The Relationship between the two nations began after the Pastry War when the United Kingdom aided Mexico against France. Also, relations improved when Mexico joined alongside the British with the allies to fight the Japanese forces in the Pacific War. Currently Mexico has an embassy in London. The United Kingdom has an embassy in Mexico City and a consulate in Monterrey.
Three Presidents of Mexico have paid State Visits to the United Kingdom: Luis Echeverria in April 1973; Miguel de la Madrid in June 1985; and Felipe Calderon in March/April of 2009. Queen Elizabeth II paid a state visit to Mexico in February/ March 1975.
Mexico is the UK’s second largest market in Latin America after Brazil. A Double Taxation Agreement (DTA) between the UK and Mexico was signed in 1994. A UK/ Mexico Investment Promotion and Protection Agreement (IPPA) has been agreed to and was ratified in 2007.
The EU/Mexico Free Trade Association Agreement has eliminated all tariffs on EU-origin industrial goods. At the end of last year commerce between the two countries had grown more than twice than what it was in the year 1999. The Trade Balance between Mexico and the UK is shown in Exhibit 1.
The Trade Balance between Mexico and the UK reveals that during the years from January 1999 to December 2008, total exports from Mexico to the UK rose a dramatic 173%. Also, imports to Mexico from the UK showed a significant 129% growth during the same period.
Reciprocal actions brought in US$4.4 billion during (2008) in business between the two countries. Compared with the previous year (2007), total commerce between Mexico and the UK has continued to grow without letting-up. During this period statistics recorded an impressive 12.64% growth in total commerce between the two partners.
According to Jonathan C. Clare, British Consul in Monterrey: “Trade between the UK and Mexico will continue to increase in line with the benefits from the new Free Trade Agreement between Mexico and the European Union. Since January 2007 tariffs were lifted on practically all industrial products between both countries.
This Agreement can be viewed as the equivalent of Mexico’s NAFTA with the European Union. We have already seen a significant jump in imports and exports as a result of the reduced tariffs in trading and as new trade corridors are opening up between both countries, as well as heightened interest in products and services in both markets”.
Currently, there are over 800 companies in Mexico recorded with registered British capital. This is over 2% of the total number of companies (34,535) with direct foreign investment documented in Mexico. Companies which received British capital are dedicated mainly to the services sector (52.5%); next is the manufacturing industry (20.6%); and then commerce with (18.3%).
Jonathan C. Clare noted: “All the British companies I have visited in the market have seen periods of sustained growth and their outlook remains positive despite the recent global economic downturn. British companies are attracted by the young skilled labor in Mexico, the growing consumer market, as well as the strategic location in accessing NAFTA markets”.
“Mexico is also a natural gateway to Central and South America. High-end machining companies in the Aerospace sector that have recently set-up operations have probably experienced the highest rampup in their operations, and the outlook in this sector looks particularly promising”, said Clare.
Obviously the UK is an important major investor in Mexico. Britain’s top investors include AstraZeneca; BAT; BP Diageo; Glaxo Smith Kline; Johnson Matthey; GKN; in addition to Shell and Unilever.
There are also NPL Technologies, Mc- Cormick Tractors, Tibbett & Britten, Allied Domecq; plus Cadburys Schweppes and Diageo all have an important presence in Mexico. The list also includes ICI; Invensys; Shell; as well as Tate & Lyle.
Another significant investment, however, was the purchase of a Mexican bank by HSBC in 2002. BT and BSI were both set up in Mexico during 2006. In 2004 British RMC was bought by the Mexican Firm Cemex for US$5.8 billion. Grupo Gruma also has significant economic investments in the UK.
Exhibit 2 shows British Investment in Mexico. During the period from January 1999 through December 2008, companies with capital from the UK invested US$7.3 billion.
The British Consul indicated: “The UK has expertise in nearly every industrial and commercial sector. Similarly, Mexico has a broad range of sectors of strategic interest to the UK. These include oil and gas. Nevertheless, the British main center of expertise lies in Aberdeen in Scotland. The UK also has a wealth of expertise in renewable and new technologies focused on alternative energies, and is looking to develop partnerships with leading Mexican institutions in this fast growing sector. The UK also has the second largest Aerospace manufacturing sector in the world after the U.S. Mexico’s strong growth in the Aerospace sector is certainly of growing interest to UK companies”.
Clare recounted: “The British largest Civil and Defense Aerospace Association (ADS) visited Mexico on a scoping mission earlier this year to review opportunities in the market. Mexico also has a major process and packaging sector dedicated to its food industry. Again the UK has strong synergies and expertise in this area; this is something that we would like to develop further with Mexican companies. The UK remains a global leader in the mining sector and we would like to exploit more partnerships with the leading mining players in Mexico”.
“The UK is the epicenter of financial capital flows in the mining sector. Fresnillo is a leading Mexican company that has been successfully listed on the London Stock Exchange in recent years. Mexico should also consider investment opportunities with the 2012 Olympics and take advantage of London’s international financial center in supporting their international operations and raising capital in the global markets. Infrastructure is a further strategic area where the UK can lend its expertise in Private Public Partnerships together with leading UK companies”, said Clare.
The distribution of economic areas received by British investment during the span beginning in January 1999 until September 2006, shows that the resources go almost completely to services (73.5%) and the Maquiladora Industry (18%). Regarding services receiving British investment, important mention has to go to the financial institutions.
The Mexican states receiving the largest British investment are the Federal District (US$2,892 billion); Nuevo Leon (US $792 million); the State of Mexico (US $115.7 million); and Baja California (US$97.7 million). The totals respectively are from January 1999 to September 2006. Exhibit 3 shows the geographical distribution of the British investment in Mexico.
About the aeronautical industry, Clare explained: “The UK is well represented in the Aerospace sector. GKN and Meggitt probably have the largest British manufacturing presence in the Mexican market at this time. GKN has its main Aerospace division in Mexicali, while Meggitt operates out of Fresnillo and Queretaro”.
He said: “Other British companies dedicated to the Aerospace sector include BAE, Cobham, EXOVA, plus AVNTK, Senior Aerospace Ketema, ITP (ITR), also CAV and the Trac Group. Leading Mexican companies in turn supply to some of the largest UK companies including Rolls Royce”.
Clare pointed out: “Conditions are already very favorable to invest in Mexico. Mexico will continue to attract FDI due to its strategic location and open market policies toward foreign investors. Mexico is modernizing its infrastructure right across the country as we have seen with major airport expansions and on-going construction projects. New road links are already creating new corridors for crossborder trade with the U.S. Mexico also has a plethora of modern state of the art industrial parks which are well placed to receive new investors”.