What is the role that Mexico plays for Indian investment in North and Central America?
Both India and Mexico are large economies; each is over one trillion dollars. Indeed, India is the 10th and Mexico the 14th of the largest economies in the world. When ranked by purchasing power parity their respective rankings are 4th and 11th. The two countries, on the other hand, are located on the globe almost like diametric opposites, or antipodes.
This geographical factor has traditionally limited our mutual contacts at all levels, including trade, business, and investment flows. In comparison the USA and Canada are the two largest countries and economies in North America. And with these two nations India has had much stronger traditional linkages for several obvious reasons, such as the size of the economy, traditional multifaceted linkages, a democratic Indian community and the English language, to name a few.
It is therefore entirely understandable that in relative terms, or even global terms, our India-Mexico commercial, economic, and investment exchanges are not so dominant. But a more relevant context is that despite all the aforementioned factors, our bilateral trade and investments have in many recent years been growing rapidly. When measured in percentage terms it is among the fastest in the entire region, and that can be seen to provide a truer basis for assessing the real potential, promise and importance of each to the other.
At this point let us also not forget the fact that Indian investors haven’t yet exactly been seeking out Mexico for its NAFTA market benefit, but principally for the Mexican market itself. As the process continues, it may be expected to gather much greater momentum. This is because Mexico’s well-known “NAFTA factor” will inevitably have its own strong pull as well.
In numbers, our bilateral trade is almost US$3 billion and Indian investments going into Mexico, according to ProMexico estimates, is already around US$1.5 billion. Our own assessment is rather conservative, but we project it at around several hundred million dollars, covering well over 25 Indian companies. The principal difference is that the former also includes investment by Arcelor Mittal, but even though this steel giant is an Indian company in the sense that it is controlled and run by an Indian family, it is in fact run as an international MNC. From this perspective I would be reluctant to claim that its investment as such is from India.
So, the short answer to your question, in the context, would be that Mexico is now playing a rapidly growing role for Indian investment in the region, as well as vice versa. And I would have to add that the vast untapped potential will ensure that the trend will continue to be sustained and strengthened in the coming years.
How has the Indian investment in Mexico evolved alongside the impressive economic development that India has experienced in modern time?
Inevitably, as the Indian economy continues to chug along, it would impart further impetus to Indian companies and investors looking wider and afar for investment opportunities. And in this view Mexico’s obvious potential and attractiveness will pull in its own fair share. This trend is already obvious in recent years, and as I have said, it is only going to get stronger with time. As of now, almost all Indian IT (Information Technology) majors have operations in Mexico. In addition there are several Indian pharmaceutical firms, and also engineering, auto parts, tires, packaging and electrical enterprises, and there are others.
What is the level of satisfaction of Indian companies with their operations in Mexico?
It is very high, and the obvious proof of the pudding is in the facts that while more and more Indian investment is flowing into Mexico in ever new and wider sectors, none has ever retreated. I recently had a meeting with all the Indian companies in Mexico and not one of them expressed disappointment or misgivings on any count.
This is, however, not to suggest that things still couldn’t be better. More flexible labour, for instance, and other regulations, interpretations and practices, and wider use of English in Mexico, as well as more direct banking, shipping and aviation channels between India and Mexico–will all facilitate and promote greater Indian investments in Mexico. This works in the other direction too, and the benefit is mutual.
What is your outlook for Indian trade and investment in Mexico?
I believe I have already covered Indian investment trends and climate. As for bilateral trade, the outlook is not dissimilar either. Indeed trade and investment generally go together hand-in-hand, each bolstering the other. Our bilateral trade growth has been accelerating rapidly in recent years, reaching US$2.8 billion in 2010.
Yet, trade with India made up only 0.5% of Mexico’s total trade in 2010. Given the strong potential and our vast complementarities, and further important measures as we move toward a free trade agreement and more direct channels and networking, I can clearly foresee reaching US$10 billion in our bilateral trade by the year 2015! Apart from the geographical distance–its one direct consequence being a lack of mutual awareness–has been the other major impediment, historically speaking. But, as the India-Mexico relations have been growing stronger, technology and other advancements are shrinking the distance. At the same time the information boom, globally speaking, is creating a greater awareness.
