Viktor Elbling, Germany Ambassador to Mexico

Editor’s Interview

How do you grade the competitiveness of Mexico for Foreign Investment?

Mexico, like Germany, is a staunch supporter of free trade. No country has concluded more free trade agreements than Mexico, which attracts foreign investors. The country’s membership in NAFTA makes it particularly interesting for German companies, for example in the automotive industry, since they gain access to the important US and Canadian markets.

Mexico’s geographical location is also extremely favourable. It has a high potential to become a real logistical, R&D and production platform between North- and South America on the one and Asia and Europe on the other hand. There’s a huge potential to be made use of.

But Mexico has yet another, important comparative advantage: Our companies find the well- trained workforce here that they need for their sophisticated production facilities. Many German companies implement a dual training system based on their experiences at home, adapted to the necessities in Mexico.

What is your plan of action at the Embassy in terms to strengthen the bilateral relationship between Germany and Mexico?

Our aim is to continuously deepen our already very intense bilateral relations. For that specific purpose, we have established a Binational Commission which will detail the essence of our bilateral cooperation in specific working-committees.

Being the economic relations the back-bone of our bilateral relations, we intend to help to bring new investors to Mexico, exploring new business opportunities and deepening and enhancing value-chains in local production. For that aim, we cooperate closely with the German-Mexican Chamber of Commerce, CAMEXA, with the German Industrial Associations and with the Mexican authorities, namely ProMéxico. We also want to foster Mexican investment in Germany.

With INADEM, we foster know-how transfer, through a bilateral manager programme called “Fit for Partnership”. It provides a selected group of Mexican executives the opportunity to visit Germany for a couple weeks, get acquainted with German business modalities and develop joint business cases with German partners.

We also intend to consolidate our cooperation in the field of vocational education. By means of the “Iniciativa Alemana de Formación Dual en México” we support the implementation of a Mexican model of a dual training system. It is based on the German model, combining an apprenticeship in a company with classes in a vocational school. We believe in the benefits this approach offers, in particular for young Mexicans that cannot afford to attend University. There is a constant and rising demand for well-trained workers, particularly, but not only by German companies investing in Mexico. This is a classic win-win situation. Germany and Mexico are close partners on a range of global issues and both committed to sustainable development. This is why we initiated, at the end of last year, a “German-Mexican Dialogue Forum for a Sustainable Future”. Experts from both Mexico and Germany meet on a regular basis to discuss global issues such as energy transition, climate change or sustainable mobility in search of new approaches and solutions.
Rule of law is another topic that is high on our bilateral agenda. We are currently in the process of setting up joint projects to improve investigative skills of the police and criminal procedures, especially concerning forced disappearance
We also prepare for a Year of Germany in Mexico in 2016/2017. We’d like to use this opportunity to update the image of Germany in Mexico. Through a wide range of events and projects in the cultural, economic, scientific, technological and sports fields, we wish Mexicans and Germans get to know each other even better.
Also, Mexico will also present itself in Germany.

One of the effects we hope the Year of Germany in Mexico will have is to intensify even more the exchange between schools and universities, pupils and university students. They are the ones that build bridges between our countries and cultures: Through mutual friendships, studies, work in the respective other country and joint projects. The German Academic Exchange Service DAAD already grants more than 1.000 scholarships per year to Mexican students and researchers.

What is your opinion of the development of the Free Trade Agreement between Mexico and the European Union after more than 10 years?

The Free Trade Agreement has been a catalyst for investment flows between Mexico and the EU and induced significant growth in bilateral trade. It has served as a powerful tool to foster closer ties between both economies and reinforced Mexico’s standing as an export-oriented economy focused on production.

With the FTA and NAFTA, Mexico has guaranteed preferential access to the world’s largest markets, the USA and the EU. Its average yearly investment flows have tripled and its competitiveness has been raised thanks to diversification of trade in goods and the liberalization of its service sector.
EU Trade Commissioner Malmström and the Mexican Secretary of Economy Guajardo have recently announced the joint intention to modernize the FTA and launch negotiations this year. This is a very important step. The FTA has proven to be mutually beneficial over the past 15 years, but it needs to be updated to adapt to new realities.

Which sectors need to be reinforced in this Free Trade Agreement between Mexico and the European Union?

The FTA has removed mostly tariff barriers. Now, we need to go beyond tariff reduction and tackle remaining, non-tariff trade barriers for example in public procurement, concerning intellectual property, services, restrictive regulations or standards such as sanitary and phytosanitary regulations, drug licensing, or technical specifications of vehicles, to name just a few.

