India-Mexico relation

Why in news?

The Mexican ambassador to India has invited Indian IT professionals to use Mexico as the base for near-shore US operations, after Trump’s H-1B visa restrictions.

What is the present sceja?

• Mexico is already a major bilateral as well as fast emerging trade partner for India.
• India and Mexico will benefit from higher trade due to the discriminatory policy of Trump presidency.
• India’s exports to Latin America as a whole declined in 2016 but exports to Mexico have increased by an impressive 22 per cent from last year ($2.77 billion) and doubled from $1.56 billion in 2012.
• In Latin America, Mexico overtook Brazil ($2.3 billion) in 2016 as the largest market for India's exports.
• Mexico has emerged as the biggest market for India’s vehicle exports.
• Mexico accounts for 13 per cent of India’s global exports of vehicles which stood at $14.98 billion in 2016.
• This is remarkable in view of the fact that Mexico itself exports $80 billion of vehicles and is the fourth largest exporter in the world.
• India’s vehicle exports to Mexico have increased by an incredible 56 per cent from 2015 ($1.17 billion) from a mere $397 million in 2012.
• Besides vehicles export, India’s exports to Mexico included engineering goods, chemicals, textiles, plastics and pharmaceuticals.
• India’s imports from Mexico were $2.44 billion in 2016, down from $3.44 billion in 2014 due to the drastic fall in the prices of crude oil which accounts for 60 per cent of India's total imports from Mexico.
• India is the third largest destination for Mexican crude exports which have the potential to increase in the coming years.
• The other major import items are: engineering products, gold, chemicals, optical products, and ores.

Why is Mexico that important?

• Mexico is the second largest market in Latin America with a population of 126 million and a GDP of $1.15 trillion.
• It is politically stable with democratic credentials.
• The macroeconomic fundamentals are healthy and strong.
• The average inflation in the last decade was just 4.3 per cent.
• Mexico’s GDP growth rate in 2017 is projected to be around 2 per cent.
• Mexico is the largest trading nation in Latin America, accounting for about 40 per cent of the region’s external trade.
• Its market is open with low tariffs and a predictable, investor-friendly policy regime.
• It has become a manufacturing hub of the Americas with a global leadership position in some consumer appliances; it is competitive in aerospace and high-tech industries.
• Mexico is blessed with rich reserves of gold, silver, copper and other minerals as well as oil.
• Thirteen Mexican companies have invested about a billion dollars in India.
• Around 40 Indian companies have invested in Mexico in 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.
• Indo-Mexican trade of $5.82 billion in 2016 can touch $10 billion in the next five years.
• Given the importance of Mexico for India’s trade, it is imperative for India to sign a free trade agreement to remove tariff disadvantages faced by India’s exports vis-à-vis exports from the 45 countries which have signed FTAs with Mexico.

Source: Hindu Business Line