Mexico, the world’s 15th-largest economy, is seeking to strengthen its connections with Hong Kong, in line with China’s “One Belt, One Road” plan, which involves land and marine routes linking China to Europe and Africa.
“Mexico is one of the original end points of the Manila Galleon, a marine artery connecting Spain, China, the Philippines and Mexico for 300 years,” Julian Ventura, the Mexican ambassador to China, told EJ Insight in an interview in Hong Kong.
“We are looking very closely at the ‘Belt and Road’ plan and the role that Hong Kong is going to play,” he said.
“We will see how we can position ourselves to contribute to that effort toward a connectivity that benefits all global economies — not just China, Central Asia and Eurasia connections.”
Mexico needs this artery to be able to connect with global trade and investment flows, Ventura said.
“We are very ambitious in terms of maritime and air connectivity with China and Asia as a whole,” he said.
“Hong Kong is a key place to do that.”
In a joint statement signed in June 2013, China and Mexico agreed to raise the level of their relations to a comprehensive strategic partnership.
President Xi Jinping and Mexican President Enrique Peña Nieto had their most recent meeting in Turkey during the G20 summit in November and will meet again at the G20 meeting in Hangzhou, Zhejiang province, in September.
China a top priority
At present, China is the third-largest global destination for Mexican exports, after the United States and Canada.
Ventura said Mexico has given China top priority in its policies in the Asia-Pacific region.
“We have to recognize that the relations between Mexico and China are deepening and widening at a very fast pace,” he said.
“It’s not a linear process but a reflection of the maturity of the relationship.”
Chinese and Mexican officials will get in touch in the ministerial meetings in Chengdu in Sichuan province, Shanghai and Xi’an in Shaanxi province in June and July, Ventura said.
They will also gather at the meeting of the economic committee of the Mexican-China Permanent Binational Commission later this year, following up on the topics discussed in the China-Latin America and the Caribbean Business Summit in October, he said.
On Jan. 19, China said its gross domestic product grew 6.9 percent in 2015, the weakest expansion in 25 years.
The world’s second-largest economy expects its growth to slow further to 6.5-6.6 percent this year.
Despite slowing Chinese economic growth, the trade and investment relations between Mexico and China will continue to grow, Ventura said.
“We might see some decline in volumes in bilateral trade between Mexico and China, but China is going to remain Mexico’s third export market,” he said.
So far, there hasn’t been a decline in Mexico’s exports of manufactured goods, agro-food and services to China, he said.
Mexican agro-food exports and tourism
In September, China signed five protocols with Mexico to kick off the import of Mexican food products including white corn, frozen beef and dairy products including milk powder, baby formula and whey. One of the protocols was signed for Mexican tequila traceability processes.
Under the new agreements, Mexico can now export a total of eight products to China, including blackberries and strawberries.
On Jan. 23, the first batch of Mexican blackberries arrived in Shanghai by air.
“Mexico is an agro-food power house. Right now, our agricultural sector is generating more revenue than tourism and oil in the Mexican economy,” Ventura said.
“Hong Kong is a major entry point for Mexican meat products. We have to see how we can replicate it in the other parts of China.”
Cathay Pacific (00293.HK) operates five weekly cargo flights between Hong Kong and Mexico, he said.
Mexico’s tourism industry has also benefited from a rising number of Chinese visitors.
In the first 11 months of last year, 80,000 Chinese tourists visited Mexico, up 20 percent from the same period in 2014.
Aeromexico, the largest Mexican airline, runs three direct passenger flights each week between Shanghai and Mexico City.
Chinese investment in Mexico
In the light of the intensive political dialogue between Chinese and Mexican leaders, more and more Chinese companies are interested in investing in Mexico, Ventura said.
In July last year, Chinese TV maker Hisense Group, parent of Hisense Electric Co. Ltd. (600060.CN), acquired Sharp Corp.’s LCD television factory in Mexico for US$23.7 million, as the financially embattled Japanese firm offloaded some of its assets.
In October, China Communications Construction Co. Ltd. (01800.HK) signed an agreement with the Jalisco state government in western Mexico to develop an industrial park in Guadalajara.
Last month, Haier Group, parent of Haier Electronic Group Co. Ltd. (01169.HK), said it would buy the Mexico-based appliance business owned by General Electric Co. for US$5.4 billion.
“Last year, Mexico attracted almost US$30 billion of foreign direct investment worldwide. We’ll surpass US$30 billion this year,” Ventura said.
“A big footprint of Chinese companies is moving forward.”
However, some challenges remain in China-Mexico investment relations.
In November 2014, Mexico announced it was revoking a US$3.75 billion high-speed rail contract with a consortium led by China Railway Construction Corp Ltd. (01186.HK) after the group’s uncontested bid prompted an outcry from lawmakers.
The 210 kilometer railway was designed to connect Mexico City and the state of Querétaro in central Mexico.
In January last year, Mexico’s environmental protection agency ordered a halt to the construction of the multimillion-dollar Dragon Mart megamall, funded by Chinese investment, in the resort city of Cancun.
It said the project had done serious harm to the area’s sensitive beaches and protected flora and birds.
Despite these specific cases, the overall trend is that more and more Chinese companies are going to Mexico, exploring market opportunities and taking part in the bidding for infrastructure, energy and oil projects, Ventura said.
“The China-Mexico investment agenda is larger than any particular project,” he said.
“Of course, it presents some challenges, but the political commitment remains there.
“We saw an incredible flow of Chinese companies, which are very dynamic in the renewable-energy sector, regularly having meetings in Mexico.”
Ventura said the announcement that Sinohydro Corp., a Chinese state-owned company, was awarded a US$386.4 million contract in January last year to build a hydroelectric power station in the southern Mexican state of Chiapas is encouraging.
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