MEXICONOW. - Please tell us how close is the relationship between Mexico and Korea?
Ambassador Chun Beeho.
- This year is the 110th anniversary of the Korean immigration in Mexico. The relationship between Korea and Mexico started in 1905, when Korean immigrants arrived at Merida, Yucatan State, from the Port of Incheon, South Korea.
Korea and Mexico maintain a very close cooperative relationship in the global stage, as members of APEC, G20, OECD and MIKTA. Also, Mexico is Korea’s largest trade partner in Latin America since 2014 and both countries have kept a close and substantial relationship throughout all the general area such as politics, economy and culture.
What is the current situation of the diplomatic relationship between Korea and Mexico?
Since Korea and Mexico established diplomatic relations in 1962, both countries have shared universal values such as democracy, market economy and human rights.
In October 2013, Pena Nieto, President of Mexico and Geun-hye Park, the President of Korea had a meeting at the OECD Summit in Indonesia. In 2010, the former President Myeong-bak Lee officially visited Mexico, Eui-hwa Jeong, President of the National Congress of Korea, visited Mexico in September 2014.
Also, Miguel Barbosa, the former President of the Senate visited Korea in July 2015, Jose Antonio Meade, the former Secretary of Foreign Affairs and actual Secretary of Social Development went to Korea as well in May 2015.
Thanks to the close relationship between the high-level representatives, in 2005, Korea could establish the strategic partnership with Mexico as a first Latin American partner. Now both countries are cooperating in political, economic, cultural and global issues and Korea considers Mexico as their core cooperative partner in Latin America.
What is the current situation of the commercial relationship between Korea and Mexico?
As of 2014, the trade volume between Korea and Mexico surpassed the record of US$13.8 billion with Brazil and reached the record of US$14 billion, which made Mexico our largest trade partner in Latin America.
Korea is the 11th largest export market and is becoming 6th trade partners of Mexico. As of 2014, the total Korean investment amount reached at US$4.3 billion by 245 companies.
The industries in both countries are in complementary relation not in competitive. Therefore, we expect to see a great development in the future.
How do you grade the competitiveness of Mexico for Foreign Investment?
Foreign investment in Mexico has increased drastically after the signing of NAFTA. It is due to that Mexico is driving Maquiladora policy based on the advantage of sharing the borderline with US who has the enormous market and providing low cost labor force.
In the meantime, Mexico entered into 15 Free Trade Agreements with 45 countries, which attract the investment of foreign corporations that wish to expand their market not only in North America but also in Latin America.
Which are the areas of opportunity that you see in terms to strengthen relations between Korea and Mexico?
Mexico has a great geographical position located close to North America, Central and South America. In addition, they have NAFTA and FTAs with many Latin American countries, which mean Mexico has an important role as the production base to enter North, Central and South American markets.
Mexico provides various investment opportunities to many different kinds of Korean companies, such as automotive, auto parts, steel, IT, electronic instruments and home appliances.
What is your plan of action at the Embassy in terms to strengthen the bilateral relationship between Korea and Mexico?
The Embassy of the Republic of Korea is trying to reopen FTA negotiations between Korea and Mexico, aiming for a sustainable economic cooperation and reinforcement of future-oriented relationships.
The bilateral FTA negotiation that was suspended in 2008 is now in need of reopening the negotiation by the both countries’ industry due to the change of industrial condition and the Korean investment has been made throughout the years in Mexican automotive and steel industry.
Through the FTA, the two countries will increase trade volumes, expand investments and elevate each economy and the quality of life in both countries.
For that, the Korean Embassy has delivered the message of the necessity of reopening of FTA negotiations to the Mexican Federal and Local governments, Congress, and Industries. The Korean Embassy will continue to promote the reopening of FTA negotiation by holding a seminar with influential people of both sides in the first half of 2016, in an amicable way that will have bilateral benefits.
How do you grade Mexico´s Automotive Industry?
Mexico is ranked at 8th largest auto producer in the world and 4th largest car exporter after Germany, Japan and Korea. The Mexican automotive industry is more concentrated in export than in imports (in 2014 Mexico produced 3,220,000 vehicles and exported 2,670,000 units which is 83% of total production).
