Sunday, March 26, 2017

Mexico has emerged as the top destination of India's exports to Latin America

Mexico has emerged as the top destination for India's exports to Latin America with a record high of 3.38 billion US dollars in 2016  (January- December). For those Indians who think that Mexico is too far and less important for India's trade than the neighbors or the traditional trade partners, here are the statistics to open their eyes:  India's exports to Mexico in 2016 are more than its exports to the neighbors such as Indonesia –3.13 bn, Thailand-2.96 bn, Iran-2.41 bn and Myanmar-1.13 bn; and more than to the traditional partners: Russia-1.81 bn, Canada-1.97 bn, Australia-2.95 bn, South Africa-3.24 bn, Spain-3.36 bn, and Egypt-2.09 bn.

While India's exports to Latin America as a whole have declined in 2016, it is heartening to note that the exports to Mexico have increased by an impressive 22 percent from last year (2.77 bn) and doubled from 1.56 bn in 2012. In Latin America, Mexico has overtaken Brazil (2.3 billion dollars) in 2016 as the largest market for India's exports.

What is even more interesting is that Mexico has emerged as the biggest market for India's vehicle exports which amounted to 1.83 bn.  Mexico accounts for 13% of India's global exports of vehicles which stood at 14.98 billon in 2016. This is remarkable in view of the fact that Mexico itself exports 80 billion dollars of vehicles and is the fourth largest exporter in the world. India's vehicle exports to Mexico have increased by an incredible 56% from 2015 (1.17 bn), 83 % from 2014 ( 1 bn) and from a mere 397 m in 2012. 

The major exports to Mexico are: vehicles –1.83 bn, Other engineering goods – 590 million, chemicals – 333 m, textiles- 214 m, plastics-83 m and pharmaceuticals- 47 m.

India's imports from Mexico were 2.44 billion dollars in 2016, down from 3.44 bn in 2014 due to the drastic fall in the prices of crude oil which accounts for 60 % of India's total imports from Mexico. Crude imports in 2016 were 1.48 billion dollars, down from 2.74 bn in 2014. India is the third largest destination for Mexican crude exports which have the potential to increase in the coming years. The other import items: engineering products –593 million dollars, gold-77m, chemicals-76m, optical products –57 m, and ores-54m. 

Mexico is the second largest market in Latin America with a population of 126 million and GDP of 1.15 trillion dollars. It is a politically stable country with vibrant democratic credentials. The macroeconomic fundamentals are generally healthy and strong.  The average inflation in the last decade was just 4.3%. The Mexican economy grew over 2% in the last two years, while Latin America as a whole had suffered GDP contraction in 2015 and 2016. The Mexican GDP growth rate in 2017 is projected to be around 2%. Mexico is the largest trading nation in Latin America, accounting for about 40% of the  region's external trade. Its market is open with low tariffs and predictable and investor-friendly policy regime. In the last four years, it has carried out many reforms opening up the previously restricted sectors such as energy. It has become a manufacturing hub of Americas with global leadership position in some consumer appliances and competitive in aerospace and high-tech industries. Manufactured products account for over 80% of exports unlike the South American countries which are dependent on exports of raw materials and commodities. Mexico is blessed with rich reserves of gold, silver, copper and other minerals as well as oil. However, Mexico has its its own share of challenges which include drug-related violence and Trump's threats to deport Mexicans from US and disrupt NAFTA.  

Thirteen Mexican companies have invested about a billion dollars in India. Around forty Indian companies have invested in Mexico in sectors such as pharmaceuticals, auto parts, IT and chemicals. Indian companies use Mexico as the platform for access to the markets of North and Central America with whom Mexico has signed FTAs. The Mexican Ambassador to India Melba Pria, known for her proactive economic diplomacy and riding in a colorful auto rickshaw with diplomatic number plate, has invited Indian IT professionals to use Mexico as the base for near-shore US operations, after Trump's H-1B visa restrictions. 

The Indo-Mexican trade of 5.82 billion dollars in 2016 have the potential to reach 10 bn in the next five years. After Trump's trade threats, Mexico is trying very seriously to reduce its over dependence on the US market which accounts for 81% of its exports and 50% of imports. It wants to diversify its trade partnerships and intensify its engagement with large markets such as India. This is, therefore, the most opportune and unmissable time for India to accelerate its trade promotion activities with Mexico.The Indian government could extend an invitation for state visit to the Mexican President Nieto who is keen on a strategic economic partnership with India. It is imperative for India to sign a Free Trade Agreement to remove the tariff disadvantages faced by India's exports vis-a-vis the exports from the 45 countries which have signed FTA with Mexico. 

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