Dr. Francisco de Rosenzweig, DTY. Secretary of Foreign Trade, Mexico

Dr. Francisco de Rosenzweig, Deputy Secretary of Foreign Trade of Mexico, was in India recently to attend the 6th India-Latin America and Caribbean Conclave held in New Delhi. The Dollar Business caught up with him to understand why bilateral trade between India and Mexico is still far off from its potential and what can be done to improve the existing state of affairs.

Interview by Vanita Peter D’souza | Novermber 2015 Issue | The Dollar Business

We are working with India to find ways to enhance our bilateral trade and internal ties

TDB: What brings you to India and how successful has this trip been?

Dr. Francisco de Rosenzweig (FR):  The agenda was to attend the 6th India-Latin America and Caribbean Conclave organised by the Confederation of Indian Industry (CII). Apart from that, I have been meeting entrepreneurs that have invested in Mexico. We have also met officials from pharmaceutical companies that are interested in investing in Mexico. I think India’s interest in Mexico is growing and vice -versa. I hope you know that Cinepolis, a Mexican movie theatre company, is planning to double its investments in India. I take this as a signal that both India and Mexico are interested in developing businesses that complement each other and the community. 

TDB: Bilateral trade between India and Mexico has grown rapidly in recent years, at double-digit rates. Are you happy with the current level of trade between the two countries? How far off is it from its potential?

FR: I think the trade figure is modest, considering that both countries are part of the G20; and that India is the 9th largest and we are the 15th largest economy globally. We are working with the Government of India to find ways to enhance our trade and internal ties. We are going to host the Commerce Secretary of India – Rita Teaotia – in November in order to conduct high level economic meetings. We will be working on several issues such as trade facilitation, tourist promotions, etc. In fact, we will also be hosting India’s Prime Minister Narendra Modi in the following months. Coming back to trade, even though it is growing in double-digits, I believe that we can do much better. We still have a long way to go.

TDB: The India-Mexico bilateral trade balance has always been in favour of Mexico. Isn’t that a concern for India?

FR: Honestly, it doesn’t matter if we have a trade surplus or deficit. For us, value addition is more important. In case our imports rise, jobs will be generated for the sake of value addition. Hence, we do not have any problem if the balance is in our favour or against us. Generally, we import intermediate or capital goods rather than finished goods. So, I don’t think it is a matter of concern for us. And it shouldn’t be a concern for India as well.

TDB: Indian companies have invested $2.8 billion in Mexico till date, while the figure is $1 billion when we talk of Mexico’s investment in India. Don’t you think the numbers are way below the bilateral investment potential?

FR: I’m sure that these figures will increase in the coming years as both governments are coming closer. We are paying attention to various areas of opportunities. The Mexican business community sees India as a strong and attractive market for investment. I am very certain that the figures you just quoted will grow at a very rapid pace.

TDB: Besides exports of vehicles, aluminium and its articles, organic chemicals, articles of iron and steel, machinery, nuclear reactors and boilers, etc., which other products in the manufacturing sector hold maximum attractiveness in the Mexican market for Indian exporters?

FR: Mexico’s total imports of products such as plastics, optic, photographic and cinematographic devices, paper and paperboard, pharmaceutical products, copper and articles, apparel and clothing, glass and glassware amounted to $42 billion in 2014.

In the same year, Mexico imported from India almost $440 million of these products, which represents an increase of 55% compared to 2013. Although it represents a marked increase for India – Mexico’s increase on total import for these products was 0.9% – India’s share as a provider of these products accounts only for 1% of our imports.

Over the past five years, we have significantly increased our imports from India by doubling our total purchases. For instance, Mexican exports to India have grown on average by 23% annually over the same period. India’s exporters should continue building upon this commercial momentum with Mexico to increase their sales to our country.

Last year, Mexico opened up its energy sector for private and foreign participation, offering more opportunities for India to enhance bilateral energy cooperation.

TDB: What are the key areas where Mexico wants India to focus on in order to foster this relationship?

FR: I would say, essentially, India should focus on IT services, infrastructure, energy, oil, renewable energy and telecom.

TDB: Any particular sector that you believe is most crucial to drive the India-Mexico trade forward?

FR: The energy sector. So far, it is the energy sector that has been leading India-Mexico trade. However, as I said, we are working on other trade opportunities as well.

TDB: What are the main challenges that hinder Mexico’s trade and investment relations with India? How do you think these can be addressed?

FR: I think most of the challenges are very well addressed through these kinds of conclaves, because they help us learn each other’s culture. They also help us understand how the business environment works in the other country, so we can identify obstacles and address them. Such conclaves also act as an ideal platform for showcasing investible projects and explore investment opportunities in both Latin America and India.

TDB: Does the Mexican government give any incentive to its services and manufacturing sectors that India needs to emulate? Does it provide extra incentives to its exporters?

FR: A crucial factor at play to foster Mexican exports has been Mexico’s economic policy. Through a comprehensive network of free trade agreements, Mexico has been able to consolidate itself as a global export base. As of 2014, India had 38% economic openness, whereas Mexico had reached 69%. We are sure that a continuous commitment to free trade can help India increase its economic openness, and thus its export abilities.

Mexico has also developed specific incentive schemes so that more companies incorporate into greater value-added operations, become more productive and benefit from our trade deals. Mexico has put a special emphasis on SMEs, providing them with financial and technical support so that they turn into a catalyst for innovation in our productive sectors.

As for incentives to exporters, Mexico and India operate similar programmes. For instance, Mexican Duty Drawback scheme for imports to be used in manufacturing of export goods resembles India’s Duty Drawback scheme. Mexican companies also benefit from concessionary lower taxes on imports of inputs and machinery for export products and processes, whereas in India such customs duties range from zero to concessionary rates (EPCG scheme). Likewise, both countries organise roundtables where businesses can network and grow trade opportunities.

India could benefit from the implementation of a national registry of highly exporting companies. Registered companies in Mexico receive tax refunds on the VAT in an expedited fashion, and can obtain administrative facilities and financial support to access international markets. India could also emulate Mexico’s training program on applicable norms and standards for international trade, as well as packaging and packing for international movement of goods.

TDB: What is your opinion of government’s ‘Make in India’ campaign, particularly considering that Mexico is also a part of India’s value-chain in the manufacturing sector?

FR: Mexico is the largest manufacturing hub in Latin America. Moreover, we have a very strong network of free trade agreements (FTAs). To the north, we have The North American Free Trade Agreement (NAFTA). Down south we have FTAs with 10 countries. While in Europe, we have FTAs with 32 European nations. In addition, we have FTAs with countries like Israel and Japan. I think, ideally, blending with this value chain would be a great opportunity for India and Mexico – not just for huge corporations, but even for small and medium enterprises (SMEs). In India, the start-up culture is trending, which lacks in Mexico. It is one of the top priorities for the Mexican government, however, India is ahead of us. I think it is one of the areas of opportunity for both India and Mexico. Involving SMEs in the value chain and the global supply chain is a priority for us.

TDB: What would be your message to Indian exporters who are looking at Mexico as a potential market?

FR: Mexico is a country which has an excellent business environment. As mentioned before, we have a great FTA network. This way, Mexico can be an easy gateway to the North American market – one of the most lucrative markets in the world – for Indian exporters. Just to give you an idea, for every dollar that Mexico exports, it has 37% value added from United States. In fact, our country can serve as a springboard not only to North America, but also to Latin America. Further, we also want to diversify our portfolio. Although, currently, energy is the sector that is leading our trade, we want to diversify across electronics, services and automobile sectors. So, my message would be simple. Mexico is open to doing business!