The relationship between Mexico and the United States is wide and deep and features a number of formal mechanisms facilitating dialogue and negotiation that together make-up one of the most well-established and complete structures in the world. The agenda shared by the two countries has direct implications for both societies.
The political dialogue at the highest level is reflected in presidential meetings. On March 27, 2013, U.S. President Barack Obama accepted the invitation of President Enrique Peña Nieto to make an official visit to Mexico and then the two Presidents held a working meeting on May 2, 2013.
The U.S. government will respect the Mexican strategy on security, Barack Obama announced. “Obviously depends on Mexico to define their structure on security and how it relates to other nations, including the United States.”
Barack Obama also reiterated his commitment to continue promoting the immigration reform, to impulse actions to reduce drug consumption in the country and on the control of arms sales, to slow their traffic to Mexico.
Prior to his visit, President Obama highlighted the U.S. – Mexico trade relationship. He said: “A lot of the focus is going to be on economics. We’ve spent so much time on security issues between the U.S. and Mexico that sometimes I think we forget this is a massive trading partnership responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border. We want to see how we can deepen that, how we can improve that and maintain the economic dialogue over a long period of time.”
On September 20th, 2013, Vice President Joseph Biden visited Mexico in order to follow up on the agreements reached by Presidents Peña Nieto and Barack Obama in May of 2013. It was his second visit to Mexico. The first took place in the framework of the “Swearing-in” of President Peña Nieto. As part of the agenda, Biden participated in the first meeting of the High Level Economic Dialogue (DEAN). He also attended a meeting with educational and academic authorities in the Bilateral Forum on Higher Education, Innovation and Research (FOBESII).
In addition to bilateral relations, Mexico and the U.S. share a broad agenda in the North American region along with Canada. Together the three partners work to maintain economic and trade ties that were strengthened with the signing of the North America Free Trade Agreement (NAFTA).
Mexico is the second largest trading partner of the U.S. and the first export destination for California, Arizona and Texas. It is the second largest market for 20 other states. Approximately six million jobs in the U.S. depend on trade with Mexico and every minute trading hovers around US$1 million. The border of 3,140 km linking Mexico and the U.S. is one of the world’s busiest. There are an estimated one million people and 300,000 vehicles that cross the border daily.
Mexico, Canada and the United States signed the Free Trade Agreement (NAFTA) December 17, 1992. It came into force on January 1, 1994. The Agreement on Labor Cooperation (NAALC) was signed on September 14, 1993 and became effective the same as NAFTA. It was the first international agreement on labor issues linked to an international free trade treaty. The Agreement on Environmental Cooperation (NAAEC) was also signed in 1993 by Mexico, Canada and the U.S.
The United States is Mexico’s largest trading partner. Exhibit 1 summarizes the Trade Balance between Mexico and the U.S. The Trade Balance has been positive for Mexico and shows that commerce between the two countries reached its maximum level in 2012, just last year. What really stands out is that since 2000 commerce between Mexico and the U.S. has been evolving very satisfactorily. It has been closely following a path of continuous growth, with the exception of the years 2001 and 2009 when there was a decrease but things started recovering in a satisfactory way again in 2002 and 2010.
Several important factors in the trade balance between Mexico and the U.S. are revealing. Take, for instance, the fact that during the 13 year time span from January 1999 to December 2012, total exports from Mexico to the USA were doubled from US$118.63 billion to US$287.82 billion (+142%). At the same time a growth of 75.84% in imports from the United States to Mexico was documented.
Total commerce between the two countries and reciprocal action brought in US$472.93 billion during 2012. In 2011 there was an adjustment in trade between the two partners and this showed important improvements when total commerce “stats” were finally available identifying a whopping US$400 billion total. In fact, the period 1999 to 2012 represents a 111% growth rate in total commerce between the two countries. Another interesting detail; in 2012 there was a 5.38% increase in commerce (US$472.93 billion) compared with (US$448.79 billion) in 2011.
Exhibit 2 shows U.S. Investment in Mexico. Companies with capital from the United States invested US$153.7 billion during the period from January 2000 to March 2013.
Microsoft, Ford, General Motors, WalMart, Intel, Kansas City Southern, Mohawk and Prudential Real Estate Investors are among some of the North American Companies with an important presence in Mexico. Many of these firms are expanding their operations there.
North American top investors include Beechcraft, Chrysler, Steel Technologies, Bell Helicopter, Praxair, Polaris, HEB, Easton Bell Sports and Boeing and hundreds of other multinationals in the auto, electronics, food, aerospace and health sectors.
General Motors recently announced it will invest $691 million for its manufacturing operations in Silao, San Luis Potosi and Toluca. Their aim is to build higher performing, more fuel-efficient powertrains. President Enrique Peña Nieto and other senior government officials were on hand to mark the importance of this investment to the country, GM and its customers.
“GM is about to reach 78 years in Mexico and we celebrate it with this new investment. It is something,” according to Ernesto M. Hernandez, President and Managing Director of General Motors de Mexico, “…which means more employment and development opportunities for the regions of Silao, San Luis Potosi and Toluca; and more advanced technology there will certainly benefit our customers.”
Ford, another U.S. company with a big interest in Mexico, invested US$1.3 billion in its Hermosillo Stamping and Assembly facility. This is where over 3,300 workers are currently employed. As part of its overall investment, Ford is adding another 1,000 new jobs in order to handle production of the 2013 Ford Fusion and its Lincoln MKZ.
In the Aerospace Sector, Beechcraft has invested in facilities at Chihuahua, Toluca and Monterrey. “Mexico has one of the largest business aircraft fleets in the world, and we only expect that to grow with the delivery trends we are forecasting for this region,” said Keith Nadolski, Beechcraft president of sales for the Americas. “Operators in Mexico find our turboprops and pistons provide the ideal reliability, payload and range to popular destinations in Central and South America, the United States and the Caribbean. We look forward to showcasing our latest advancements of these products at AeroExpo this week.”
In the year 2010, Bell Helicopters opened a plant in Chihuahua to manufacture helicopter cockpits with an initial investment of US85 million.
Intel, the world’s largest manufacturer of computer processors, has been in Mexico for over 20 years running and is planning to remain there for many more. “Mexico has given us many advantages. First, I’d say it is a very important domestic market in terms of technology; it is the world’s fifth largest emerging market, together with Brazil, Russia, India and China,” says Scott Overson, district manager of Intel Mexico. “In absolute terms, Mexico is ranked tenth globally in computer sales and is growing quickly due to the development and growth of a middle class that has embraced technology,” he adds.