling points are that we are a strong democracy and have a very stable economy with world class industrial clusters. In the talks that I have had recently with Indian officials and corporates, I have realised that we can build a new era of trade and economic opportunity. We have signed two agreements with India, a bilateral investment promotion and protection pact and an MoU to set up a high level group (HLG) of top public officials and experts to look around for areas of synergy. The HLG in its annual and other meetings would help spot the obstacles in trade and investment, besides reviewing progress of commercial, economic and technical cooperation and suggest steps to strengthen ties. Once we get to know each other more, we will go in for a preferential trade agreement or even a comprehensive economic partnership agreement.
Are you satisfied with the level of trade between India and Mexico?
There are some ailments which reflect that the Mexico-India ties are below potential and that we were not paying that much attention to the Indian economy and industry. I am the first Mexican economy minister to come to Mumbai. This shows the level of ignorance about India in Mexico. For quite long we were concentrating on the Nafta (North American Free Trade Area) market. But we have now realised that there are many opportunities for us in trade and investment in Asia and India, in particular. Bilateral trade posted a 37.5% growth in 2006-07 over the previous year. It has grown from the 1991 figure of $251 million to reach $1.6 billion in 2006. Trade has picked up, but at a very slow pace.
Can you tell us about Mexican investments waiting to flow to India ?
We have displaced Canada as the top suppliers of autoparts to the US. Though I cannot disclose the names, I can tell you that there are two to three big Mexican companies in the auto-component industry doing their assessment to make huge investments in India.
How can trade with Mexico help Indian companies?
India exports a lot of pharmaceuticals to Mexico, led by Dr Reddy’s and Ranbaxy. There are also many top Indian IT companies in Mexico. Mexico could complement India to serve the US and Latin American markets. We can give you a good platform to trade in those markets. Besides, we have Free Trade Agreement (FTA) with 44 countries. By establishing a base in Mexico, Indian companies can avail preferential access to economies which account for 70% of the world’s GDP. Besides, we also have a very strong domestic market. We can provide services that are close to your clients in those markets. For instance, Foxconn, the biggest exporters from China, has set up base in Mexico too. I asked whether the reason is due to cost effectiveness. They told me, they build the basic computers in China itself. But the advanced and latest models are made in Mexico and also due to our proximity to the US market. Foxconn also sources from India. Now you can see how Mexico can play a complementary role to India and help India.
In IT, Indian companies, be it software developers or call centres, have an opportunity by setting up a base in Mexico to look out for both Latin American and the US market. This holds true for the energy sector too. Some of the Indian auto and auto part companies have gone and opened shops in Brazil and Argentina but are yet to start operations in Mexico. But they do not know that Mexico has trade agreements with most Latin American countries and can give them a better opening to Latin American and the US markets. It is easier to get to Mexico and then proceed to Latin America and the US.
Will the rush to sign FTAs upset the WTO’s multilateral system?
Multilateral agreement is the common denominator. But regional and bilateral trade agreements go further and deeper. The Doha Round can give us the framework and we can then go deeper with bilateral agreements. Our 44 FTAs give us the advantage, and we export more than what all Latin American countries have exported together. This is also due to our stragetic location, as we share a 4,300 km border with the US. But we sell and buy a lot and are a very open economy. Our exports are over $250 billion and so are our imports. I see trade with Mexico as a big opportunity for India. We are looking forward to working closely with India, as it is a very important player in the Doha Round negotiations. Since Mexico, like India, is more on the ambitious side regarding talks on services, we want to be closely associated with India and we would hold talks and be in touch with your commerce and industry minister Kamal Nath in this regard.
Have you achieved any breakthroughs after your talks with Indian companies?
We have had constructive discussions with several Indian companies though I cannot reveal their exact commitments. In the IT sector, we talked to Infosys, Wipro and TCS for investments in Mexico. In the energy sector, we told Reliance and the Birlas that we could explore opportunities for them in Mexico. In the automibile sector, we have started talks with Tata Motors. In the electronics sector, we have had discussions with Videocon, which has tied up with Thomson, to expand their operations in Mexico. I am sure with such efforts, we can double trade and investments in the near future.
