Sara Hradecky Canada Ambassador to Mexico

Editor’s Interview

How do you grade Mexico’s competitiveness as a destination for Foreign Direct Investment?

Mexico is currently among the most competitive emerging economies, and its attractiveness as an FDI destination will be further bolstered with the implementation of the government’s recent structural reforms. This, in addition to Mexico’s geographic location, trade openness, and ongoing transformation resulting from NAFTA, have resulted in Mexico’s total stock of inward foreign direct investment (FDI) more than doubling in just ten years - from US$193.3 billion in 2004 to US$389.1 billion at end-2013, according to UNCTAD data.

Additionally, Mexico’s ambitious infrastructure program – which includes 3 significant railway projects, key investments in energy, housing, communications, health, tourism and a new international airport for the City of Mexico – all serve to add to Mexico’s attractiveness as an investment destination.

What is the role of the Embassy in strengthening the bilateral relationship between Canada and Mexico?

Canada and Mexico enjoy an excellent bilateral relationship. The relationship is bolstered through activities carried out by the Embassy in numerous areas, including:

Trade Relations: On the commercial front, we have a team of officers from the Canadian Trade Commissioner Service based in the Embassy in Mexico City as well as in our Guadalajara Consulate and Consulate General in Monterrey. The team is tasked with promoting and supporting trade, investment, and innovation partnerships between Canada and Mexico. It provides services both to Canadian companies seeking opportunities in Mexico, and advice and guidance to Mexican firms interested in investing in Canada.

Consular Relations: Given both the large number of Canadians (over 2 million) travelling to Mexico yearly and over 50,000 Canadians permanently living in the country, Canada maintains an extensive network of 11 points of consular service in the country – in effect among the largest of all Canadian consular networks in the world. Consular relations between Canada and Mexico are excellent, and the Consular Section at the Embassy has developed consultation and communication mechanisms aimed at encouraging dialogue, strengthening communication, and coordination with diplomatic/consular officials and authorities at the federal as well as the provincial/state levels.

Political, Public Affairs, and Economic Relations: The Embassy provides political analysis of Mexico, always with an accent on how developments here involve Canada. This analysis extends beyond the actions of the executive to those of the legislative and judicial branches; it also moves beyond the federal level to that of key states, identified by their importance to domestic political dynamics and by the range of Canadian activities and interests. Security, justice reform and human rights are themes of particular interest. We also have an active program for cultural and public affairs to share Canada’s culture, such as literature, arts, and music in Mexico, as well as the promotion of academic and educational linkages between Canada and Mexico.

What is your opinion of the development of NAFTA after 20 years of its implementation?

Strengthened by NAFTA, Canada and Mexico are among each other’s largest trade and investment partners. Canadian data shows that total bilateral merchandise trade grew from US$4.1 billion to US$31.2 billion since NAFTA took effect in 1994.

Furthermore, NAFTA has contributed to creating a framework within North America in which Canadian, US, and Mexican companies do more than just manufacture and sell to each other’s markets. Companies in North America increasingly collaborate and integrate their production to maximize capabilities and efficiencies, helping make North American industry more competitive. The benefits from this type of supply chain integration accrue to the entire spectrum of companies located in the three countries.

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

Mexico and Canada just finished a year of milestone celebrations: the 10th year of the Canada-Mexico Partnership, the 20th anniversary of NAFTA, the 20th Bilateral Meeting of Legislators, the 40th year of the Seasonal Agricultural Workers Program, and the 70th year of diplomatic relations. The Canadian Prime Minister, the Right Honorable Stephen Harper, marked these anniversaries with a visit to Mexico in 2014.

Our countries’ leaders are able to celebrate a relationship that is ever-more complex and deep and that is centered around four over-arching priorities: fostering competitive and sustainable economies, enhancing people-to-people contacts, protecting our citizens, and projecting our partnership globally and regionally. In the economic sphere, Mexico and Canada are together working to build a 21st century North American production platform spanning across most economic sectors. People-to-people exchanges are also flourishing, with Mexico among Canada’s top tourist destinations.

Educational and academic exchanges have grown rapidly in recent years, and students from Mexico now constitute Canada’s largest source of long-term students from Latin America. As well, Canada recently designated Mexico among six priority countries in our new International Education Strategy, setting the stage for an even greater interchange. As neighbors, allies in global economic and political groupings, and as friends, Canada and Mexico have great potential to build ever stronger bridges between us.

What is the current situation of the commercial relationship between Canada and Mexico?

In 2013, Mexico maintained its standing as the fifth-largest destination for exports of Canadian goods, with shipments totaling almost US$5.2 billion. Leading Canadian exports to Mexico include oil seeds, electrical machinery and equipment, motor vehicles, machinery, and cereals. Mexico is also the top sun travel destination for Canadians and our second most popular travel destination in the world after the United States. Over 2 million Canadians visited Mexico in 2014 (up from 1.9 million in 2013), including tens of thousands of “snowbirds” (i.e. Canadians who winter in tropical regions).

