Mexico’s President Enrique Peña Nieto travel’s to China in search of economic and diplomatic relations. Photo: Reuters
Over the past weeks, Mexico has repeatedly been called “the new China” as well as “the next China.” Yet President Enrique Peña Nieto, who is visting Asia from April 4th through the 10th, where he will meet China’s equally new president Xi Jinping and attend the regionally influential Boao Forum on Hainan island, is on a practical mission: to persuade China to be a bigger investor in Mexico, not to present his country as a competitor.
On a business level, Peña Nieto will seek to develop China’s economic presence in Latin America’s second-largest economy through new commercial and investment agreements. On a political one, he will try to kickstart the countries’ almost nonexistent diplomatic relations.
These are tense and distant, according to a Strategic Agenda for Mexico-China Relations (in Spanish), a document presented by a group of 100 academics, businessmen and politicians to Peña Nieto shortly after he took office last December. “We have no policy to speak of for China. There’s no strategy that adequately reflects China’s global importance and does justice to our second leading trade partner. I don’t think economic and trade relations can get any worse,” Enrique Dussel, director of the Centre for China-Mexico Studies of the National Autonomous University of Mexico, and one of those who drew up the Strategic Agenda, told IPS in January.
That means Peña Nieto must be willing to walk in to the meetings he will participate in as the underdog. He is fully aware that the dependence that Mexico has on China is much greater than vice versa. Mexico tacitly acknowledged that in January when it postponed for one year the reduction of import duties set for 2013 on footwear and other products of the textile and apparel industry coming from China. At the same time, the two nations compete to sell manufactured goods to U.S. consumers, an issue likely to come up during Peña Nieto’s visit.
The trade balance is illustrative of the economic leverage China holds over Mexico. Mexican imports from China, the main pillar in their relationship, totalled $52.2 million in 2011, accounting for a seventh of Mexico’s total. Mexico accounted for only a fiftieth of China’s that year. The trade balance runs 10-to-one in China’s favor.
Mexico’s oil could close the gap. China is on a global drive to secure oil for its expanding economy, and continues to secure energy agreements worldwide. Peña Nieto plans to open his country’s oil industry to foreign investment, a priority in his new energy reforms expected to be implemented from the summer, to help reverse the long-term decline in the country’s oil production. China’s oil firms could be welcome partners in that endeavor, especially at Mexico’s onshore fields that are closer to the Pacific than the bulk of its current oil production in and bordering the Gulf of Mexico.
At the same time, Mexico’s state-owned oil giant, Pemex, is expanding abroad rapidly. This seems fertile ground for oil-for-investment deals and joint ventures.
Mexico has not been able to attract much foreign direct investment from China to date, and certainly not in comparison to the sums other nations in the region have received. It is so small that there has been difficulty counting it. China says its FDI in Mexico in 2011 stood at $614 million; Mexico’s secretary of Economy reckoned it to be $157 million. Which ever it is, it will have been boosted a year ago by joint business deals and investment worth some $560 million.
Much more is expected following Peña Nieto’s trip. A proposal for Chinese companies to connect Mexico City and the industrial city of Toluca with a high-speed rail line is one of the infrastructure projects on his agenda.
China is also hoping to start work next month on Dragon Market Cancun, a $180 million exposition center in the Yucatan intended to be the largest trading center for Chinese products in the Western Hemisphere. Construction has been held up by objections from environmentalists and businesses. Peña Nieto will doubtless smooth the way for that, too — a political price for a much bigger economic relationship.
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