China-Mexico ties hitting 'all-time
low' By Emilio Godoy
MEXICO CITY - "We are completely
'clueless' when it comes to China." This statement
by Enrique Dussel, director of the Center for
China-Mexico Studies of the National Autonomous
University of Mexico, perfectly describes the
currently stale state of relations between the two
countries.
"We have no policy to speak of
for China. There's no strategy that adequately
reflects China's global importance and does
justice to our second leading trade partner. We
seem to have hit an all-time low. I don't think
economic and trade relations can get any worse,"
Dussel said in an interview with IPS.
China is Mexico's second biggest trading
partner, behind the United States, yet no efforts
have been made by the Latin American country to
modify its highly negative bilateral trade
balance with the Asian giant
or to attract Chinese foreign direct investment
(FDI), which is marginal.
This distancing
of the two countries is best illustrated by the
controversy over the construction of the Dragon
Mart retail complex, planned by local and Chinese
investors for the area surrounding the
southeastern town of Puerto Morelos, some 1,634
kilometers south of Mexico City.
The
mega-project, announced in 2011, will cover 192
hectares in total, including storefronts, storage
facilities, and luxury residences, with an
estimated investment of more than US$1.5 billion
and some 6,000 new direct and indirect jobs,
according to Mexican press sources and the
official Chinese newspaper, China Daily.
This sprawling infrastructure is set to be
the trade platform from which Chinese-made goods
will be supplied to all of Latin America, and it
will create a Chinese enclave in a major tourist
hotspot, as it will be just 34 kilometers from the
resort city of Cancun, in the Mexican state of
Quintana Roo.
The project has raised
concerns in Mexico, Latin America's second-largest
economy, where both the leading business
associations as well as academics and
environmentalists have expressed their objections,
fearing that the shopping complex will foster
smuggling, unfair competition and the sale of
counterfeit products, in addition to causing the
area environmental harm.
Ricardo
Samaniego, director of the Applied Economics and
Public Policy Center, strongly opposes the
project, telling IPS that construction of Dragon
Mart "must be put off until its environmental and
socioeconomic costs are assessed... The project is
part of a strategy deployed by China to secure
energy and natural resources. Chinese involvement
in commercial projects is subsidized by the
government."
In his opinion, "increasing
worldwide complaints against Chinese trade
practices and the project's negative economic
externalities" compound the situation. "Mexico
must hold out for a more reciprocal deal before it
makes certain concessions. And this has to do with
the country's general policy towards China," he
said.
The Dragon Mart complex projected
for the leading port of Quintana Roo replicates
and expands the huge Dragon Mart established by
China in 2004 in the United Arab Emirates city of
Dubai.
At the same time, criticism of the
project feeds China's wariness to invest in Mexico
and explains why economic and trade relations
between both countries are tense, despite
maintaining full diplomatic ties since 1972.
Mexico has a high trade deficit with
China, having purchased $52 billion worth of
Chinese goods in 2011, while selling products to
that country for a value of only $2 billion.
China's FDI in Mexico is equally
discouraging, although the two countries give
different figures for this indicator. Mexico's
Finance Secretariat puts the figure at $157
million in 2011, while Beijing says it was almost
four times that much, roughly $614 million. Both
governments agree that Mexican investments in
China that year were barely above $100 million.
China's meagre investment in Mexico is
underscored by the fact that the United States'
FDI in the region was upwards of $8 billion that
year and $15 billion the year before, according to
the United Nation's Economic Commission for Latin
America and the Caribbean.
A group of 100
academics, politicians and business operators,
under Dussel's coordination, have drafted a
Strategic Agenda for Mexico-China Relations, in
which they highlight the absence of a "short-,
medium- and long-term [plan] for China, which
affects economic and trade relations".
The
proposed agenda was presented to Mexican President
Enrique Pena Nieto in December, immediately after
his inauguration on the first of that month, and
it calls on the government to prioritize a
strategy with Beijing, given "the great
involvement of the Chinese public sector in trade
and investment". It also cautions: "If
political and strategic talks between the two do
not improve, it will be hard to solve and
negotiate other pending binational issues."
The proposal, which examines economic,
trade, environmental, educational and cultural
aspects, notes that China does not invest in
Mexico because of the country's widespread
insecurity, the local government's failure to
grant trade benefits, and the lack of support for
joint venture investments with Chinese capital.
The friction caused by the Dragon Mart
project in which Chinamex Middle East Investment
& Trade Promotion Center - an overseas
promotion effort of China's Ministry of Commerce -
is involved, fuels an already tense relationship.
The experts consulted described the two
countries' relations as "dysfunctional" and
observed that the problem is more than economic.
In October 2012, the Felipe Calderon
administration (2006-2012) filed a complaint
against China with the World Trade Organization,
accusing it of granting subsidies prohibited by
that body to textile and garment industries, a
sector in which China and Mexico compete for the
United States market.
In the first week of
January, one of Pena Nieto's first measures as
president was to postpone a 25-20% tariff
reduction for Chinese garments and footwear until
2014, in response to a demand from local textile
and shoe manufacturers.
The poor relations
between these two nations have had numerous
repercussions, including Mexico's failed bid for
the International Monetary Fund's head position in
2011, as China turned its back on Mexican
candidate Agustin Carstens.
"Mexicans
disagree on the stance to take, as some sectors
call for a strengthening of relations while others
want nothing to do with China," Dussel said.
In November, before taking office, Pena
Nieto met a delegation of one of China's leading
state banks, the Industrial and Commerce Bank of
China, but his administration has not given any
hints as to how it will address its bilateral ties
with China.
The Strategic Agenda for 2013
recommends creating a $50 million credit program
to promote exports to China, and establishing a
Chinese Investment Attraction Fund, with $40
million a year, to bring in capital from Beijing.
"China's trade practices have not been
very transparent. Mexico has to pay close
attention to these practices. In the case of the
Dragon Mart project, the government's position was
remote," Samaniego said.
Dragon Mart has
generated a current of negative opinion, and
Beijing can read and, better still, interpret the
signs, the experts said.
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