Business people, as the case in point, and traders from both sides are discovering an attraction for each other, and this is something which is really fuelling our rapid bilateral growth. We have not yet reached anywhere near the optimum point in this process and therefore the growth and acceleration in our trade should continue with the same tempo.
Of course, both sides can and should also take several measures to further promote and facilitate this process. A free trade agreement will certainly provide a big boost. Direct banking, shipping and aviation channels would be another important facilitator. More frequent exchange of business delegations is the need of the day. Likewise, more frequent participation in each other’s trade fairs, as well as organization of exclusive trade fairs are great catalysts for increasing business.
India recognized the importance of Latin America for its business relations some two decades ago, and we launched promotion schemes and measures under the rubric ‘Focus LAC’ (Latin America and the Caribbean). A series of Latin American conclaves have been organized by Indian apex chambers, both in India and in Latin America. One such conclave is being planned to be held in Mexico in October, naturally with a particular focus on Mexico.
We are also working on a major India Show to be held in Mexico next February as a multi-purpose vehicle. We already have, between India and Mexico, a bilateral High Level Group on trade, investment and other economic cooperation, as well as a bilateral Joint Commission. Both are working to hold their next meeting in the next couple of months. The former will be in New Delhi and the latter in Mexico. The Joint Commission meeting this year will be held for the first time at an elevated level for Foreign Ministers. This is being done in recognition of mutual recognition by both governments of each other’s commercial and economic importance.
It bears repetition that notwithstanding all this, Indian and Mexican business sectors are yet to discover each other in a real sense. My assessment is that so far we have only scratched the surface. The potential is far greater and therefore the outlook for growth will remain bright for a long time on an on-going basis.
Is there any additional Indian investment in Mexico to be expected in the near future?
Investment flows between any two business partners are generally an on-going process, encouraged and promoted by the potential and promise of healthy returns. From all the feedback that I have, from Indian companies that have invested in Mexico, as well as from Mexican companies in India, the general level of satisfaction is consistently high and therefore we should only expect, to reiterate, continuing and increasing Indian investments in Mexico.
In the free-market there are capitalist structures that predominate in both our economies. In fact, much of the business is carried out through the private sectors and there is naturally a certain culture of business confidentiality about their investment plans at least during the planning stage. I would therefore not provide any specific instances of additional Indian investments to be expected in the near future, except to confirm that this is certainly to be expected, and increasingly so as time passes. Information on the quantum, sector, location, and such, will inevitably be accessible in the public domain at the appropriate time.
Are there specific sectors targeted by Indian companies?
Both India and Mexico have large, diversified, multi-varied economies, and therefore it is natural for both our countries to seek attractive investment opportunities in all possible sectors. I would not preclude any specific sectors from Indian companies’ possible interest in investment in Mexico, but having said that, I could specify certain sectors of the Mexican economy which I expect to have a definitive interest in for Indian investors.
First of all, mining is a virgin sector in Mexico for India. And with our growing requirement for raw materials and minerals, it is only natural to expect Indian investments in this area in Mexico.
Automobiles and auto parts is another sector in which both our countries are strong and growing. It is one of the largest and most diversified sectors globally. The opportunities for mutual investments here are ample on account of our essential complementarities. In pharmaceuticals, another excellent example, with India’s well-known quality and price competitiveness, further collaborations by Indian companies in Mexico should be expected.
We already have 13 Indian pharmaceutical companies active in Mexico. Some of them, it should be pointed out, have already made investments here in setting-up or taking-over plants. In information technology, India’s expertise is well-known globally and almost all Indian majors already have a growing presence in Mexico. Potential exists for further continued growth.
There are many other promising sectors such as chemicals and petro-chemicals, energy and hydrocarbons, bio-fuels and renewable energy. In services we have tourism, health and education, but I would highlight here only one more sector, somewhat unconventional, which is the cinema. Indian cinema, or “Bollywood”, as it is called, is the largest in the world and is quite well-known.
With the cultural and value compatibilities between our peoples, I foresee this as a vast area for our mutual collaborations in myriad ways, whether doing outdoor locale shooting in Mexico, planning joint productions, in marketing and distribution, or even an exchange of film actors and personalities. Or, maybe it might be just screening in theatres and on TV, in Mexico and throughout Latin America.
