MEXICO

AND ITS
TRADE
RELATIONS
WITH THE
WORLD
____
BY MARA CRISTINA ROSAS*
PHOTO ARCHIVE
T
rade agreements are mechanisms
that seek to eliminate the obsta-
cles to trade exchange between
nations. Free trade agreements
(FTAs) are regional or bilateral trade agree-
ments that are designed to expand the mar-
ket for goods and services by eliminating or
substantially reducing tariff and non-tariff
barriers to the flow of goods and services
between the participating countries. There-
fore, FTAs propose:
To oliminalo liado obslaolos and lo faoili-
tate the circulation of goods and services,
expanding national markets and en-
abling the creation of economies of scale.
To iomolo oondilions of faii oomoli-
tion, as well as to protect and assert intel-
lectual property rights, generating cer-
tainty between the countries involved.
To oioalo offioionl ioooduios foi llo
implementation and fulfillment of the
agreement for its joint administration
and conflict resolution, helping to estab-
lish an atmosphere of trust among the
participants.
To gonoialo guidolinos foi fuilloi bilal-
eral or regional cooperation to expand
and improve benefits, to reduce the vul-
nerability of exports to unilateral and
discretional measures, to strengthen
national industry by means of a solid and
competitive export sector and to assist in
job creation.
To soivo as a iofoionoo fiamowoil foi
subsequent trade negotiations and
even foster those developed at the mul-
tilateral level.
Currently, Mexico is the country that
has signed the largest number of free trade
agreements in the world 12 FTAs, which
include 44 countries in America, Europe
and Asia, in addition to 23 bilateral invest-
ment agreements that provide preferential
access to a market of close to one billion
potential consumers. In only two decades,
Mexico has become 1 of the 10 biggest trad-
ing powers in the world and the largest in
Latin America. In addition, with a domestic
market of over 112 million people, the coun-
try offers a wide range of opportunities for
trade as well as investment.
Although the slump in the global economy
and elevated uncertainty in financial mar-
kets has had significant impact on Mexicos
level of trade and financial transactions with
other countries, in 2011 Mexicos total global
trade recorded a 16.8% growth.
That same year, Mexico recorded Foreign
Direct Investment (FDI) revenue of 19.4 bil-
lion USD. In addition, it produced revenue in
the foreign investment portfolio account of
41.7 billion USD, 40.9% higher than in 2010.
The principle underlining the existence
of numerous free trade agreements in Mex-
icos economic agenda is diversification
and the desire to venture into preferential
conditions in diverse foreign markets, thus
offsetting the effects of the economic stag-
nation that is prevailing in the US and the
European Union.
Furthermore, for Mexico, like the rest
of the world, it is extremely bad news that
the round of trade negotiations of the World
Trade Organization (WTO), known as the
Doha Round, are at an impasse, making
existing trade agreements all the more rel-
evant since through them the country may
aspire to reach various markets, in spite
of the adverse conditions prevailing in the
global economy.
Mexico maintains a
solid commitment to
economic development
that is based on free trade.
For the country, that has
been the best strategy
to avoid the challenges
and difculties of the
international nancial
crisis and the leading plan
of action to consolidate its
participation as one of the
major players in global
commerce.

Negocios ProMxico 15 14 Negocios ProMxico
Mexicos active FTAs are:
Noill Amoiioan Fioo Tiado Agioo-
ment (NAFTA), with the US and Can-
ada, which has enabled a trade increase
in the North America region of over
300%.
Fioo Tiado Agioomonl will Colombia
(formerly called the Group of Three),
which has contributed to the increase
of Mexican exports to that country by
more than 600%.
Fioo Tiado Agioomonl will Cosla
Rica, which was the first agreement
negotiated by Mexico after NAFTA
and is based on the latter, including
issues and provisions that had never
been negotiated before between two
Latin American countries. For Costa
Rica, it was an enriching experience
that allowed it to use this FTA as a ref-
erence for future negotiations, while
bilateral trade with Mexico grew by
more than 400%.
Fioo Tiado Agioomonl will Bolivia,
which throughout its duration enabled
bilateral trade to increase by 145%.
Fioo Tiado Agioomonl will Nioaiagua,
which aided an increase in exchange
between the two countries of more
than 600%.
Fioo Tiado Agioomonl will Clilo,
which throughout its duration has en-
abled a growth in mutual exchange by
more than 600%.