In the Korean car market, the participation of foreign cars is 16.5% and it is expected to reach 30% in 10 years. At present the Mexican participation in the Korean vehicle market is 7th position after Germany, USA, England, and others without having the FTA.
Recently the Trans-Pacific Partnership Agreement (TPP) was reached and Mexico has become the focus of attention as the production base of global vehicle companies. Many global corporations such as Hyundai Kia, Nissan, Volkswagen, Ford and BMW, are presenting their investment plans in Mexico.
As a consequence, in 2020, Mexico will be able to produce 5 million vehicles per year and the automotive industry will be one of the leading industries of the Mexican economy.
How will the investment of Kia affect the commercial and industrial relationship between the two countries?
From May 2016, Kia Motors is planning to produce vehicles by investing US$1 billion and 16 auto parts companies including Hyundai Mobis, Hyundai Wia and Mando have invested another US$1 Billion to tool up and 14,000 jobs will be generated.
If Kia Motors investment in Nuevo Leon is successful as a prime example of economic cooperation between Korea and Mexico, Korea will contribute to the economic development of the northeastern regional economic, Japan and the United States will influence the economy in Guanajuato and Volkswagen will help the development in Puebla.
Do you expect more Korean investment to locate near Nuevo Leon?
The production capacity of the KIA Motors plant that is being constructed in Nuevo Leon is 300,000 vehicles per year. However, there is the possibility of additional investment if extra demand is generated. This may induce the additional investment of the auto parts industries that entered together with Kia.
There are various Korean companies eager to invest in Mexico. The Korea Electric Power Corporation (KEPCO) and Daerim Energy are preparing to invest in Topolobampo Combined Cycle Power Plant. POSCO Mexico is reviewing their additional investment possibilities and Hyundai Translead’s additional investment plan to produce trailers is already in process in Rosarito, Baja California State.
There are also possibilities of investment in the renewable energy sector. Some oil companies such as Hyundai Oil Bank and GS Caltex are moving towards extending importation of Mexican crude.
What is the level of satisfaction of Korean companies with their operations in Mexico?
As mentioned, Mexico is a really attractive investment location because of its accessibility to the USA. Apart from this, a readily available good quality and affordable labor force. Moreover, Mexico has good infrastructure such as roads, railways, electricity and gas. Mexico has signed Investment treaties with Korea ensuring guaranteed and stable investments for Korean companies.
In relation to the Mexican investment system for foreign companies that is provided and guaranteed by law, such as VAT refund, it is expected that the authorities comply.
Recently some infrastructure promises, for example, moving of gas pipes and road maintenance, and tax incentives for KIA Motors, made by the former Governor of Nuevo Leon, have been delayed. Korea hopes that everything will be carried out as planned and promised. These promises were not personal promises from the Governor but directly from the Nuevo Leon State and this was a crucial factor in KIA’s decision to invest in Nuevo Leon.
As a reference, Ildefonso Guajardo Villarreal, the Minister of Economy mentioned “The Nuevo Leon Government and KIA Motors will find a solution to fulfill these promises through dialogues” during the interview at the end of the Annual Meeting of Industrial association on 26, Nov. and added “We are totally ready to listen to both sides”.
The Korean companies that have entered Mexico are generally satisfied with their businesses, but they have a little difficulty with hiring skilled labor to operate their plants. Although the public security has been improved through the efforts of Federal and Local governments, however, many Korean companies are still expecting security to strengthen and improve.
Any last comment for the MexicoNOW subscribers?
Korea and Mexico have a very close diplomatic, economic, and cultural relationship. But the Korean Embassy wants to stress that the FTA between Korea and Mexico is necessary to have an even closer relationship and a successful economic accomplishment for both countries.
Through the FTA, the trade volumes and investments between the two countries will be increased. In addition, The Korean Embassy hopes that the two countries promote sustainable economic growth through technical/technological cooperation and personal interchange so that both nations can be benefit in the quality of life for their people.