Japan in Mexico

Mexico has signed several agreements with Japan. Some of them come from before the nineties. Some examples are the Treaty of Friendship, Commerce and Navigation; the Commerce and Air Services Agreement; there is also the Agreement on Tourism Cooperation. In recent years, Mexico and Japan have signed other important agreements. One of them is an agreement to avoid double taxation and prevent fiscal evasion with respect to income tax. There is also the Agreement for Strengthening the Economic Partnership between Japan and Mexico. And we must not forget the Memorandum of Understanding on Air Services (an amending agreement signed in 1972) or the Protocol to improve market access conditions.

Among the mechanisms for dialogue between Mexico and Japan we have the Economic-Financial Group. Their objective is to boost economic and financial cooperation working along with the Mexico-Japan Business Committee. They get together to discuss important points in the Economic Partnership Agreement.

The Japan-Mexico Economic Partnership Agreement (EPA) executed in September 2004, promotes liberalization of trade and investment, as well as promoting a freer flow of persons for business purposes between the two countries. The Agreement also aims to promote a comprehensive economic partnership. This includes a competition policy, improving the business environment and bilateral cooperation in such fields as vocational education and training and support for small and medium enterprises. The Agreement contributes to making the most of the economic complementarity between Japan and México. In this way it strengthens dynamic bilateral economic relations.

Exhibit 1 summarizes the Trade Balance between Mexico and Japan. It shows that commerce between the two countries reached its maximum level last year (2011). What really stands out is that since 2000 commerce between Mexico and Japan has been evolving very satisfactorily. It has been following a path of continuous growth, with the exception of the years 2003 and 2009.

Several important factors in the trade balance between Mexico and Japan are revealing. Take, for instance, the fact that during the 12 year time span from January 1999 to December 2011, total exports from Mexico to Japan almost tripled. They rose from US$946 million to US$2.25 billion (+138%). And at the same time, it should be pointed out, imports from Japan to Mexico showed an impressive 224% growth.

Total commerce between the two countries and reciprocal action brought in US$18.75 billion during 2011 in trade between the two partners. Total commerce between Mexico and Japan showed important improvements, especially during the period since 2006. This was when, for the first time, the total commerce stats were available identifying the US$15 billion. In fact, the period 1999 to 2011 represents a 210.93% growth rate in total commerce between the two countries. And in 2011, there was a 10.66% increase in commerce (US$18.75 billion) compared with (US$16.94 billion) in 2010.

Exhibit 2 shows Japanese Investment in Mexico. During the period from January 2000 through June of 2010, companies with capital from Japan invested US$896.30 million. This amount represents 0.4% of the total invested in Mexico during that time.

Among the countries from the Asia Pacific Region, Japan is the main investor in Mexico. In Exhibit 2, a negative trend in the Japanese investment in Mexico is shown in the year 2006. According to ProMexico, this figure does not represent the exit of Japanese capital in Mexico and the reason for this figure is because of the fiscal movement of a big Japanese Company to another country.

Most of the Japanese investment in Mexico goes to the manufacturing industry (76%). This is shown in Exhibit 3. By December 2009, 375 companies with Japanese capital were registered in Mexico according to data from ProMexico.

Japanese Companies active in Mexico include: Nissan; Toyota; Mitsui & Co. and Tokyo Gas. There is the Takeda Pharmaceutical Company and Mazda Motors. Add to the list Aida Engineering; Isuzu Motors; Amano Enzyme and Kinugawa Rubber Industrial. Others are Yokogawa Corporation and Panasonic.

In addition we have Mitsubishi Heavy Industries; Mitsubishi Electric; Toto and Nippon Express. They all have important operations in Mexico.

Among the Top 500 Companies in Mexico, according to Expansion magazine, nine of them are from Japan: Nissan Mexicana (14); Toyota Motor Sales de Mexico (82); Honda de Mexico (91); Sony de Mexico (120); and Mazda Motor de Mexico (232). There are also NR Finance Mexico (254); Panasonic de Mexico (255); plus Susuki Motor de Mexico (378); and also Tokio Marine Seguros (448).

Nissan continues growing its investments in Mexico. In a ceremony in July, the Japanese automotive manufacturer announced it will build its third manufacturing complex in Mexico in the state of Aguascalientes.

The new automotive complex will become the second one in the state. It will be 2.5 times larger than the current complex and will be the result of a $2 billion investment announced earlier in the year as an effort: “…to increase manufacturing capacity needed to satisfy the high demand for Nissan vehicles in the domestic and international markets.” This was reported by the company through a press release.

The first phase of the project will include stamping, body, painting and final assembly facilities and is expected to be operational by the end of 2013 capable of producing 175,000 compact vehicles per year (B-platform). This will create 3,000 direct jobs and generate approximately 9,000 indirect jobs.

The complex will include a supplier park and a quality proving ground. “The magnitude of Nissan’s commitment to this new automotive complex is without par,” says Armando Avila, Vice President of Manufacturing at Nissan Mexicana. “With this investment,” he explained, ” we will be able to increase our manufacturing capacity from over 600,000 units per year to more than 800,000 units by the close of 2013. In this way we continuing setting our record production rates in Mexico. And this is only Phase 1,” he added.