How do you grade the competitiveness of Mexico for foreign investment?
Mexico is one of the most competitive countries in the world. It is a large country with excellent human resources and connectivity with not only the NAFTA market to the north, but also access to Central America, the Caribbean and South America.
Mexico’s macro-economic and political stability increasingly make it an attractive destination for investment. It has low inflation backed by a huge domestic market. In recent years, Mexico has fast emerged as a global manufacturing hub. It is similarly a favored destination for investments in the services sector.
The country boasts a strategic geographic location which is unique. Its network of Free Trade Agreements around the world is an added advantage for those that invest in Mexico. Recent reforms, especially in the Energy and Telecom sectors are of great interest to foreign investors, including those from India.
What is your plan of action at the Embassy to strengthen the bilateral relationship between India and Mexico?
Mexico and India are old friends that share a trouble-free relationship. We both have rich and ancient cultural legacies. Although we are located at the opposite ends of the world, we share many things. There are similarities in terms of how we resemble one another. Our food is also similar, in terms of the curry and the mole or the chappati and the tortilla.
As emerging markets, we are both engaged in bringing the fruits of development to the larges masses in our countries. During 2014, we had considerable activity on the bilateral front. In March 2014, we held the Third Round of Foreign Office Consultations in New Delhi at the Vice Ministers’ level. In October of this year, the Foreign Minister of Mexico, Mr. Jose Antonio Meade Kuribrena, visited India at the head of a very large delegation for the 6th Bilateral Joint Commission Meeting.
The latter resulted in agreements on a broad range of issues, including MOUs for co-operation in Science & Technology and Space. The MOU in Space Co-operation follows the recent historic development in which India became the first space power in the world to reach Mars on its very first attempt. India’s experience in space technologies and remote-sensing, its sophisticated satellite manufacturing capability and its commercial space launch program could, we are really certain, be of special interest to Mexico.
Earlier in August 2014, the Embassy of India organized an India Show in Guadalajara with the participation of 72 exhibitors. Recently, at the end of October 2014, a Goodwill Delegation of Parliamentarians led by a Minister, visited Mexico for interaction in both houses of the Mexican Congress.
In the coming year, we hope to promote our trade and economic exchanges. We hope there will be more high-level exchanges during 2015. This will mark the 65th anniversary of the establishment of diplomatic relations between India and Mexico.
What is the current situation of the diplomatic relationship between India and Mexico?
India-Mexico relations are very warm, friendly and cordial. We value the mutual understanding that exists between us and we are committed to deepening our ties in diverse fields.
Mexico was the first Latin American country to recognize India’s independence. Mexico inspired Indian painters like Satish Gujral who spent several years in the Mexico of Diego Rivera, Frida Kahlo, Siqueiros and Orozco. In the 1960s, India’s efforts to achieve food security were greatly assisted by the high-yielding hybrid wheat seed, Sonora. This was created by Norman Borlaug and his team in Mexico.
A great deal of credit must go to Nobel-Laureate and diplomat Octavio Paz Lozano. He was, in fact, Mexico’s most distinguished Ambassador to India for eight long years. He was the one who firmly placed India on the mental horizon of the Mexican people.
Today, India and Mexico are large, populous, and their emerging economies are dynamic. We are both members of the G-20. We face similar challenges, primarily of bringing the fruits of development to our masses. There is convergence in our viewpoints on many global issues.
Our two countries elevated their ties to a ‘Privileged Partnership’ during the Mexican President’s state visit to India in 2007. High-level meetings have given impetus to our bilateral ties and deepened cooperation. There are regular meetings of bilateral interactive mechanisms. These include a Joint Commission and a High Level Group on Trade, Investment and Economic Cooperation, as well as consultations between the two foreign ministries. Several bilateral agreements also exist between us including investment promotion and protection, as well as on double taxation avoidance, extradition, administrative assistance in customs matters, air services, and for cooperation in many other sectors.
An outstanding feature of our current engagement is the sharp spurt in our bilateral trade and investment in recent years.
Another important development is that there are many more Indians living in Mexico today. In recent years, many private businessmen and other Indian nationals working for Indian investments in Mexico or for multi-national corporations made their home there.
