With its impressive manufacturing structure – as large as all of Latin America together – Mexico could help GCC countries meet the demands of fast-growing populations. Caitlyn Taulien explores
The straight-talking former president of Mexico, Vincente Fox Quesada is no wallflower – most recently making headlines for his heated Twitter exchange with US president elect Donald Trump.
And at the Global Business Forum on Latin America in 2016 at Atlantis, The Palm, in Dubai, the candid leader was no shyer in insisting upon Mexico posturing itself as an ideal trade hub for Gulf companies eager to access Latin America’s US$10tn market, keen to take advantage of trade agreements with 43 markets.
Dubai is already Mexico’s second-largest international trade and investment partner, as the growth of trade between the two countries soared to AED17bn in 2015, up from AED13.5bn in 2010.
However, Latin American leaders, such as the commercially savvy Secretary of Agriculture, want more – not least to feed the Emirates’ growing appetite for avocado on toast. Humorous as it may sound, Jose Calzada’s most recent plan for Mexico to open trade offices such as ProMexico in Dubai in 2017, is the perfect platform to sell the country’s coveted avocado, a fruit that sold 100,000 tonnes (220m dollars worth) at the American Super Bowl.
Food and farming exports
Beyond the humble avocado, these discussions surrounding farming and food production are ramping up. The Undersecretary of the Ministry of Economy for Economic Affairs, H.E. Eng. Mohammed Ahmed bin Abdul Aziz Al Shehhi, certainly thinks so, stating in 2016 that ‘Mexico has a strong farming sector offering large opportunities for growth domestically and worldwide, which fits naturally with the UAE's economic programme on food security.’
In addition, a significant trade for Dubai is re-exports, which, during the 2010-2015 period substantially increase by 246 per cent to US$37.5m. From 2010 to 2015, Mexico’s imports to Dubai grew to US$1.25bn (up 18.3 per cent) and exports went up to US$30m (up 21.2 per cent).
Government initiatives such as the avoiding of double taxation, energy cooperation and the protection of investments and tourism enable these positive figures, says the head of the Mexico Trade Office in UAE, ProMexico, Enrique Abud Dip.
‘We are new in this relationship, but the advances have been very important and relevant. Both nations and its entities have entered into different agreements regarding the petroleum industry, environmental protection and climate change, higher education, cultural and artistic cooperation, and promotion of investments among others.’
The impact of political reform
Foreign investment also came on leaps and bounds thanks in part to the 2013 reforms implemented by Mexico’s current President Enrique Peña Nieto to privatise the gas and oil sectors. Despite the global drops in oil prices since 2014, the economy has continued to progress and expand, thanks to the reform and diversification of the economy.
Abud Dip says Mexico has more to offer than its superb geographic proximity to the US, Latin America and UAE – further benefits come from its favourable business environment, competitive costs and domestic market.
‘The young and talented population; macroeconomic and political stability; low inflation; size and strength of the domestic market (120m people); and capacity to produce advanced manufacturing, are important elements for Mexico to guarantee access to international markets through a network of free trade agreements’, he says.
Lessons from China
China took large strides in making investor-friendly reforms to secure bilateral trade with GCC long ago – it is now valued at AED176bn. The location of Dubai in re-exporting US$2bn to Africa and the Middle East, was particularly important in achieving this valuation, says the CEO of Dubai Chamber of Commerce and Industry, Hamad Buamim.
Mexico could also benefit from following suit in encouraging foreign investment, as China and Dubai have done with special economic zones for foreign bodies – such as Dubai ‘freezones’ that enable foreign investors to establish a presence in the chosen country. In fact, Dubai's expanding free zones and Dubai Maritime City present further opportunities for collaboration as its flagship registry and free zones have played a lead role in making Panama the second largest economy in Central America’, said Chief Executive Officer of the Dubai Investment Development Agency Fahad Al Gergawi on a recent trip to Panama City, or ‘strategic logistics hub’ as he names it.
2. Diversify trade partners
China’s trade agreements are hugely varied, placing it as the number one trade body in the world. Mexico must diversify its trading partners; an approximate 75 per cent of Mexico’s exports are to the United States.
One example of many is Vietnam. With an ever-improving economy, the country is developing an increasingly elaborate trading system. Both places could benefit from a mutually beneficial trading system of preserved fruit, medical goods and much more.
3. Diversify exports
Mexico’s primary exports to China are raw materials, including oil. China dwarfs Mexican exports tenfold, shipping the more profitable processed products (i.e. chemically altered food products) into Mexico worth US$57bn. Both Al Gergawi and Deputy CEO Khalid Al Boom recently made contact with business representatives and investors in Mexico City and Panama City to discuss the diversity of infrastructure and services, such as manufacturing, agricultural and trading sectors as well as machinery and financial services.
Plans for Mexico-UAE relations will continue to grow and prosper, says Abud Dip. ‘I see the UAE and particular Dubai, as the point of entry and platform for Mexican companies to access a huge market of more than 1.6bn consumers; therefore, there are a lot of mutual opportunities to explore.’