Edmund Duckwitz – Germany Ambassador to Mexico

Our bilateral relations already have a very broad base. Traditionally, Mexico and Germany have long-standing relations in the spheres of politics, culture, academic exchange, science and development - to name just a few fields of successful German- Mexican cooperation. On the German side, we owe this not only to the work of the Embassy, but to the dedicated efforts of numerous German organizations such as the GIZ, the Goethe-Institute and the DAAD. I would also like to emphasize the immense contribution made by German companies to German-Mexican relations: their investments and their commitment to Mexico are a significant pillar of the good bilateral relations between our countries.

These relations are very good indeed; the recent visits by President Wulff and the German Foreign Minister Guido Westerwelle to Mexico underlined this once again. My job as German Ambassador is therefore to deepen and expand the existing good relations. Yet, this should not be misunderstood as "business as usual". Great challenges lie ahead on the international agenda, such as finding a common response to climate change. German and Mexican international climate policies share many similarities. We should use this common ground to continue to coordinate our efforts. I am also referring to economic and financial policy: Mexico will assume the G20 Presidency in 2012 at a time of crisis. Hence, Germany intends to play an active role during Mexico's Presidency and we will strive for close cooperation with Mexico. Another focus of my agenda is bilateral economic relations. Although those relations are already very good, I still see ample room for further cooperation and investment. I am thinking here of the renewable energy sector, the aerospace sector and tourism in particular.

What is the current situation of the diplomatic relationship between Germany and Mexico?

As I indicated above, diplomatic relations are very good and there is broad agreement in many areas of policy. In addition to that, we can build on a rich tradition of direct and very personal relations. This makes my work here in Mexico very enjoyable.

How has trade between Mexico and the members of European Union evolved in the past 5 years?

Before the crisis year 2008, growth was stronger than with other regions, notably NAFTA. In 2009, trade flows diminished significantly, but picked up again in 2010. First figures for 2011 show that exports and imports might even outperform the record year 2008. The European Union is still the second most important export market for Mexican products. Regarding imports, China has outdistanced the European Union during the crisis years. The European Union, and especially Germany, is an important provider of capital goods with state-of-the-art machinery and industrial input. These are needed to obtain the substantial gains Mexico makes with exports to the United States and, with growing importance, to Latin America. I would also like to point out that Germany is by far Mexico's most important trading partner in the European Union.

What is the role that Mexico plays for German investment to cover the North and Central American markets?

Mexico plays a central role for a large number of German companies. The good infrastructure in Mexico, investment protection and low labor costs remain a major incentive for German companies to choose Mexico as a production location. The companies also greatly benefit from the numerous free trade agreements and from Mexico's privileged geographical position when it comes to producing for the NAFTA market, especially the United States market. Mexico therefore represents a huge opportunity as a hub for the Americas for German companies.

How has German investment in Mexico evolved?

German investment has a very long history in Mexico. Companies such as Bayer, BASF, Siemens and many others have been here for decades. These big companies have always attracted additional small and medium sized enterprises to the Mexican market. The official statistics speak of roughly 1,200 companies with German capital participation here in Mexico. During the last 10 years, according to the official statistics, Germany has been the 4thmost important European investor, after Spain, the Netherlands and the UK. However, I honestly believe that these statistics usually do not reflect the full reality: due to investments from German transnational companies through their subsidiaries in other European countries, German investment is certainly much higher than the figures which feature in official government statistics. The German-Mexican Chamber of Commerce and Industry estimates that accumulated German investment in Mexico stands at US$25 billion.

What is the level of satisfaction of German companies with their operations in Mexico?

A survey of German companies in Mexico at the end of 2010 showed that expectations for growth on the Mexican market are high. Almost 75% of all consulted companies had plans to invest in 2011 and two thirds even planned to increase their labor force. In general, German industry is very satisfied with Mexico as a location, despite problematic regulatory issues in the health sector with COFEPRIS and the current security situation, which is worrying many, but still does not present any obstacle to further investments in Mexico.