A recent study by The Conference Board of Canada (“Sweet Spots for Canadian Businesses in Mexico”) has identified numerous sectors of opportunity (“sweet spots”) for Canadian businesses in Mexico, characterized by the confluence of three factors: high growth potential, policy openness, and Canada’s proven trade strengths. Notable among these sectors are: grains and oilseeds, motor vehicle manufacturing, mining, financial services, construction, and electricity generation. These sectors are largely in line with the priority sectors identified by Canada’s Embassy in Mexico, specifically agriculture and agro-food, automotive, aerospace, mining, oil and gas, education, clean technologies, ICT (information and communication technologies), and infrastructure.

Mexican trade data shows that Mexican exports to Canada were second-largest - behind the United States but ahead of China. Principal Canadian imports from Mexico are electrical machinery and equipment, motor vehicles, agriculture and agro-food products, machinery, and mineral fuels and oils.

Which are the areas of opportunity that you see in terms to strengthen commercial relations between Canada and Mexico?

Canadian companies have identified Mexico as an important part of their manufacturing and distribution platforms in key industrial sectors; this supply chain integration contributes to increase the region’s competitiveness. As noted by our three Leaders at the North American Leaders’ Summit held in February 2014, the future success and competitiveness of North America depends on our ability to foster innovation, to provide our citizens with access to high quality educational opportunities and technology, and to promote a workforce with the skills necessary for success in the 21st century global economy.

More broadly, Canada-Mexico trade relations are based on a North American production platform that encompasses not only North American producers, but also companies from other countries establishing their supply chains in the region. This “whole of North America” model harnesses the top competitive features of each country’s production processes. Its results may be seen, for example, in the recent growth in Mexico’s automotive and aerospace industries.

This strategic trading relationship stands to be further enhanced by our joint participation in the Trans-Pacific Partnership (TPP) trade negotiations. Canada is also an observer to the Pacific Alliance, of which Mexico is a founding member. 

What is the current situation for bilateral investment between Canada and Mexico?

According to Mexican data, the stock of Canadian foreign direct investment in Mexico in 2013 was US$16 billion. Canada has been the fourth-largest source of FDI into Mexico for some years now, behind the US, Spain, and the Netherlands. Numerous Canadian companies that are household names in the world economy have invested in Mexico, including Bombardier, Scotiabank, Magna, TransCanada Pipelines, Air Canada, Palliser, Apotex, Linamar and Martinrea. Canada is also the largest foreign investor in Mexico’s mining sector, led by firms such as GoldCorp. 

While Mexican investment in Canada had long been at conservative levels, this changed in 2014 when the Mexican bread company Grupo Bimbo invested US$1.8 billion for the purchase of Canada Bread and US$109 million in the purchase of Saputo’s snack cake business.

What is the role that Mexico plays in catalyzing investment from Canada for Central and South America?

Given its position as both a major player among emerging markets and a key partner in North America’s supply chain and production platform, Mexico has the added benefit of acting as a cultural and logistics bridge between Canada and the markets of Central and South America. The experience of Canadian companies in Mexico often helps to increase their comfort level in operating elsewhere in the region. Some Canadian companies manage their Central and Latin American business operations from Mexico, such as Apotex (the pharmaceutical firm) and Blackberry.

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

Canadian companies have overall been successful when expanding to Mexico. Canadian suppliers increasingly recognize the value of locating in Mexico where, in addition to the close proximity to end users, they can also leverage Mexico’s competitive advantages such as qualified labor, plentiful services, modern production facilities, and solid infrastructure. This in turn allows Canadian companies to focus their efforts on design, innovation and research activities in Canada. It is worth noting that Canadian investment in Mexico is being carried out not only by the large household names, but also by small- and medium-sized companies.

How do you grade Mexico´s Aerospace Industry?

Canadian aerospace giant Bombardier provided the spark for the increased development of Mexico’s aerospace industry through its investment in Queretaro in 2006. Other aerospace companies have since followed, and Mexico’s aerospace sector has proven to be an attractive investment destination over the past several years, ranking among the top five destinations for aerospace FDI worldwide between 2009 and 2013. In 2014, two Canadian trade missions in this sector visited Mexico; and the President of Mexico’s Aerospace Industry subsequently attended the annual meeting of the Aerospace Industries Association in Canada.

Any last comment for the MexicoNOW subscribers?

Canadians and Mexicans are close neighbors and friends. Canadians appreciate Mexico, not only for its warmth and sun and spectacular tourist destinations, but also because of its people, its history, culture and heritage. Conversely, Canada is also a wonderful land of opportunity for international education, something which Mexico and the Pacific Alliance members have highlighted as an important issue to be pursued for their own citizens. Canada has some of the world’s best colleges and universities, and the linkages between Canada and Mexico can only grow as more Mexican students explore Canada as an educational option.

The Mexican market is important for Canada; and its importance is set to grow even more as our two countries integrate even further. This brings us closer together and creates even more common ground, not only in our trade relationship but also in our broader relationship. As we continue to seek ways to further enhance our bilateral relations – be it commercial, cultural, or political - the future of the Mexico-Canada relationship appears bright indeed.