Mexico and India Move to Expand Economic Relations with Possible Free-Trade Agreement

SourceMex Economic News & Analysis on Mexico, May 30, 2007 | Go to article overview

Mexico and India Move to Expand Economic Relations with Possible Free-Trade Agreement


Mexico and India have announced plans to expand economic and trade relations with an eye on eventually negotiating a full free-trade agreement (FTA). In a meeting in New Delhi in late May, Mexico's Economy Secretary Eduardo Sojo Garza-Aldape and India's Commerce Minister Kamal Nath agreed to create a group made up of senior trade officials to work out details for a trade accord. In a decisive step toward that goal, the two countries signed a second agreement, a 10-year accord to promote and protect investments. The Bilateral Investment Promotion and Protection Agreement (BIPPA), which will remain in force for 10 years, will also provide for free repatriation of funds by an investor of either country.

"We have signed two agreements with India, a bilateral investment promotion and protection pact and a memorandum of understanding to set up a high-level group (HLG) of top public officials and experts to look around for areas of synergy," Sojo told the New Delhi daily business newspaper The Financial Express.

The India-Mexico working group, which will be co-chaired by Sojo and Nath, is planning to hold its initial meeting in the next few months. Sojo said a goal of the group would be to find ways to further boost bilateral trade, which has already increased by 600% during the last six years. "We want to start a new year of trade investment and economic cooperation between the two countries," Sojo told reporters at a trade conference.

Commercial relations could increase greatly

Trade between India and Mexico amounted to US$1.6 billion in 2006-2007, compared with only US$251 million in 1990-1991. And some members of India's private sector foresee total trade increasing significantly in coming years. Bilateral trade could potentially reach US$3 billion by 2010, said Sunil Bharti Mittal, president of Bharti Enterprises.

One challenge for Mexico will be to find ways to narrow the trade deficit with India, which has widened as bilateral trade has increased. The Secretaria de Economia (SE) said that India's exports to Mexico approached US$1 billion last year, including transportation equipment, jewelry, engineering products, pharmaceuticals, and textiles and apparel. In contrast, India imported only about US$600 million worth of goods from Mexico during the same period, including electronics, iron, and steel.

The two agreements announced in May follow another Mexico-India accord, signed in March 2006, to promote small and medium-sized businesses in the two countries. As part of that agreement, the countries agreed to develop workshops for small and medium-sized enterprises on opportunities in both countries. "Our main objective is to begin to build a relationship among small entrepreneurs in the two countries," said H.P. Kunhar, a business executive who traveled to Mexico as part of the initiative. "We also want to look for opportunities for investment and transfer of technology in all areas."

Members of the Mexican private sector appear more interested in India than they are in China, the world's other emerging economic power. "There is a great disinterest in Mexico toward China," said Jaime Solano Soto, a construction-industry executive. "The level of trade between our two countries is still low, and there are many opportunities."

India seeks to take advantage of NAFTA, other accords

Indian government and business officials readily admit that they see an FTA with Mexico as a bridge to the North American Free Trade Agreement (NAFTA) and to other countries in Latin America. And Sojo is using that premise to lure Indian companies to invest in Mexico. "We have free-trade agreements with 44 countries," the Mexican economy secretary said. "By establishing a base in Mexico, Indian companies can avail themselves of a preferential access to economies that account for 70% of the world's GDP."

The New Delhi-based newspaper The Hindu suggested that some Indian companies might look into establishing maquiladora plants near the Mexican border with the US. …

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