India-Mexico: An Economic Partnership With Great Potential
As Mexico celebrates its Independence Day on 16 September, here's a macro perspective on the economic partnership between the two surging economies through a candid conversation with Mexico’s Ambassador to India, H. E. Mr Federico Salas.
In more than one way, the growth trajectory of India and Mexico is quite similar. Regional superpowers, both countries can be tagged as developing economies, destined to play a critical role in the new world order where supply chains are diversified and market sizes dictate diplomacy.
Both nations enjoy the geographical privilege that makes them indispensable from an export-import perspective. However, when it comes to numbers, both economies, ranked in the top fifteen globally, have significant potential for growth and expansion.
In terms of value, in 2018, Mexico’s exports to India were around $4.67 billion. In April 2021 alone, the exports exceeded $57 million, perhaps dented by the aftermath of the pandemic. In 2018, India’s exports to Mexico were around $4.22 billion. In March 2021, India’s exports to Mexico were worth $300 million.
Two-thirds of Mexico’s exports to India are crude petroleum products. In contrast, India primarily exports cars, other automobile parts, raw materials like aluminium, iron, steel, organic chemicals, and electrical machinery.
The author, ahead of the nation’s Independence Day (16 September), spoke to H. E. Mr Federico Salas, Mexico’s ambassador to India. The conversation encompassed economic areas of mutual interest, growth opportunities, and scope for expansion through soft power exercises.
Even though India’s share of trade with Mexico is merely 20 per cent of Latin America, Ambassador Salas was confident that the numbers would improve in the years to come and strengthen bilateral economic ties.
What are your thoughts on the economic and diplomatic relations between the two countries, to begin with?
Before we began the conversation, you stated about the two nations punching below the weight of the economic relationship, but that is the story of every bilateral economic partnership.
Nevertheless, in the last ten years, India has become one of Mexico's top ten trading partners. The numbers tell one story and depend on where you look, but more or less, Mexico is now India’s number one trading partner in Latin America. We are the number one investor from our region in India.
The economic relationship between the two countries is quite vibrant and alive. For instance, TCS is expanding in Mexico, almost doubling its employee count in the country, as are several other Indian companies.
There is an acknowledgement that the complete potential is not being tapped. In March, earlier this year, the foreign minister visited India. Beyond routine politics and diplomacy, there were three-four areas of great importance where the relationship must be refocussed.
One, the pharmaceutical industry and the health sector. Several MoUs are already in place, one with CIPLA, which is not restricted to purchasing medicines alone but also knowledge transfer.
Two, in the information technology and artificial intelligence sectors. The foreign minister came with young entrepreneurs from Mexico who are digital pioneers in the country and would like to collaborate with startups. This is a very fertile ground for the two countries to work together.
Three, to work on the new space technologies. Already, there is an MoU that we have signed with the Indian Space Research Organisation (ISRO), and that has now been expanded to encompass agricultural monitoring to aid farmers and a lot more than being done for space programmes.
Four, Ayurveda or traditional medicine, and the Indian side has put this forward as one of the critical areas of partnership.
Another critical aspect is to diversify the trade pie. Currently, significant exports from Mexico to India are that of oil. Changes in this industry are inevitable, especially factoring in the recent events where Russia’s crude imports to India have surged.
Even Mexico is looking to cut down oil exports, as announced by the President and aiming for self-sufficiency in energy, and our overall crude exports might come down.
Thus, diversification is essential. The Indian side also realises that Mexico is an important market as many companies are tapping into its complete potential. One of the more enormous challenges for the two countries is knowing each other better; that is what the other can offer, what the conditions are.
Given the NAFTA, India was not always the priority for Mexican companies, but that is changing as we venture into the South-Asian market.
Mexico, today, has fourteen free trade agreements with several countries, giving it access to a population that is equivalent, if not more, to India. Thus, for the Indian companies, there is a massive benefit in setting up shop in Mexico, as they would be able to access the North American and Latin American markets.
Dr Jaishankar also recently remarked about increasing the overall trade with Latin America from $50 billion to $100 billion. These are good signs.
Let’s skip the last two-three years, but between 2008, after the Great Recession, to 2019, where do you think the opportunities were missed by both the countries and where can they improve going forward, say in the next ten years?
I wouldn’t say something was missed, but a complete understanding of what the opportunities are needs to happen, that is to make both sides completely aware. The sooner this realisation happens, the sooner stakeholders can tap into it.
We are looking at India as a nation that will be the third-largest economy in the world, something the private sector in Mexico also acknowledges, and they want to tap into this window of opportunity. One can safely assume that India’s economic fundamentals are firm compared to other countries.
Companies in Mexico are used to doing business in the United States of America, the European Union, Singapore, Japan, and other open markets. However, in India, they are needed to overcome obstacles pertaining to bureaucracy and also some protectionist tendencies. That needs to be fixed.
Also, we are currently studying the viability of a free trade agreement with India. Not that our future economic ties depend on it, but it would undoubtedly be of great help.
In China’s growth story, several Western enterprises have contributed significantly, setting up shop at the right time, tapping into the market, and expanding further. For India, how do you imagine Mexican companies tapping into India’s growth story in the upcoming decade?
Cinepolis, one of the multiplex players in India, is an example of how companies can succeed in India. Another auto-parts company in Mexico is now an integral player in the supply chain of Tata Motors.
I believe that Mexican companies can come to India, tap into the complex web of supply chain and manufacturing network, and play a key role. The companies that do well in India inspire other companies to set up shop here. This is going to be an ongoing process.
What is that Mexico can import from India?
Digital services are one sector, and UPI is already being looked into. The scalability and efficiency of some of the digital services here is impressive.
In Mexico, we are still working on taking the internet to rural communities, enabling access for everyone, and that is one area where India and Mexico can work together.
Beyond the hardware and software question, we must also explore partnerships for tech innovation. Even though different in size, our challenges are similar, and both countries can learn from each other’s experiences.
Compared to other countries in Latin America, what are the advantages that Mexico enjoys, one India should be aware of?
Both countries have an important regional reach, which is not the case with other countries in Latin America. We can explore free trade agreements, and the access that comes with them is quite an advantage. There is also the demographic advantage, one already tapped into by Indian companies as they go on a local hiring spree.
The American market is entirely accessible to Mexico, as evident by the fact that some large automakers like Ford and Volkswagen have huge operations here. The Indian companies coming to Mexico could also use NAFTA to expand their scope of operations and revenue.
What about a soft-power push? Also, people-to-people relationships?
We do have to expand bilateral contacts. Mexican students are now enrolled in Indian universities, though this was dented during the pandemic as many had to return to their country, and the momentum of enrollments must be regained.
Partnerships amongst universities must be encouraged, not only for student transfer but also for innovation, research, and development. There are some fantastic incubators in several private and public universities in India, and this is where entrepreneurs from both nations can come together.
There is the tourism aspect also. Many Indians are now planning destination weddings in Mexico, and it is no surprise how big an affair Indian weddings are. Perhaps, private airlines can also partner amongst themselves to ensure a seamless experience for travellers.
Interestingly, to our surprise, when the pandemic hit, many travellers were stranded in India, way more than we initially thought.
To conclude our conversation, where do you imagine India’s place in the world to be in the new global order?
India will become the most populous country in the world, overcoming China, which is already a strong economy and a regional power, and will become more assertive with time.
Today, many international organisations like the WHO and UNSC are not working at their full potential, and countries like India must be engaged for these organisations to be more accountable, responsible, and responsive to global needs.
One question we need to ask ourselves is whether the global architecture that emerged post-1945 serves the needs of the future. However, whatever happens next, India will play a key role.
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