Mexico building bridges with China

By Zhang Tao

marketwatch.com

BEIJING (Caixin Online) — Mexico’s new president, Enrique Pena Nieto, wants to redefine bilateral relations with China.

In a trip to the southern province of Hainan in early April, four months after he took office, the 47-year-old Pena Nieto met with the head of China’s new leadership, Xi Jinping; announced the establishment of a government agency to handle trade with China; and repeatedly sent the message that the two economies can complement each other, rather than compete.

“I’ve come to reaffirm, and to also confirm very clearly, the interest Mexico has to expand its relationship with China,” Pena Nieto said in an exclusive interview with Caixin on April 6.

Sino-Mexican economic relations have long been tense. Both are major suppliers of manufactured goods, especially to the United States. Mexico was the last country to sign a bilateral deal with China in 2001 to pave the latter’s way into the World Trade Organization, and it has launched several WTO complaints against Chinese exports.

Mexico’s trade deficit with China is the largest among its trade partners.

“China has set up strategic relationship with many Latin American countries, but economic ties with Mexico have long been one of the worst because both are competing for the North American market,” said Dong Jingsheng, deputy professor of history at Peking University.

Reuters

Mexico’s President Enrique Pena Nieto

“(Pena Nieto) choosing to emphasize Sino-Mexican relations at this particular moment might be triggered by sluggish U.S. growth in recent years, and China’s robust development means Mexico can benefit from a strong bilateral ties.”








Pena Nieto’s formula to beef up relations is to let Mexico learn from China’s experience in economic growth, and to have the two countries’ products integrate in a global, value-added chain.

Time might be on Mexico’s side. While China’s labor costs are rising rapidly, Mexico still enjoys low labor costs and advantages in transport, taxes and access to raw materials.

In addition, Pena Nieto’s reform blueprint, if implemented, could be the start of economic and social strength. But as is the case with the country’s new friend, China, “the largest obstacle for Mexico’s reform is the resistance from vested interests,” said Jiang Shixue, deputy head of Chinese Association of Latin America Studies.

Excerpts of Pena Nieto’s interview follow.

Caixin: Mr. President, what brings you to China?

Enrique Pena Nieto: We are just beginning a new administration in Mexico, and our main interest here is in establishing a new relationship with China. We have to recognize the very important role of China as an engine of the world economy. Our relationship should be closer, more trade and more integration to complement our economies.

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Caixin: Mexico is troubled with a large trade deficit with China. How do you plan to tackle the deficit?

Pena Nieto: Mexico is now working to promote its economic growth, more infrastructure and more opportunity for investment.

Yes, the trade flow is in deficit for Mexico. First of all we should be bringing Mexico to the attention of China, so that we have more productive investment from China, which is only about $300 million today, and more productive investment also from Mexico to China, which is just over $90 million.

What I’d try to discuss with president Xi is that in this relaunch of the relationship we may find institutional mechanisms with more capacity to resolve any obstacle we might have had in the past, so that we may facilitate trade exchange.

This is a general interest of Mexico to boost the relationship with China, and for China to find in Mexico an opportunity of growth with the very broad market that Mexico has been able to build through free trade agreements with 44 nations. We can complement each other.

Caixin: China and Mexico compete in a number of export categories. How do you view this competition?

Pena Nieto: More than it being a competition, I think we should now see that in this new relationship and find complementarity in our productive capacities. In this way, we can have value-added on production in both Mexico and China, and for this to be generated for the whole world.

I think we could establish a linkage in a chain of greater value for production. We should also take advantage of the strengths that we have in different fields of the economy.

Caixin: In recent years, China has increased its involvement in Latin America via investment and infrastructure projects. In your view, what has China brought to this region?

Pena Nieto: Asia today is a region with important economic growth in a sustaining manner. It is also generating wealth for the world. China is the great engine of the economic growth in this region and of the rebalancing throughout the world.

Mexico is now working on structural reforms that will allow us to take advantage of having a stable macro-economic condition, low inflation and low level of public debt. It allows us to speed up the pace of economic growth.

Latin America is a region which is also growing, and Mexico is part of the region as a major gateway of access to two important marketplaces: the Latin American marketplace, which is the region that we are a part of, and also the North America market, with which we have a free trade agreement.

Caixin: What’s your plan to root out corruption?

Pena Nieto: We have already presented initiative national anti-corruption bills to the congress, and the (National Anti-Corruption Commission) should be able to expand the capacity of Mexican states to fight corruption.

Today in Mexico, we are having important reforms: education reform, telecommunications reform, energy reform, fiscal reform and financial reform. Some of them have already been passed, such as labor and education reform.

Right now, we are debating the telecommunications reform to expand for new investment and originating and fostering more competition in the sector. And the other reforms will also be coming.

They will materialize through a political agreement between the federal government and the main political forces of our country. This will create greater opportunities and a greater relationship that we are going to have with China.

Caixin: Recently you have taken on the telecom oligarchs. What makes you confident that your predecessors’ lost battles to break up monopolies can be won this time?

Pena Nieto: Thanks to the political agreement with main political forces of my country, we do have a bill that we have submitted. It’s been passed in the lower house and it’s now being discussed in the upper house. If it’s passed by both houses, it will go on to the different local congresses. For this type of constitution reform, it’s possible wherever there’s political will.

Caixin: As the new president, you have a long list of tasks and a short time window to use political capital. How do you pick your priorities?

Pena Nieto: The important thing is to have clarity on the path of the government of Mexico.

I have pointed out five major objectives. One is Mexico at peace. Two, more government efficiency to reduce the conditions of insecurity that exist in some parts of the country. Third, an inclusive Mexico, as China has also been doing. Fourth, Mexico should also become a responsible global actor. And five, work against poverty and for the inclusion of all Mexicans in the different opportunities offered by the country and education of high quality.

We will promote prosperity for Mexico through growth and through a free-market economy with social sense. This is also what China is now doing.

Caixin: The Mexican economy was the poster child for a developing country’s economic transition until the Tequila Crisis in 1994. What lessons did you take from the crisis?

Pena Nieto: We have to have structural changes, and this is exactly what is happening now in this country. It is necessary for us to have a climate of democracy. It’s important for us to establish a working agenda among the different political forces and the government of Mexico.

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We set this agenda with 95 different topics that we are attending to. And if this materializes, it will be possible for us to speed up the economic growth of Mexico. An aspiration we have is to turn Mexico into a top 10 economy in the world.

This 21st century may undoubtedly become a century of economic growth in the area of the Pacific. The area is an example for the whole world and a major factor of global equilibrium. Mexico doesn’t want to be absent. We want to be part of this economic dynamic. That’s why we’ve expanded our trade relationship through the Pacific Alliance with other countries of Latin-America, like Columbia, Chile and Peru.

The TPP, the Trans-Pacific Partnership, is also a way to integrate with the region of which we are already a part. And I’ve come to reaffirm, and to also confirm, very clearly, the interest Mexico has to expand its relationship with China.

Caixin: You said Mexico should regain leadership on the world stage as an emerging power. What role does Mexico plan to play?

Pena Nieto: The best way to promote Mexico’s image in the world is through having accomplishments and more development in our country. Mexico will be better promoted throughout the world, if it has internal accomplishments. And this is exactly what’s happened in China.

China has projected itself throughout the world because it has internal, domestic success. And this is the route to follow in Mexico to really be able to accomplish more growth, more social development and more economic development.