Mexico-China Economic Relations: New Administration, Same Old Shortcomings*

The China Daily recently interviewed Felipe Garcia, Commercial Counselor of the Mexican Embassy in Beijing regarding Mexico-China relations. The gist of the interview was that Mexico-China relations would improve under Mexico’s new federal administration because both countries want closer relations and because China knows just what is needed for such closer relations. In the China Daily’s view (and presumably that of the Chinese government as well), closer relations are a near-certainty because the first ambassador met by Mexico’s President López Obrador was from China and because China then reciprocated by inviting Mexico to the China International Import Expo (CIIE) to be held in November 2019.

The China Daily piece, titled With a New Leader, Mexico Eyes Stronger Ties with China is actually emblematic of how the Mexican government still does not understand how to generate more trade with China.

1. The Chinese Ambassador inviting Mexico to the CIIE says nothing regarding relations between China and Mexico’s new federal administration both because Mexico had been invited to this event long before it had even become clear that López Obrador would be Mexico’s new President — it had been promoted among Mexican business circles for almost a year before this so-called invitation.
2. The invitation is not that big a deal anyway. Many countries get invited to the CIEE (which is an annual event) and it is not clear Mexico has sufficient resources to promote its goods, services, tourism and investment opportunities at the CIEE. Mexico attended last year’s CIEE not so much because it was invited to do so, but because Mexico’s previous administration had a strong policy of promoting economic diversification abroad and it devoted substantial resources to do so. It is not at all clear President López Obrador shares this same economic view or the same willingness to devote resources to expanding Mexico’s global trade.
3. The trade numbers given by Mr. Garcia in his interview hide the true shape of Sino-Mexican economic relations (something quite convenient after fiascos in recent years, such as the Mexico City-Queretaro high speed railway fiasco or the Dragon Mart fiasco. The China Daily interview mentions that “[e]ven before the expo there had been good news in the air. Bilateral trade had climbed 11 percent to nearly $48 billion in 2017, and Mexico’s avocado exports to China in the first half of this year, a whooping 9,368 tonnes, had already overshot 2017’s total.” These numbers conveniently ignore that China exported more to Mexico than the previous year and that China’s trade deficit with China is approximately that Mexico exported less than USD$7 billion to China in 2017, while importing more than $74 billion from China in that same year for a whopping $68 billion yearly trade deficit.
4. The China Daily also uses a “before we had nothing” argument to highlight whatever little has been achieved in terms of Chinese investment into Mexico. The article notes that in 2017, “China’s JAC Motors, a state-owned automobile manufacturer, teamed up with Mexico’s Giant Motors to invest $200 million in an SUV auto plant in the central state of Hidalgo. And after China and Mexico decided to set up a joint investment fund of $2.4 billion, one of the fund’s first deals in 2016 was to invest $140 million in Citla Energy, a new Mexican oil company. According to a widely-cited Atlantic Council report last year, from 2014 to 2016 Mexico saw more than 40 deals valued at over $4 billion from China, a significant jump since no previous year had seen more than five.” But if you put these numbers in perspective, $4 billion is nothing compared to the value of projects currently underway between China and Chile, a Latin American country with a much more developed relationship with China. For instance, China has already invested US $3 billion in Chile according to the World Economic Forum and, as of last November, Investchile was working on “74 Chinese companies and 18 specific projects worth over US$1,800 million in areas such as energy, mining and infrastructure.” Though Chile’s economy is much smaller than Mexico’s it (along with Brazil) are China’s biggest trading partners in Latin America and Chile, at least in part because Chile has a wealth of qualified people that Chile have furthered Chile’s trade relations with China. Chile has even expressed its intention of joining the Belt and Road Initiative (BRI).
5. Mr. Garcia nicely mouths the same old discourse to “win China over,” by highlighting Mexican exports of agroindustrial products that if not exported to China would almost certainly be exported to various other countries and “Mexico’s strategic location, bordering the US and a beachhead into Latin America [that] could help China’s global reach.” Or as the China Daily puts it: Mr. Garcia that “stressed the importance of bilateral trade…before ticking off in quick succession some of Mexico’s proud exports, like avocados and tequila.”

The China Daily interview irritated me for other reasons, too. Cabinet members in Mexico seem also persist with an outdated and ineffectual view on how to “approach” China. On December 20, during her first press conference as Economy Minister, Graciela Márquez Colín, issued assurances that the new Mexican government would work to make China a “very important market for this country,” as though that same plan had not been official Mexican foreign policy during past administrations. She also stated the obvious, saying that “Mexico must look for a way to insert itself into the Asian region, which is a growth locomotive for the coming years,” and that “although [evolution of Sino-Mexican] cultural and educational relations had begun since the 70s, that of trade had been slower.” But the punchline came when she pointed out that Sino-Mexican trade exchanges would teach Mexicans “how to understand this potential market” and given that “there are Mexican entrepreneurs in China…there was a “great opportunity to understand China’s technological and innovation advancements.” Sadly, I view her talking about opportunities to understand China as only confirming how little has been learned about dealing with China from either past administrations or from those Mexicans who actually have been dealing with China for the last two decades.

Mexico’s Undersecretary for Foreign Trade, Luz María de la Mora, stated (as we have heard so many times before) that “Mexico was seeking with China an agenda that responds to the interests of both countries” and that this agenda should be strengthened for Mexico’s export offerings, adding that we are “also very interested in attracting quality Chinese foreign direct investment (FDI) that allowed fostering an initiative of innovative industries development [using] top-notch technology” and pointing out that the CIIE was “a very interesting fair . . . where Mexico . . . could present its products to that Asian country which displays export opportunities.”

Mexico must start thinking of Chinese FDI as more central to our economy, and not just as one of many possible ways to boost Mexican exports. Even if the new administration is putting closer economic relations with China high in its priority list, its ignorance and lack of plans regarding how to accomplish that have so far been its defining traits.

There have been many changes already under Mexico’s new federal administration, including one that will significantly impact Mexico’s economic relations with China and the rest of the world: This is the plan to close all overseas offices of ProMexico, a trust fund of the Federal Government of Mexico that promotes international trade and investment. In my next post, I will discuss the legal and business implications of a shrinking ProMexico and budget reductions of various key Ministries, all with a focus on China.

For more on China-Mexico relations, check out the following:

For more on business relations between Mexico and China, check out the following:

• Improving Mexico and China Business Relations: Make it the Law
• China and Mexico: The Two Amigos? Part I
• China and Mexico: The Two Amigos? Part II
• China and Mexico: The Two Amigos? Part III
• China and Mexico: The Two Amigos? Part IV
• Is Mexico Really Better Without China?
• Is Mexico Really Better Without China? Part Two

*  The above post is by Adrián Cisneros Aguilar. Adrian is the founder/CEO of Chevaya (驰亚), an Asia-Pacific internationalization services company. Adrián has a Doctor of Laws from Shanghai Jiao Tong University and an LL.M. in International and Chinese Law from Wuhan University. He also is our law firm’s go-to lawyer for anything Mexico.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.