Likewise, there are many more Mexicans living and working in India than ever before. In 2014, I was really happy to see so many Mexican pilots signing contracts with Indian airline companies such as INDIGO. They want to take jobs in the rapidly growing civil aviation market in India. The next time one flies on Spice Jet or any of its routes in India, the captain of the airplane could well be a Mexican pilot!
I have also noticed a large number of young people going from Mexico to India on contracts in the modeling and entertainment industry and for similar jobs. This kind of people-to-people exchange is good in the long run. It helps destroy the myth that all of Mexico is very violent and dangerous. At the same time it destroys the myth that India is still just a land of snake-charmers!
We need to understand each other’s true picture and potential, given that India is the world’s 9th largest economy (already the world’s third largest in terms of Purchasing Power Parity), and Mexico is the 14th largest, another country that has tremendous potential.
What is the current status of the commercial relationship between India and Mexico?
Indian companies are very competitive globally. They are constantly looking for better investment opportunities and many of them see Mexico as a major investment destination with access to NAFTA, Europe and Latin America. Several Indian companies have already invested in Mexico in recent years.
The three strongest performing areas for Indian investments in Mexico are Information Technology (IT), pharmaceuticals and automotive sectors. Almost all major Indian IT and ICT companies including TCS, Infosys, Tech Mahindra, and NIIT, Aptech, plus Hexaware. Other major concerns are Wipro, Patni Computer Systems, and BirlaSoft. They all have operations in Mexico. Many, like TCS in Guadalajara employ thousands of persons. Employment is generated locally and India’s best skills and practices are shared with Mexico.
A number of Indian pharmaceutical firms have investments and operations in Mexico as well, for example, Dr. Reddy’s Laboratories, Zydus, Strides Labs, Claris Life Sciences, and Hetero Drugs. In addition there are Wockhardt, Sun Pharma, and Solara.
Indian companies have also invested in manufacturing auto parts, tires, packaging, and electricals. TORNEL, which makes tires for cars and trucks in Mexico, is owned by JK Tyre, an Indian company. Bajaj Auto has a tie-up in Mexico with AUTOFIN for assembling and marketing two-wheelers (motorcycles) and threewheelers. You can see many Bajaj three-wheelers in Oaxaca and in Yucatan and especially around Merida and Chetumal.
The Samvardhana Motherson Group (SMP) of India has investments in Puebla and San Luis Potosi. They are busy manufacturing auto components for Original Equipment Manufacturers like Audi and VW. And there are sizeable Indian investments in the north of the country too, such as Flex Americas in Tamaulipas and Verroc Lighting (making modular LED lighting units for the auto clusters) in Monterrey.
What is even more important is the interest being generated in India by Mexico’s reforms in the telecom and energy sectors. These profound changes are likely to attract even greater Indian investments in the near future in these two sectors.
Leading Mexican companies like Cinepolis, Tremec, Nemak, plus Softec, Metalsa, and KidZania, and there are some others, have likewise invested in India in recent times. Overall, of course, Indian investments in Mexico are far greater than the other way around. This is probably because Indian companies have a long history of investing overseas in search of new opportunities.
What important areas of opportunity do you see in terms of strengthening relations between India and Mexico?
I feel our relations and interaction are also somewhat impeded by a certain lack of mutual awareness. Frankly, Mexicans do not know enough about contemporary India or its achievements. Mexicans often have a romanticized notion about India, focused on its history, culture and cuisine which of course are all very important parts of India’s identity.
At the same time, there is need for the Mexican media to highlight and report on India’s many contemporary achievements. Since achieving Independence in 1947, India has made notable advancements in science and technology, space and atomic energy, also in agriculture, education, as well as poverty alleviation.
Defense and many other fields should be included on the list, apart from its wellknown economic advancements. We now have the third largest pool of qualified scientific and technical manpower in the world. India is one the few countries with an independent space program, a nuclear program covering the full spectrum of technologies. This includes building reactors. India can build and operate its own aircraft-carriers and even nuclear submarines. India’s Information Technology, IT and IT Enabled Services sector, features revenue running into several tens of billions of dollars. All this has elevated the country as a software giant and a global outsourcing hub for business and knowledge processes.