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

The relationship between Germany and Mexico is excellent. Mexico is one of the most important partners of Germany worldwide. The regular high-level visits of politicians to Mexico and Germany testify to the intense, open dialogue that we conduct, based on mutual trust.

We share common values: Mexico and Germany advocate free trade, sustainable development, peaceful conflict resolution, respect for human rights and the necessity to combat climate change and transnational crime. This is why, on the occasion when Foreign Minister Dr. Steinmeier’s visited Mexico last year, he and his Mexican counterpart Dr. Meade established a Binational Commission. This Commission met for the first time on the 8th and 9th of June in Berlin. It will allow for an even closer exchange between our countries on topics of common interest and to discuss shared initiatives on the international stage.

For instance, we welcome the decision of Mexico to participate in UN missions in the future. As a country that has also had long debates about its own participation in such missions before finally taking part for the first time in the beginning of the 90's, we are happy to share Germany's experience and support the preparation of Mexican UN-missions.

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

Germany is Mexico’s main trading partner from the EU. In 2014, Germany represented 3.44% of Mexican imports and 0.88%of Mexican exports. In absolute figures, German exports to Mexico accounted for US$13.5 billion in 2014 and Mexican exports to Germany for US$3.5 billion.

The Mexican government’s ambitious reform program, for example in the energy sector, will provide interesting opportunities for Germany companies in Mexico.

But we would also like to see more Mexican commerce with and investment in Germany. I take it as our common goal to enhance our commercial relationship even more.

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

There are roughly 1,750 companies with German capital in Mexico. They have a so far invested about 25 billion EURO in Mexico and created 150,000 jobs. The exact figure is impossible to provide, since our statistics neglect reinvestment or investment chanelled through third countries or through banking places.
Three more German world-class companies from the automotive industry, BMW, Audi and Mercedes, have recently announced substantial investments here in Mexico. I am confident that these investments will attract other investments, e.g. from car suppliers.

Which areas of opportunity are considered by Companies from Germany to invest in Mexico?

Other than in the automotive sector, the structural reforms initiated by President Peña Nieto created opportunities for German companies, for example in the energy sector. Mechanical engineering companies, primarily as suppliers for oil and gas companies, but also companies specialized in power plant construction, in renewable energies or chemical industries should be interested in getting involved in the Mexican Market. To give you just one example: Siemens just announced it will open an office in Mexico specifically offering solutions in the field of power generation and distribution. The company sees business opportunities arising from companies being allowed to generate their own power and feed any access power into the public grid.

What is the role that Mexico plays for investment from Germany for the NAFTA Market?

NAFTA has been an important catalyst for German investment in the automotive sector. Access to the North American market was the main objective in the beginning. Other advantages, as already explained, kept convincing ever more German investment to come to the country. And due to the excellent labour-quality and comparative advantages in wages, Mexico has gained investment that was made here and not in the US, namely in the automotive sector.

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

German companies such as Volkswagen, BASF or Siemens, to mention just a few, have been on the Mexican Market for a long time, some since the beginning of the 20th century. Typically, German enterprises assess investment decisions carefully, but never evaluate them in the short term. They follow long-term strategies and from what I hear when speaking to members of the German business community, our entrepreneurs believe in Mexico and the Mexican market. They find a sound business environment and economic framework and evaluate the mid- to long-term outlook positively.

Still, there are also some challenges. Our businessmen follow the security situation in the country very carefully. They will invest even more in the years to come. The bilateral Chamber of commerce annually evaluates the assessment in the German business community with respect to security and it was not surprising that a raising number of companies expressed more worries in late 2014 than the year before.

At the same time, I have no knowledge of any German company that puts its investment into question or contemplates withdrawing from the Mexican market. On the contrary, as the investments of the three big German carmakers I mentioned earlier show.

However, it would be in the interest of all stakeholders, the International and Mexican business community, the people and the Government, if the security-situation improved; if the rule of law was strengthened and corruption fought effectively. We stand ready to support our Mexican partners in the face of this challenge.

How do you grade Mexico´s Automotive Industry?

I think Mexico's Automotive Industry is extremely well positioned. It has grown by almost 10 % in 2014 and export has grown by over 9 %. Today, Mexico is the world's 7th biggest car producer (and the 4th car exporter); by 2020 it could enter the TOP 4. Considering that not only the three German premium carmakers Audi, BMW and Mercedes will step up their engagement in Mexico, but also KIA, Ford and Toyota have made or announced serious investments, I assess the future of Mexico's automotive sector in a very positive way.