For Mexican investments in India, I would certainly flag the high potential and promise of infrastructure, housing, and food processing in particular.
Which conditions are needed in Mexico to increase Indian investments?
Mexico’s investment climate is already quite conducive, but this is an area without limit for improvement. From what I said earlier, the foremost condition needed to increase Indian investments in Mexico is to create a greater awareness among Indian business circles about Mexico’s potential. This is something which calls for more intensive interaction, exchange of visits, a publicity and information campaign, promotion of tourism and so on. Indian business, fuelled by its rapid growth, is actively and vigorously looking for investment opportunities abroad. And I have to say that at present Mexico does not yet figure very prominently because of this general lack of awareness.
In addition to this Mexican rules and regulations, including the incentives regime, are items that can be made more liberal and generous to attract overseas investments.
There are two areas in particular in which our companies in Mexico have often pointed to as having cumbersome and timeconsuming procedural requirements. Namely pharmaceuticals and agricultural produce are mentioned and the Mexican authorities may wish to revisit these with a view to simplifying and expediting things.
Between India and Mexico we already have all the necessary institutional mechanisms to promote and facilitate investments. There are, for example, bilateral investment protection and promotion agreement. And there is a double taxation avoidance treaty, besides others, and therefore while bilateral investments both ways would continue to grow by their own momentum, these suggestions would considerably further catalyze and promote the process. Growth of bilateral trade will also contribute to promote investment flows in both directions.
What is the future of India and Mexico in their bilateral relations?
India and Mexico last year celebrated the 60th anniversary of the establishment of their diplomatic relations. The two nations have consistently enjoyed a cordial, friendly and warm relationship, unaffected by vicissitudes. The bilateral relations are exemplary in many ways, characterized by our mutual understanding and cooperation. Respect is always the cornerstone of any relationship and we both have ample respect for each other, for our interests, concerns and compulsions. We may have occasional divergence of views, but we understand and appreciate each other’s reasons for that, and we can conclude that our relationship has always been on an even keel.
Given all this, the future of the India- Mexico bilateral relationship remains very bright, positive, and valuable-–not only for each other, but also for promoting and strengthening a global framework of friendly relations founded on peace, security and cooperation.
What is your opinion of the Mexican economy?
Our opinion on the Mexican economy is most positive. Mexico was the first developing country which advanced to the level of joining the OECD, the organization of developed economies. This was way back almost two decades ago. It remains one of the largest economies of the world, one of the most prominent “emerging economies”, is characterized by robust macro indicators and it is well managed by its political leaders and economists.
Mexico’s membership in the important G-20 is an acknowledgement of her credentials and capabilities. We share the common perception that the Mexican economy is slated to grow among the world’s 6 or 8 largest economies in the next couple of decades.
Mexico enjoys several favorable factors for this prognosis. It is an immediate neighbor of the mightiest global economy, with whom it has a valuable free trade agreement, NAFTA. It has direct access to the Pacific and Atlantic Oceans on each coast. It is also neighbor to several important Central American countries, besides sharing intrinsic attributes throughout the southern hemisphere and Latin America. Mexico is richly endowed with natural resources.
The Mexican people are hardworking, talented and enterprising. Mexico’s political, economic and education systems may have room for further growth and improvement, but as such they already favor comparably with those obtained in many other countries around the world. Mexico’s democratic and secular credentials allow the whole nation to participate in the process of socio-economic development as active players and contributors.
Would you like to add any comment for the MexicoNOW subscribers?
First of all, I would like to extend my warm greetings and best wishes to your subscribers and readers.
I wish to underline that the India- Mexico bilateral relations, founded as they are on our shared values, mutual empathy and understanding, friendly cooperation, and similar socio-economic conditions and aspirations, are set to be a principal factor in the global structure for years to come. This makes it incumbent upon both of us, at all levels and not only for our governments, to work to promote these important ties. We would welcome more Mexicans to visit India, for business, tourism, education, or just to get to know each other better, and vice versa.
To paraphrase President Calderon’s words, we need more Mexico in India, and more India in Mexico.
And to conclude, I would value comments and suggestions from the MexicoNOW readers, which they may feel free to address directly to us at the Embassy (email@example.com).