Argentina in Mexico

Argentina in Mexico

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MEXICONOW Staff Report

Diplomatic relations between Argentina and Mexico have been stable and friendly. In 1960, Mexican President Adolfo Lopez Mateos became the first head of state from Mexico to pay a formal visit to Argentina. To date there have been several presidential visits, reciprocally between the nations. During the 1970s, Argentina was ruled by military generals who targeted anybody who did not support them. During the “Dirty War”, several thousand Argentinean citizens fled the country and sought asylum in Mexico.

In 1982, Argentina and the United Kingdom declared war on each other for the Malvinas Islands. Mexico remained neutral on Argentina's claims to the islands during the war. Today, however, it supports Argentina's eventual possession of the islands.

Both nations are members of the G-20 major economies, including the Organization of American States, Organization of Ibero-American States, Rio Group and the United Nations.

The Economic Cooperation Agreement, ACE-55, was signed in 2002 between Mexico and the countries of the Mercosur bloc, made up of Argentina, Brazil, Uruguay, and Paraguay. The pact entered into force on January 1, 2003. Its principal objective was to promote free trade between Mexico and Mercosur countries and facilitate integration of their automotive sectors.

More recently, Mexico and Argentina signed a Strategic Partnership Agreement (2007) to increase economic cooperation and coordinate trade approaches.

In 2012 Argentina's government expressed its intention to cancel the Economic Cooperation Agreement, ACE 55, with Mexico, Brazil and Uruguay. With this decision, Argentina was trying to change its strategy regarding their automotive industry towards Latin America.

At the end of 2012, however, Mexico and Argentina decided to start a new era of trade in the automotive field under the Economic Complementation Agreement (ACE) 55. This came after it had already been suspended by the decision of Argentina in June, 2012. In the first steps to restore the agreement, they agreed to quotas for the export of Mexican vehicles with an eye toward total liberalization of trade in 2015.

According to Eduardo Solis, President of the Mexican Association of the Automotive Industry, this agreement will reach only 40% of the trade that existed with Argentina prior to the unilateral decision to close the Mexican market for duty free cars. This came at a time when Mexico sold US$1.1 billion in 2011.

Exhibit 1 summarizes the Trade Balance between Mexico and Argentina. It shows that commerce between the two countries reached its maximum level last year (2013). This certainly reflects the excellent moment that the bilateral relation is now having. The bilateral commerce has experienced many ups and downs, leaving Mexico for many years with a negative trade balance. But since the 2010 the trend has been reversed.

Several important factors in the trade balance between Mexico and Argentina are revealing. Take, for instance, the fact that during the 13 year time span from January 1999 to December 2013, total exports from Mexico to Argentinean increased from US$256million to US$2 billion (+667%). And at the same time, imports from Argentina to Mexico also showed an impressive 451% growth.

Total commerce between the two countries and reciprocal action brought in US$3.1billion during 2013 in trade between the two partners and has consistently shown important improvements. This has been especially true of the period since 2006. This was when, for the first time, that total commerce “stats” were available identifying the US$2.5 billion. In fact, the period 1999 to 2013 represents a 570% growth rate in total commerce between the two nations. And another interesting detail is that in 2013 there was an increase of 6% in commerce (US$3.1billion) in comparison with (US$2.9 billion) in 2012.

Foreign Affairs Ministers of Mexico, Jose Antonio Meade and Argentina’s Hector Timerman, agreed to deepen the bilateral relationship, plus expand and strengthen trade and investment in both countries. This was decided at a meeting held in Mexico City this year. Both Ministers presided at the third meeting of the Political Affairs Committee of the Strategic Partnership Agreement between Mexico and Argentina. During the course of the get together issues on the bilateral agenda of a political, economic and cooperative nature were reviewed.

Exhibit 2 shows Argentina’s Investment in Mexico. During the period from January 2000 through June 2014, companies with capital from Argentina invested US$718.4 million.

According to the Ministry of the Economy, at this time there are 1,765 societies operating with Argentinean Capital in Mexico.

Companies from Argentina have an important presence in the Mexican steel industry and a good example is the Techint Group. This is a company that has Italian-Argentinean origin (legally incorporated in Luxembourg) that has owned Tubos de Acero de Mexico (TAMSA) for over 50 years through its subsidiary Tenaris.

The Tenaris Tamsa Industrial Center in Mexico is one of the largest in the world in the manufacture of steel pipes for the energy industry. With over 4,700 employees, three manufacturing plants to produce tubes, a Corporate University and a Research and Development division, this company has contributed to the growth of the Mexican energy industry for 60 years. The enterprise is located in Veracruz. Tenaris Tamsa is a leader when facing the most demanding challenges in exploration and production of oil and gas anywhere in the world.

Techint Group has a presence in Mexico through its subsidiary Ternium, which acquired two important Mexican steel companies (IMSA and Hylsa) between 2005 and 2007.

Ternium is a leading company in Latin America that prepares and processes a wide range of steel products utilizing the highest technology. Ternium and its subsidiaries have 15 manufacturing plants in Argentina, Colombia, the United States, Guatemala and Mexico.

Ternium Mexico is a highly integrated steel complex by virtue of its extensive value chain. Its activities range from mining iron ore in its own mines, to processing steel, as well as developing many other high value-added finished products as well as distribution.

Ternium plant, Monterrey
Ternium develops its industrial activities everywhere around the Mexican territory. The firm owns 100% of the mining company Las Encinas, with iron mines in Colima, Jalisco and Michoacan, in addition to a pelletizing plant in the state of Colima. . Other ventures include 50% ownership of Peña Colorada (featuring an iron mine in the state of Colima and a pelletizing plant in the City of Manzanillo). The company also has two production plants for long products (one in Apodaca, Nuevo León and one in Puebla). There are two flat steel production facilities (both in San Nicolas de los Garza, Nuevo Leon). It also has operations in Monclova, Coahuila, Apodaca, and two in San Nicolas de los Garza in Nuevo Leon. Service and distribution centers are located in the main cities of Mexico.

Other highlights by Argentinean companies investing in Mexico are made ??by the Arcor Group, specializing in the production of candies, cookies, chocolates and food products.