Ever since Independence, our leaders have placed great emphasis on education and on building capacities for long-term research and development. The economic reforms introduced since 1991 have unleashed the creative potential and the entrepreneurial spirit of India. This is particularly true for the youth. India has emerged as the world’s third-largest economy in PPP terms. Besides, India’s participation in the global economy has continued to expand. The quantum increase in the growth rate during the last decade has produced an explosive growth in opportunities available to our youth. It has lifted millions out of poverty.
Many Indian companies have emerged as world leaders in different sectors, not just IT. Britain’s iconic brand Jaguar, for instance, is owned by the Tata conglomerate of India. Many of the world’s leading companies conduct an increasing portion of the research and development in India. I believe that all these achievements have attracted global attention.
The reason is because, even in these hard times, India, together with other emerging economies like Mexico, remains a good story. India’s large youthful population (with 50% of the population being younger than 25 years), gives India a distinct advantage at a time when many others are facing the challenge of an aging populace. No wonder then, that Goldman Sachs has predicted that of all the emerging economies, India is the only one that stands a good chance of maintaining 5% growth rate until 2050.
India has changed more in the last six decades than in the six previous centuries and there is a lot we can be justifiably proud of. Our economic growth rate has more than tripled. The literacy rate has increased fourfold. After having attained self-sufficiency, we are now net exporters of food grain. Significant reduction in the incidence of poverty has been achieved. Among our other major achievements is the drive towards gender equality. At the same time, much remains to be done.
Projecting the right image is a common challenge. We need to ensure that coverage of Mexico in India is not limited to apocalyptic reports about crime and cartels. Actually, Indians know a great deal more about Mexico’s economic rise and potential than the other way around. This explains why so many Indian companies are already investing in Mexico. Mexico has to catch up!
What is the current situation for bilateral investment between India and Mexico?
India’s economic rise has drawn global attention in recent decades. In Latin America, the long-term bets are on Mexico’s economic growth and its unfolding potential as a trading power and major manufacturing hub.
Understandably, our bilateral trade has grown rapidly in recent years, touching US$6.7 billion in 2013. The trade balance is marginally in favor of Mexico. At the same time, about 85% of Mexico’s exports comprise just one item, crude oil. India imports about US$3 billion worth of oil from Mexico. It is already Mexico’s third-largest market.
Since India is the world’s fourth-largest consumer of oil and one of the world’s fastest-growing economies, there is scope to buy much more oil from Mexico in the future so that the energy requirements of India’s economic growth can be met. On the other hand, India’s exports to Mexico, worth nearly US$3 billion, are diverse and include a broad range of manufactured items.
Mexico’s imports from India include chemicals, electrical machinery and equipment, pharmaceuticals, textiles plus garments, engineering goods, gems also jewelry – mainly diamonds--, iron and steel, auto and auto parts. In addition to all these add agriculture produce.
Mexico’s exports to India include crude oil, mineral fuel, fertilizers, iron and steel, electrical goods, machinery, and also chemicals. India buys crude oil from Mexico, but sells refined petroleum products back to Mexico. This is because of India’s excellent refining capacity.
What are the areas of opportunity being looked at by companies from India so they will invest in Mexico?
From India there is high potential for investment in Mexico in mining so the growing requirement for raw materials and minerals there can be met. In pharmaceuticals, with India’s well-known quality and price competitiveness, further investments and collaborations by Indian companies in Mexico can certainly be expected.
We already have more than a dozen Indian pharmaceutical companies active in Mexico, and some of them have already made investments there setting up or acquiring plants. India’s expertise in, information technology (IT) is well-known globally and almost all Indian majors now have a growing presence in Mexico, the place where they can take advantage of Mexico’s rich human resource base and proximity to the U.S. market. Potential always exists for further continued growth in both directions.
For Mexican investments in India, there is high potential and promise in infrastructure, housing, and food processing in particular. India requires a large investment to upgrade its infrastructure and will spend US$1 trillion in the next few years in this sector alone. Mexican companies have ample opportunity to look into the challenging possibilities in India in the different infrastructure sub-sectors. The large-scale development of the housing sector, especially vertical development in urban areas, also offers excellent opportunities for Mexican companies to promote their technologies and products.
