Trade tango with Mexico
Trade tango with Mexico
With the geopolitical conditions in Latin America favouring a deeper engagement between India and Mexico, the years to come will only add more warmth and trust to the relationship
Hardnews Bureau Delhi
When India attained independence in 1947, Mexico was the first Latin-American nation to recognise the new-born country. To demonstrate the value Mexico placed on its ties with India, former President Emilio Portes Gil was sent as the first Mexican ambassador to New Delhi. Since then, the diplomatic ties between the two countries have only grown deeper, nurtured by frequent visits by heads of states and strengthened via bilateral cooperation and trade. Even as India’s trade with Latin America has dipped in the last year, Mexico has overtaken Brazil as the top destination for India’s exports to the region and the numbers are expected to grow.
In the past year, with Donald Trump winning the presidential election in the US, the geopolitics of the region has witnessed a sea change. On the one hand, the new restrictions on H-1B visa policy have hit Indian business interests in the US and on the other, the continued tussle between the US and Mexico have dealt a blow to the bilateral ties between the two nations. With the US threatening to scrap the North American Free Trade Agreement (NAFTA), which would deal a blow to Mexico, new opportunities have emerged for India and the Latin American country to engage in trade. Mexico can now provide India with the base for near-shore US operations.
The Latin American nation has emerged as the biggest market for India’s vehicle exports, as it accounts for 13 per cent of India’s global exports of vehicles. The total value of vehicles exported by India stood at $14.98 billion in 2016. This is interesting especially because Mexico itself is the fourth-largest exporter of vehicles in the world. And yet, India’s vehicle exports to Mexico have spiked by an incredible 56 per cent from 2015 ($1.17 billion), 83 per cent from 2014 ($1 billion) and from a mere $397 million in 2012. Apart from vehicles, India also exports engineering goods, chemicals, textiles, plastics ($83 million) and pharmaceuticals ($47 million) to Mexico.
Mexico has the 10th largest crude deposits in the world. It has traditionally played the role of an energy supplier to the US, however, as the US becomes more energy independent by the day, the Mexican exports to the US have shrunken and so have the revenues for the country. Mexico is now looking to expand its export base and has started looking towards countries like India and Japan. India, at the same time, has been trying to diversify its energy exporters and the Latin American nation can provide India with a welcome break from the Middle-East that has conventionally been the oil exporter to India.
Because of the dramatic fall in the prices of crude oil which makes up 60 percent of India’s total imports from Mexico, the overall value of imports from the country has dwindled in the last year. India’s imports from the nation stood at $2.44 billion in 2016, down from $3.44 billion in 2014. However, India continues to be the third largest market for Mexican crude exports and the value is only expected to increase in the coming years.
Prime Minister Narendra Modi’s visit to Mexico in June last year has also set the tone for taking the bilateral relationship forward. During the meeting, the leaders stressed the necessity of developing a greater connectivity between the two countries and encouraging cooperation in the infrastructure sector, among small and medium enterprises, in pharmaceutical products, in energy, in the automobile sector, in Information and Communication Technology, in agriculture, in food processing and in other related sectors. With the geopolitical conditions in the region favouring a deeper engagement between the two democracies, the years to come will only add more warmth and trust to their relationship.