India and Mexico are both strong trading and investment partners. Mexico is the main Latin American destination for Indian investments and in turn the largest Latin American investor in India. Both countries say they want to build on that relationship.
Bilateral trade and investment have grown rapidly between the regions, ranging from automotive, IT, and energy to entertainment.
In 2011, trade reached $3.2 billion, India exporting around $2 billion million while absorbing $1.2 billion in imports from Mexico. Investment is expected to reach a combined $10 billion by 2015.
Gateway House recently discussed plan to broaden and deepen ties with Mexican Ambassador Jaime Nualart at his embassy in Anand Niketan, New Delhi.
Q. What is behind the India-Mexico business relationship?
Mexico is the main Latin American investor in India, and Mexico is the first Latin American destination of Indian investments. Mexican investments in India cover various sectors:
One of the newer ones is Cinépolis. They discovered that India is the main film producer and a great cinema consumer; they produce 1000 feature films per year. Cinépolis discovered that there is an opportunity niche to build movie theatres in malls, which are also a new phenomenon in India. They are planning on installing 400 or 500 screens in the next four years.
Metalsa is a leader in the production of side rails for heavy trucks. When TATA Motors established a facility in Jharkhand to manufacture trucks, they discovered that the best side-rail company was Metalsa’s plant in Jharkhand. Cygnus Group is in Chennai producing electric generators in a co-investment with General Electric. Omaxe Group is involved low-cost real estate.
Another company, NIMAC, will produce parts for Ford models. One of these models, Figo, has Mexico as its only destination in Latin America. The EG Corporation produces water and gas pumps and is building a manufacturing plant in Gujarat.
Q. What attracts Mexican companies to India? What are the advantages?
The market opportunities and consumption. Some 30% of the world population is split between China and India. They have a middle class which grows day by day.
Q. And what are the barriers?
Ten years ago, there were no Mexican investments in India. Now we are recording noticeable growth. Land ownership is a complicated problem. But these problems exist in other countries, and can be overcome.
Q. Many Indian companies—IT companies such as Infosys, TCS, Wipro and pharmaceutials makers like Ranbaxy and Dr. Reddy’s Labs as well as JK Tyres in auto-components and U-Flex in packaging are in Mexico. What kind of impact have they had in the country?
The first significant investment in Mexico was MITAL, with the iron and steel company Lázaro Cárdenas. This multimillion-investment was the detonator for Indian investments in Mexico.
There were various reasons: Mexico’s economic growth; the fact that business groups in India have grown immensely in the past 20 years, becoming one of the main economic groups in the world; and the proximity with the United States. This allows Indian businesspeople to take advantage of the North American Free Trade Agreement
In Mexico, it takes a foreign investor 9 days to open a company, so it is very easy. All the Mexican companies linked to information technology need qualified personnel who speak English that is comprehensible to Americans, and who work in their same time zone. Banks and great technology companies need someone to develop their software, not necessarily call centers. This is still a very small part of what companies such as Wipro, TATA Consulting Services, and Infosys do.
Two years ago, these companies had maybe 100 engineers and now they have 600. Demand for their services is greater and greater. It is also important to note that those who work in these companies are Mexican. By law, no more than 10% of the employees can be foreigners. However, this does not happen in any of these cases since Mexican personnel are very qualified. You find that the managers and directors of these companies are Mexican.
Q. Do you foresee any partnerships around energy with India in the near and long future?
My understanding is that there are no possibilities in investments for exploration. We do have an excellent relationship with Reliance, who is our main client for Mexican hydrocarbons. We have a good relationship with Essar Oil and with TATA in the hydrocarbon sector. There are other areas too.
Q. How do Mexico-India relations differ from Mexico-China relations? While China has the economic heft to lure Mexico, what comparative advantages does India have?
China is Mexico’s 2nd commercial partner worldwide, and the 1st one in Asia, with bilateral trade of some $50 billion in 2010; Chinese investments in Mexico, however, are minimal: $130 million. The Chinese are interested in exporting manufactured goods.
On the other hand, India is Mexico’s 19th commercial partner worldwide, and the 7th one among Asian countries. Our bilateral commerce is around $3 billion. The investments ahead could bring it to $4 billion, 5% of the volume of our commerce with China. But we have an immense deficit with the Chinese, which has been accumulating.
The commercial balance with India has historically been more balanced for Mexico. We have an immense deficit with the Chinese, which has been accumulating.
Q. How do Mexican companies compare investing in India versus China?
They are attracted to the Chinese market due to economies of scale, which are magnificent in volume and low cost. They come to India in some sense for a creative factor. The Chinese are good at copying, at mass producing. Indians innovate in the area of software, they are always thinking of how to do the same thing differently and that is why the great software centers are located in India.
Q. India has expressed great interest in reaching out to Latin America: they already hold multiple partnerships with Brazil, and recently increased trade and investment with Peru. Is it the same with Mexico?
I believe there is a very well organized business sector in India, which sees the benefits each of these countries offers. All Latin American countries are seeking out foreign investors.
Q. What are the top priorities for Mexico in India? What is the 5, 10, 15-year vision for Indo-Mexican relations?
The priority for Mexico is to attract Indian investments to Mexico in the sectors that I have just mentioned. In terms of a vision, I believe it is evident that there is a tightening of the economic relationship, an enrichment, a growth that is more and more meaningful, which is accompanied by a phenomenal political dialogue between the two countries. For example, President Calderón visited in 2007 and in 2008 President Pratibha Pratik visited Mexico. We are hoping that Prime Minister Manmohan Singh will visit Mexico in 2012; there have been visits from the ministers in the key economic sector for both countries, including agriculture, commerce, foreign relations, environment, health and electoral processes.
Q. As a conclusion, what do closer economic and political ties between India and Mexico mean in the big picture? Do they signal a shift in the global order of things?
They signal that the so-called emerging powers, like Mexico and India, perform a role with increasing importance in the political, economic, and social architecture. In other words, that what happens in our countries, and the way in which we interact, and what we say also affects the global order.
Q. With relation to the United States, does Mexico see closer ties with India as a break from dependency on the United States?
I do not think Mexico wants to break the relationship, nor do I consider it to be a dependency; rather I think that it is a complimentary relationship. I simply think that any businessperson from any country and any government is interested in diversifying its relations in all sectors. Mexico has 11 free trade agreements with over 40 countries. It is the country with the most free trade agreements; we are not only tied to NAFTA. This is something I would want all Mexican businesspeople to understand: to not only do business with the United States. With India we must discover other areas to continue with the political dialogue that would allow us to bring delegations of businesspeople. We have a constant ebb and flow of businesspeople, and this speaks to the fact that society, through the business sector, sees in the other pole of the relationship a series of opportunities; and this is what is important for both of us, to provide them with the facilities for them to conduct their business, to help them.
Jaime Nualart is Ambassador to India for Mexico
Karen Woodin-Rodriguez is a Global Recruit with Mahindra & Mahindra.
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