What role does Mexico play for India’s investment in North America?
Automobiles and auto parts is a sector in which both our countries are strong and growing. It is one of the largest and most diversified sectors globally, and the opportunities for mutual investments are ample because of our essential complementarities. METALSA and RUHRPUMPEN of Monterrey also have invested in India.
Recently NEMAK, which is part of the ALFA Group of Mexico, invested US $ 11 million in a manufacturing facility in Chennai in southern India. The plant specializes in production of engine blocks and cylinder heads. This is done in cooperation with FORD to cater to the fast-growing automobile sector in India.
SOFTTEK, an IT company from Monterrey recently becomes the first Latin American company to invest in the service sector in India. This happened when the firm invested US $26 million in acquiring an Indian company in Bangalore. Great Foods & Beverages of Mexico has invested about US $10 million in India and has a great future for its fruit chill bars and noodles.
What is the level of satisfaction of the companies from India with their operations in Mexico?
According to my information, Indian companies are quite satisfied doing business in Mexico.
However, some firms believe the laws governing labor unions in Mexico are not very helpful. As a result, they end up paying much more than the market rate for members of the workforce who are not necessarily very productive. This, in turn, raises the cost of manufacturing and ultimately impacts adversely on competitiveness. It also takes some companies much longer to become profitable ventures.
How do you grade Mexico´s Information Technology (IT) industry?
Mexico provides a great opportunity for near shore investments in the IT sector, especially given its own growing domestic market and the ease with which operations based in Mexico can also cater to the huge market for ICT products and services in the United States.
Almost all the major Indian IT companies are present in Mexico today. Some, like TCS and Infosys, have a large presence in places like Guadalajara, Monterrey, Mexico DF and Queretaro. TCS, for example, employs more than 4,500 persons in Mexico and the firm has plans to ramp up its investments.
I believe Mexico has excellent human resources. The system of higher education in Mexico is conducive to creating a large pool of science and technology graduates and diploma holders around the country. Several states are also competing among themselves to emerge as the attractive hub of IT industry and this raises the number of options available to investors in the IT sector.
Mexico is also a major player, on its own, in fields like animation. Mexico should be considered as a destination by investors looking for competitive labor costs, good language skills, cultural, geographical and time-zone compatibility with the huge adjacent U.S. market and don’t forget favorable government support. Mexico is undoubtedly the leader in terms of the IT industry in Latin America.
Is there any additional investment expected from India to Mexico in the near future?
Promising sectors for mutual investments include chemicals and petro-chemicals, energy and hydrocarbon, bio-fuels and renewable energy. At the same time services like including tourism, health and education should be included.
I can say with confidence that many Indian companies are looking to invest in Mexico in the energy sector once the bidding process is completed by PEMEX.
It is widely believed that the automotive, pharmaceutical and the IT sectors, which have topped the list in terms of Indian investments so far, will continue to attract Indian companies to Mexico.
What is your opinion of the structural reforms initiated in Mexico under the Government of Enrique Peña Nieto?
Over the last year, the Government of Mexico has put in place a large number of reforms, especially in education, fiscal matters, the electoral system, telecom and energy. These are aimed at making Mexico more competitive globally, not just in the region. I believe these reforms are timely and will propel Mexico onto a high-growth trajectory in the near future.
These structural reforms will also ensure that high growth, when achieved, will be sustainable in the long run. The changes will secure Mexico’s position as a major and dynamic emerging economy.
Any last comment for the MexicoNOW subscribers? I find MexicoNOW a very stimulating and informative magazine, one that is fully plugged into the rapidly changing domestic and global economic environment in Mexico. It is an important source of information and analysis of trends for domestic and foreign investors. It symbolizes Mexico’s integration with the global economy. I am confident MexicoNOW and its subscribers will continue to achieve remarkable success in the years to come.
I invite all your subscribers to visit India, both for business and leisure. We have the world’s finest opportunities for both. India has some of the world’s best beaches, deserts and mountains. Add to that the magic of our ancient culture, our famous monuments, palaces, forts and temples around the country. One look and there you are…the picturesque backwaters and spas, the magic of yoga and Ayurveda, and your subscribers will quickly reach the conclusion that India is the place they want to visit!