Eoonomio Pailnoisli, Polilioal Cooidi-
nation and Cooperation Agreement with
the European Union, which is in fact the
most complex and ambitious negotia-
tion currently in effect between Mexico
and a trading power of that magnitude.
This agreement is made up of three sec-
tions: trade, politics and cooperation,
all of which are important since the ne-
gotiation includes subjects such as de-
mocracy and respect for human rights
as conditions for receiving a preferential
trade agreement; these provisions may
be invoked both by Mexico and the Euro-
pean Union.
Fioo Tiado Agioomonl will Isiaol,
which allows Mexico to work alongside
one of the economies with the greatest
scientific and technological develop-
ment in the world; trade has grown by
more than 200%.
Fioo Tiado Agioomonl will llo Euio-
pean Free Trade Association (Norway,
Switzerland, Lichtenstein and Ice-
land), granting Mexico access to mar-
kets with high purchasing power.
Fioo Tiado Agioomonl will El Salva-
dor, Honduras and Guatemala, also
known as the Northern Triangle
linking Mexico to a neighboring region
of great importance, considering the
cultural affinity and similarities in the
challenges facing all of the countries
involved.
Fioo Tiado Agioomonl will Uiuguay,
which is a window for Mexico into the
Southern Common Market (MERCO-
SUR).
Agioomonl foi llo Slionglloning of
the Economic Association between
Mexico and Japan, which has contrib-
uted to trade liberalization, promot-
ing Japanese investment in Mexico,
improving the trade environment for
both countries and stimulating bilat-
eral cooperation.
It is important to highlight that on
September 2, 2012, the Central American
Free Trade Agreement (CAFTA) entered
into effect and will substitute the exist-
ing agreements with Costa Rica, Nicara-
gua and the Northern Triangle. This am-
bitious agreement unified 98% of the reg-
ulations established in previous agree-
ments and will have a single certificate of
origin, which will allow companies to re-
duce administrative costs when export-
ing or importing within the region. In ad-
dition, through the CAFTA, Mexico will
contribute to position Central America
as a region on the international economic
stage which, considering the size of the
five participating economies, represents
added value for the Mesoamerican area.
Through its FTA network, Mexico
contributed to creating a new generation
of trade agreements. Most of the agree-
ments in which Mexico is a participant
go beyond simple tariff dismantling and
incorporate provisions on sanitary and
phytosanitary measures, trade in ser-
vices, investments, intellectual property,
temporary entrance for entrepreneurs,
compensatory quotas and conflict reso-
lution mechanisms.
Mexicos accumulated experience in
these types of negotiations is unques-
tionable and it has placed the country in a
position to advise other governments and
institutions on establishing FTAs. On the
other hand, all negotiations contribute to
coordination and the fact that Mexico has
invested physical and human resources
in establishing its FTAs has allowed it to
become well known. At the same time, it
has become familiar with other markets,
some of which are remote and non-tra-
ditional, but that represent valuable op-
portunities for trade and investment at a
time when the international economy is
experiencing severe difficulties and fac-
ing protectionist tendencies. n
* Professor and researcher in the Political and
Social Sciences Faculty, National Autonomous
Universityof Mexico (UNAM).
The principle underlining the
existence of numerous free trade
agreements in Mexicos economic
agenda is diversification and the
desire to venture into preferential
conditions in diverse foreign markets,
thus offsetting the effects of the
economic stagnation that is prevailing
in the US and the European Union.
16 Negocios ProMxico Negocios ProMxico 17
Trade Liberalization
and Legal Certainty:
Essential Elements for
Productive Investment
in Mexico
In Mexico, trade liberalization and a series
of economic policies that provide certainty
for productive investment have become
determining factors for the countrys
economic development. Today, Mexico
remains an attractive destination for
foreign investment and possesses the
necessary conditions to continue being an
important player in international trade.
____
BYJOS F. NARRO GARCA*
PHOTO ARCHIVE
M
exico has taken its participa-
tion in international trade
so seriously that, since 1994,
when the North American
Free Trade Agreement (NAFTA) entered
into efect, it has signed a further 12 trade
agreements to engage in free trade with 44
countries around the world, which implies
preferential access to more than 1.2 billion
potential consumers and nearly 63% of the
worlds Gross Domestic Product (GDP).
