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WORLD OF INDUSTRIES 02/2018

WORLD OF INDUSTRIES 02/2018

NEWS AND MARKETS on

NEWS AND MARKETS on improving its logistics performance index, a score on which it aims to join the ranks of the global top 20 by 2030. Mexico’s foreign trade and policy Mexico is an increasingly important consumer market and a production destination for companies all around the world. It is a very attractive location for foreign direct investment. Having your company’s manufacturing operations based in Mexico opens the door to favorable customs treatment to a whole range of countries. Apart from this, the country offers a sound economic policy, energy, infrastructure and tax reforms, and relatively low labor costs. Despite the current uncertainties, Mexico traditionally has close economic ties with the USA. It’s foreign trade has long been focused primarily on North America. Indeed, the USA is still indisputably Mexico’s most important trading partner. However, Mexico is now increasingly looking to diversify in order to insulate itself from the ups and downs of the American trade policy. Foreign trade is a key part of the Mexican economy and is currently supported by 12 free trade agreements covering a total of 46 countries, making the country Latin America’s largest import and export nation for commodity goods, far ahead of Brazil and roughly on par with Canada. Totaling more than $ 370 billion in 2016, Mexico’s overall export of goods is about twice as high as Brazil’s and only slightly below Canada’s export volume. Modernization of the free trade agreement with the EU ranks high on Mexico’s priority list. The plan to modernize the old agreement between the EU and Mexico has gained momentum in 2018. Negotiations will include topics like market access, combined efforts on regulatory issues and the fight against corruption. Tariff-free trade of machinery and machinery parts is already stipulated in the trade section of the current agreement. However, this only applies to mechanical engineering products where over 70 % of the production is carried out within the EU or Mexico. Many mechanical engineering companies no longer fulfill this quota as individual parts of the value chains were outsourced to companies in third countries as part of globalization. Modernizing the outdated rules of origin is therefore an urgent requirement. Mexico also has its sights set on free trade agreements with several other countries, including Jordan, Paraguay and Turkey. It is also a member of the Pacific Alliance trade bloc, alongside Colombia, Peru and Chile, has plans to secure trade deals with Australia, New Zealand, Singapore, Vietnam, Malaysia and Brunei, and is extremely interested in developing closer economic relations with China. Important destination for German exports Taking a more specifically German perspective, Mexico is by far Germany’s biggest export destination in Latin America. From 2014 to 2015, Germany’s exports to Mexico increased by 24 % to $ 11 billion – more than it exported to countries like Brazil and India. By contrast, Germany accounts for only 0.9 % of Mexico’s total exports. Mexico’s economic growth is very much export-led. For instance, in 2016, the country’s automobile and automotive subcontracting industries exported more than 3 million vehicles. In short, automobiles and auto parts make up half of Mexico’s exports. German companies like Volkswagen has a large-scale manufacturing presence there for many years. Volkswagen, Daimler, BMW and Audi have all recently either opened up new or expanded existing plants in Mexico. The lion’s share of foreign investment goes into automobile manufacturing and automotive subcontracting, pharmaceuticals, chemicals and logistics. Figures released by the German Association of the Automotive Industry (VDA) indicate that the number of German subcontractors in Mexico has jumped from 40 to 150 since 2010. The total number of German companies in Mexico has also increased sharply, and, according to the German-Mexican Chamber of Commerce, is currently sitting at around 2,000. In recent years, Mexico has become an important market for mechanical engineering companies in Germany. Machinery exports from Germany almost reached € 2.5 billion in 2016. Sectors such as machine tools, plastics and rubber machinery, food and packaging machinery and precision tools were the branches with the highest demand in 2016. In 2017, by the end of November, the overall machinery exports had reported an increase of more than 25 %, reaching nearly € 3 billion. Mechanical engineering companies are benefiting from Mexico’s industrialization, machinery suppliers from Germany have been significantly involved in the tangible upward trend of the manufacturing industry in Mexico since 2009. Apart from the automotive sector, the Mexican food and beverage industries are one of the best-performing areas. Due to the strong competition and the statutory provisions in the food industry, the necessity to invest in modern machinery and equipment is particularly high in these sectors. Machinery suppliers from Germany can provide the innovative cutting-edge technology required here. Mexico at Hannover Every year, the Federation for German industries (BDI) and Hannover Messe, the world’s leading trade show for industrial technology, shines its spotlight on a chosen Partner Country. At this year’s Messe, Mexico will be that country. As Partner Country, Mexico will have the chance to present itself as an attractive investment destination as well as it can showcase its innovative spirit and technological developments in the manufacturing sector – factors that make it a key player on the global stage. As the Partner Country at this year’s show, Mexico wants to demonstrate that it is interested in sustainable industrial and economic development driven by innovative technologies like industrial automation, IT and integrated energy. Apart from domestic industrialization, the country’s main economic focus is on opening up foreign markets and supporting innovative home-grown companies. Mexico currently has more than 30 clusters implementing industry 4.0 and IoT technologies, more than 90 research and design centers related to advanced manufacturing and industrial innovation. Many Mexican companies are already developing industry 4.0 technologies and are thus highly attractive partners for foreign companies. For the Latin American country, participation in Hannover is an opportunity to send a clear signal to the European Union that despite rising protectionism, globalization is still the way forward. Photographs: Lead Photo Fotolia, Deutsche Messe AG www.hannovermesse.de/de/rahmenprogramm/partnerland-mexiko 14 WORLD OF INDUSTRIES 2/2018

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