It Has Got The Beans: India And Mexico Seek New Partnership – Analysis

At the invitation of President of Mexico, Enrique Peña Nieto, Prime Minister Narendra Modi, on the concluding leg of his five nation tour on June 8, 2016, undertook a brief working visit to Mexico. The main objective of the visit was to carry forward the recent momentum in bilateral relations, discuss cooperation and seek Mexico’s support for India’s entry into the Nuclear Suppliers Group (NSG).

Bilateral relations between India and Mexico have witnessed an upswing in the last two years. In September 2015, PM Modi had a substantive bilateral meeting with the Mexican President on the sidelines of UNGA. Thereafter, the Minister of Foreign Affairs of Mexico visited India in March 2016. Modi’s visit is the first bilateral visit of an Indian head of state to Mexico in 30 years.

India and Mexico have been examining various measures as well as easing visa norms and establishing a mechanism for carrying out direct trade in precious metals including, gold and silver, to boost trade and investment ties. A Bilateral High Level Group (HLG) on trade, investment and economic cooperation between the two countries has been looking at measures to increase collaboration between companies in sectors such as renewable energy, hydrocarbons pharmaceuticals, automobile and auto-components, information technology, tourism and entertainment. However the HLG, which was set up in 2007, last met four years ago, in 2012. Not surprisingly, the annual bilateral trade is just USD 6.2 billion mainly comprised of energy imports by India; this is seen to be at a fraction of the trade potential.

Another area of bilateral cooperation is space technology and Mexico is aware of the progress made by India’s space programme and accomplishments of Indian Space Research Organisation (ISRO). Since 2014, space agencies of the two countries have held productive dialogues and are collaborating on disaster management techniques to be used during geological phenomena like cyclones, floods and earthquakes.

Notwithstanding the tepid state of trade relations, Mexico is the largest Latin American investor in India, with an influx of almost USD 1 billion during the last six years, through several Mexican companies that have invested in sectors such as, auto-parts and entertainment. Indian investments in Mexico are around USD 2 billion, the biggest Indian FDI in Latin America. Approximately 60 Indian companies, mainly from the automotive, pharma and IT sectors, have invested in Mexico and have benefited from the fact that Mexico is a part of two economic blocs – the North American Free Trade Agreement (NAFTA) and the Transpacific Partnership Agreement (TPPA).

Mexican market is one of the rare bright spots for the passenger vehicle market across the globe and is expected to grow into the top five car markets in the world by the end of this decade. Despite being one of the farthest countries from India, Mexico, is set to become the biggest export market for Indian carmakers, with 20% of all cars shipped out of the country head to Mexico. It vies with South Africa as the top overseas car market for India carmakers.

Despite freight cost plus import duty of 20%, gains from economies of scale and cost advantage in the country translates into a profit margin of 20%-30%. Volkswagen India
ships Volkswagen Vento from India to Mexico, while General Motors India ships Beat small car, which is sold as Spark in that market. Hyundai’s i10 Grand and Xcent, Ford’s Figo and Aspire, and Maruti Suzuki’s Ciaz are other Indian cars dispatched to Mexico.

Also on the agenda for the current visit was support for India’s membership of the NSG. Switzerland and Mexico are known as non-proliferation sticklers, and, along with China, are seen as the major barrier in securing the unanimous vote required to secure India’s membership of the NSG. While PM Modi has got the Swiss nod during the first half of his current tour, Mexico’s acquiescence on the issue was seen as a tougher challenge. Mexico became a member of the NSG in 2013 and would like India to sign the Nuclear Non-Proliferation Treaty (NPT) before joining the NSG.

Mexico had strongly condemned India’s nuclear tests of 1998 and at the Conference on Disarmament in Geneva during the year, termed India’s actions as “not conducive to the achievement of a nuclear weapons-free world; rather, they exacerbated regional tensions and were inconsistent with the actual international climate of détente”. However during the visit Modi has convinced the Mexican leadership of India’s credentials and secured a positive response on the NSG issue.

In deepening their bilateral relations, the two countries can learn from each other’s individual experiences. For instance, in the midst of the rhetoric hullabaloo that is coming to surround the current the US presidential elections, Mexicans have realised that they have not been able to appropriately communicate to the US community the contribution of Mexican and Mexican-American community to the well-being and advancement of the US. Mexico’s foreign minister believes that Mexico must take a leaf out of the Indian ‘playbook’ on engagement with the Diaspora and get the Mexican community in US to “speak up” and inform their fellow Americans about their significant contribution to the US society.

India, on the other hand, can learn from Mexico, as to how to manage and shape its relations with its neighbours. Today, illegal immigration from Mexico to US has dropped to historic lows and Mexican investors have started pouring billions of dollars into the U.S. economy. One factor in this turnaround has been integrated supply chains. Many of the manufactured goods that move across the US-Mexico border are products that US and Mexican firms assemble together in shared supply chains. According to one estimate, 40 percent of the content in finished goods that Mexico exports to the US has been source from US. These integrated supply chains that run from Mexico through the US to Canada have not only ensured that these industries remain competitive, but have discouraged their off-shoring to other parts of the globe.

As India moves on to the global stage it needs new partners and partnerships based on shared interests and, to that end, India-Mexico bilateral relations has got the beans.

*Monish Gulati is an Associate Director of the Society for Policy Studies, New Delhi. He can be reached at: [email protected]. This article was published at South Asia Monitor.