The Location Advantage and Strategic Significance of Investing in Mexico.
This year marks the 50th anniversary of the establishment of diplomatic relations between Mexico and China. Since 2013, China and Mexico have established a comprehensive strategic partnership and continuously strengthened exchanges and cooperation in various fields. At present, China has become Mexico's second largest trading partner, second largest source of imports and third largest export destination. In 2021, the bilateral trade volume between Mexico and China has exceeded 100 billion US dollars. Mexico is the first country among developing countries to sign free trade agreements with the world's two largest trade blocs (North American Free Trade Area and the European Union). At the same time, it has advantages in many aspects such as location advantages, resource advantages, labor cost advantages, and demographic dividends. It has become a foreign country. Latin American countries where investments are focused. In 2018, the United States, Mexico, and Canada signed the United States-Mexico-Canada Trade Agreement (USMCA), which came into effect in July 2020. Under the dual influence of this new agreement and the trade war between China and the United States, the prospect of investment in Mexico has attracted more attention from Chinese investors and manufacturing companies. To a certain extent, the significance of investing in Mexico for the American mainland market is no less than Vietnam's position in the Asian market, but the market still lacks enough attention and understanding. Randy's Mexico business team summarized the following points on the main location advantages and strategic significance of investing in Mexico:
1：Strategic regional location advantage
Mexico is the third largest country in Latin America after Brazil and Argentina. Mexico is a necessary place for land transportation in South and North America, bordering the United States to the north, Guatemala and Belize to the south, the Gulf of Mexico and the Caribbean Sea to the east, and the Pacific Ocean and the Gulf of California to the west. It has an exclusive economic zone of 3 million square kilometers and a continental shelf of 358,000 square kilometers. The coastline is 11,100 kilometers long, including 7,828 kilometers of the Pacific coast and 3,294 kilometers of the Gulf of Mexico and the Caribbean coast.
Mexico is the first developing country to sign free trade agreements with the world's two largest trading blocs (NAFTA and the European Union), and Mexico is located in the backyard of the world's largest consumer markets (the United States and Canada). The United States and Mexico share a common border of more than 2,000 miles. The distance between Mexico and the United States means that trucks transporting goods can be driven from Mexico to any location on the continental United States within 48 hours (except Hawaii and Alaska), so Mexico is a natural trading partner of the United States and manufacturing base.
2：Doing Business and Free Trade Agreements
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Mexico has signed 14 free trade agreements (FTAs) with 52 countries and regions, 32 mutual promotion and investment protection agreements with 33 countries and regions, and 9 economic complementary free trade agreements. Mexico is an active participant in multilateral and regional forums such as the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC) and the Latin American Association for the Development of Latin American Integration (ALADI). At the same time, Mexico is also a member of the Organization for Economic Cooperation and Development (OECD), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and other mechanisms.
According to the Doing Business Report 2020 released by the World Bank, Mexico ranks 60th out of 190 countries and regions in the world. According to the 2019 Competitiveness Report published by the Lausanne Institute of Management (IMD) in Switzerland, Mexico is ranked 50th out of 63 assessed economies in the world. In this ranking, Chile ranks first among Latin American countries, ranking 42, followed by Mexico at 50, second only to Chile (42), which ranks first among Latin American countries. Other Latin American countries such as Colombia (52nd), Peru (55th), Brazil (59th) and Argentina (61st) are all behind.
The USMCA, in effect on July 1, 2020, provides an excellent opportunity for businesses looking to manufacture in and export to North America. The agreement sets Mexico apart from other Latin American countries, with unique investment competitiveness and trade facilitation.
China has formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and Mexico is currently one of the 11 member states. CPTPP is a free trade area composed of Asia-Pacific countries, and is the new name of the agreement after the United States withdrew from the Trans-Pacific Partnership (TPP). The agreement will strengthen mutually beneficial linkages between member economies and promote trade, investment and economic growth in the Asia-Pacific region, which together cover a population of 498 million and account for 13 percent of the global economy.
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3：leading industrial base
Industry is the most important sector of the Mexican national economy, providing more than 30% of the country's jobs. Mexico has a relatively complete and diverse industrial system. It not only has light industries such as food, pharmaceuticals, textiles, tanning, clothing, and paper, but also heavy industries such as automobiles, steel, chemicals, and machine manufacturing. The energy industry is relatively developed, and the petroleum industry and mining. The industry also has a long history. Manufacturing is the backbone of Mexico's economy, with more than 80% of its export earnings and about a quarter of its GDP derived from manufacturing.
The manufacturing industry includes more than 20 industries including steel, automobile, chemical, electronics, metal processing, machine manufacturing, food, textile, paper, clothing, rubber, pharmaceutical, etc. Mexico is one of the major oil producers in Latin America, and the oil industry occupies an important position in its economy. The export revenue of petroleum products is the main source of Mexico's fiscal revenue; the automobile industry is the largest manufacturing sector in Mexico and its pillar industry, and Mexico is an important global It is a major producer and exporter of automobiles, mainly exporting to the United States. Mexico is the 6th largest automobile production base in the world, the 4th largest exporter of light vehicles and the 5th largest production base of heavy vehicles.
4：Minimize the impact of the Sino-US trade war on Chinese-origin goods
Processing and manufacturing is one of the key areas for Chinese enterprises to invest in Mexico. Manufacturing companies investing in Mexico to build factories can take advantage of the preferential tariffs in the North American Free Trade Zone and the advantages of being closer to customers in geography, to replace the unfavorable conditions such as high costs or high tariffs directly exported by Chinese factories to the North American market, and at the same time to expand the group’s presence in North America, especially in North America. is the share of the US market; on the other hand, some products are also exported to the EU market through an extensive trade agreement between the EU and Mexico. This is an additional advantage for Chinese manufacturing companies to invest in Mexico.
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