Mexico seeks to balance books with mainland

PUBLISHED : Thursday, 02 July, 2009, 12:00am
UPDATED : Thursday, 02 July, 2009, 12:00am

Mexico is looking to reduce its multibillion-dollar trade gap with the mainland by attracting new investment, its ambassador to China said.

In an exclusive interview with the South China Morning Post, Jorge Guajardo said Beijing had promised his country it would buy more Mexican products or encourage more Chinese to travel to Mexico because of the yawning trade gap.

'For every dollar we sell to China, we buy US$15 of Chinese goods. That's something we've tried to work out with the Chinese leadership,' Mr Guajardo said. 'We need to find creative ways to balance the commercial situation, because big trade deficits do not favour anyone in the long run.'

Mexican government figures show the country's trade deficit with the mainland was US$32.7 billion last year. The ambassador stressed that attracting mainland investment to Mexico would be one of the best ways to narrow the gap.

'There are very clear reasons why we want to do that. We have recently been reading how manufacturing in China has become more and more expensive,' he said, referring to a report by global economic consultancy AlixPartners on outsourcing on the mainland, in Mexico and other countries.

The consultants' report said that Mexico had leapfrogged the mainland in low-cost country rankings because of low oil prices, the global economic meltdown, and currency fluctuation.

The ambassador said lower labour costs in his country had contributed to the appreciation of the yuan and devaluation of the Mexican peso. He also highlighted the proximity of Mexico to the United States - the key market for Chinese and Mexican goods.

'It takes a long time for Chinese goods to reach the United States. If you made the goods in Mexico, not only would you avoid shipping costs, but also you'd get them right there to the market,' he said. 'We read in many daily newspapers about the threat of a possible trade war. Mexico is a country with free-trade agreements with the US, Canada, Europe, Japan and many other countries.'

The ambassador suggested the mainland car industry could shift assembly and installation work to Mexico while retaining the manufacturing of parts.

'The cars are Chinese products, but they can enter the US duty-free because of our free-trade agreement with the United States,' he said. That's a reason why China and Mexico can co-operate, and not be competitors.'

With the peso so cheap, the envoy said now was the perfect time for mainland tourists to visit his country.

'Twenty-six million tourists visited Mexico last year. Just 18,000 were Chinese. I would say 16,000 of them were businessmen - so, very few tourists,' he said.

'I think we can do more to attract Chinese foreign investment and tourists.

'We are making visa issuance easier [for mainland tourists], and for a longer duration.'

He said tourism had been the first industry to pick up since the start of the global financial crisis.

'Tourism, which is one of Mexico's main sources of revenue, actually went up due to the financial crisis because US tourists, who could not travel to Europe and Asia, were coming. Mexico is a logical destination for them.'

Trade torment

Mexican government figures show last year's trade deficit, in US dollars, with the mainland was: $32.7B