It is interesting to remember that in
1993, Mexicos balance of trade totaled
117.25 billion USD, combining imports and
exports (65.36 billion in imports, and 51.88
billion in exports). By 2011, the trade bal-
ance had risen to 700.51 billion USD, for
both imports and exports, meaning that the
countrys foreign trade has increased six-
fold during this period.
The foregoing is due to multiple factors.
What stands out is the trade liberaliza-
tion policy that has been implemented in
Mexico. From being a country with a closed
economy, today it has one of the most open
economies in the world. In fact, the Gen-
eral Import and Export Tarif Tax (TIGIE)
is deductible in most cases, meaning only
5,052 of the 12,249 tarif codes that are in-
cluded in the TIGIE require the payment
of import taxes.
In addition, tariff restrictions on im-
porting merchandise to Mexico are lower
than in countries such as China and Bra-
zil. This factor increases protability for
companies established in Mexico since
they are able to access supplies and nal
products at very competitive prices. The
countrys network of trade agreements
provides them with preferential access
to the US and European markets, when
compared to merchandise originating in
economies such as that of Brazil.
Through the Maquila Program in the
1970s, foreign trade opportunities in
Mexico began by allowing temporary im-
ports of supplies, machinery and general
equipment for all of the goods that were
required to cover the production of export
products. That represented an important
stimulus for foreign investment given that
it could take advantage of very competi-
tive labor costs and import all of the sup-
plies that it needed without paying any
tariffs. At that time, import tariffs were
very high. That benet was later extended
to include domestic industries with idle
production capacity (PITEX).
The former policy boosted industrial
development by creating jobs and devel-
oping new technologies, even though, ini-
tially, this did not imply the participation
of domestic industry in the maquiladoras,
since almost all of the supplies used in
that sector came from imports.
The determining factor in achieving
greater participation by domestic indus-
try in the maquiladoras was the system-
atic boost given by the creation of a legal
framework that provides investors with
certainty, in such a way that the legisla-
tion provides for all of the legal mecha-
nisms to allow imports free from General
Import Tax (GIT) and Value Added Tax
(VAT) for any goods that are used in the
production of export products.
In fact, in order to recover GIT that has
already been paid, there is the Draw Back,
better known as the Import Tax Return
Program for Exporters, which allows its
beneficiaries to recover the general im-
port tax paid on imported supplies, raw
materials, parts and components, packag-
ing and containers, fuel, lubricants and
other materials that are incorporated into
the exported product or for importing
merchandise that is returned in the same
state, or for merchandise that is imported
for repair or modification. Likewise, ar-
ticle 106 of the Customs Law provides
payment terms for occasional imports
(for example, merchandise for temporary
work and exhibitions, among others).
Through the Sector Program (PROSEC),
GIT-free imports are permitted for the
integration of products that are destined
for export as well as the domestic market
and, if that werent enough, Rule 8 exists
for all cases of taxed merchandise that is
destined for export.
Similarly, certicates of origin may be
applied and, also, the IMMEX (Manufac-
turing, Maquiladora and Export Service
Industry), which means that any investor
who needs to produce or develop in com-
petitive conditions will nd all of the legal
benets in Mexico, within a framework of
legal certainty. The threads for this for-
eign trade liberalization were woven over
more than four decades in the Ministry of
Economy (SE) by molding policies and the
required legislation in order to achieve
Mexicos increased presence in the inter-
national market.
As a success story, we must mention
the automotive industry. In this produc-
tive sector, Mexico occupies the fourth
place in the world in light-vehicle exports
and is the eighth-largest producer in the
world. The country is also the leading sup-
plier of auto parts to the US, whose supply
is based on a large network of auto parts
producers that cover the requirements for
this sector at the domestic level and have
become large exporters that generate bil-
lions of dollars in revenue for the country
each year.
The same situation is evident in the
electric-electronics sector where Mex-
ico is the worlds largest exporter of flat
screen televisions and the second largest
of refrigerators, an area that has record-
ed major advances. Many other success
stories exist in each of Mexicos strategic
industries and serve as evidence of the
countrys business potential.
All of the above comes to show that
Mexico possesses the necessary structure
and tools to continue attracting produc-
tive foreign investment. Moreover, the
country represents a true window of op-
portunity based on the reconguration of
the global economy. In short: It is in the
right place, at the right time. n
*General Director at Asesora, Gestin y Adminis-
tracinAduanera, S.C.
18 Negocios ProMxico Negocios ProMxico 19