What is your outlook for German trade and investment in Mexico?

I am sure that German companies will continue to invest in Mexico. Recent investments by companies such as Bosch, Volkswagen and DHL and a number of smaller German companies confirm this positive trend. The development of bilateral trade will also depend on the development of the global economy. Many European countries, as well as the US, have to make fundamental adjustments to their economies. The handling of these adjustments will influence bilateral relations. Still, Germany emerged from the last crisis invigorated and more flexible to face any new crisis. Mexico also overcame the 2008/2009 crisis and showed impressive growth rates in 2010 and in the first half of 2011. Germany could provide an important input to improve the competitiveness of Mexican firms with state-of-the-art technology and high quality inputs. The long history of commercial relations between Mexico and Germany will guarantee that any future crisis can be overcome. For 2011 it seems that import flows from Germany to Mexico are reversing the steep decrease in 2009. Figures for the first 5 months suggest that imports from Germany will grow by 10% above the record year 2008. Mexican exports to Germany also grew strongly in 2010 (17%), but still haven't quite reached the exceptional levels of 2008.

Are there specific sectors targeted by German companies?

German companies have traditionally targeted the automotive sector, the logistics sector, the chemical sector and the pharmaceutical industry. This will certainly remain that way. However, I am confident that German industry will soon strengthen its involvement in other business areas, focusing on the energy sector, in specific on alternative energies, where Germany is a world leader. In September, we hosted a mission of German companies from the solar energy sector and German firms displayed the latest German technology in this field in the German pavilion at the "Green Expo". In June, we also showed solutions for the houses of the future with the "casa alemana" presented in Chapultepec. This model house included solutions for a highly energy-efficient dwelling which hardly used any energy from the outside. Another focus is the aerospace sector. In October, we hosted a mission of German companies visiting the aeronautic clusters in Mexico in Queretaro, Chihuahua and Nuevo Leon. Education is another big challenge in Mexico and Germany with its dual education system for technicians can provide a very successful model. German security technology is another very interesting sector we would like to promote in Mexico. German health technology and pharmaceutical products can give a very high added value to the Mexican health industry, notably with regard to health tourism. A major problem in this field is the poor infrastructure provided by the health regulator for obtaining registrations and import certifications.

What is your opinion on the Mexican Automotive Industry?

The Mexican automotive industry is thriving and has a great future. German companies will continue to want to be part of it. Due to its closeness to the US market and thanks to its skilled workforce, Mexico has important competitive advantages. Mexico has a unique competitive advantage in the automotive industry because of its free trade network. It is the only country in the world from which you can export cars duty-free to most big automotive markets. This has attracted most of the big car manufacturers to invest in Mexico, providing excellent business opportunities for auto part suppliers. For European companies, Mexico is the place to be if you want to supply the North and South American markets, and at the same time export and import components to and from Europe.

How important has Mexico been for the consolidation of Volkswagen in North America?

Volkswagen has been in Mexico for many decades, building and selling cars. Today, Volkswagen's Puebla operation has become one of the biggest assembly plants of the North American auto industry. Volkswagen's bestsellers in North America, the Jetta and the Beetle, are built here. In addition, Volkswagen has developed an important engineering capability in Mexico, and is working in close cooperation with Mexican universities to build up local automotive know-how.

What is your opinion on the Mexican economy?

The Mexican economy is doing well. However, we all know that several fundamental reforms are needed in order to tap its full potential.

Any last comment for Mexico NOW subscribers?

Mexico is a country that is very attractive for companies and investors from many points of view. That's why I always recommend that German companies and investors consider Mexico as a market for their products or as a destination for new or additional investment. I also have a recommendation for Mexican entrepreneurs: Don't just look to the north. Try to diversify your business relationships. This means also to look towards Europe and of course towards Europe's largest economy: Germany.