Mexico Takes Step Toward Becoming Competitive Global Trader, Signs FTA

26 Apr

by Carlos Arredondo @ MATT.org

What began some 5 years ago finally has seen completion this month. In 2005 Mexico had begun talks with Peru to develop a legal framework for a free trade agreement. There have been 8 rounds of negotiations since then, with the last meeting taking place in 2007, but early this month closure was finally reached as the two concluded by signing the Mexico-Peru Trade Integration Agreement.

The signing took place in Lima, Peru in the presidential palace with various heads of state including the Peruvian President Alan Garcia, Peruvian Minister of Economy Ismael Benavides, and Mexican Economy Minister Bruno Ferrari amongst others. While Peru was definitive in its objective of advancing its trade relationship with Mexico, it also openly acknowledged this is a smaller step in an overarching longer-term goal to grow healthy and efficient trade relationships between China and Asian countries. An undertaking they are attempting to get Chile and Columbia to join as well as Mexico. China, which has the world’s second largest economy, borders the Pacific as do all four of these Latin American countries and the idea is to make shipping between the continents a simpler and smoother affair. The FTA’s between these four countries is a beginning to this end and a step toward increasing their international competitiveness as global traders. Peruvian Trade Minister Eduardo Ferreyros said, “We already have agreements with Colombia and Chile; this is going to permit us to have a more profound integration with the Pacific and integrate with Asian markets.”  President Garcia said, “This is a decisive step to draw closer to Mexico, but it is also a preliminary step for a major project on which we’re working with Chile and Columbia, in addition to Mexico” and that the project seeks, “a deep integration of our four countries, in the exchange of products and people, to expand towards Asia.” Speaking of Mexico he also said they were associating with, “an economy of great dimensions, great growth, great vitality that is linked to the world’s largest economy, the United States” … “We feel that we’re recovering this Mexico that we love so much, whose presence in the South American region is going to have revitalizing effects.” Mexican Bruno Ferrari remarked that, “After overcoming great obstacles, we’re attaining a shared vision and we’re assuming the common task of building a more prosperous and equitable future for our peoples” and that “this is a step forward for the decade of Latin America.”

Mexico has the second largest GDP of Latin America (around 1 trillion US dollars) and represents a market of 112 million people,  four times that of Peru’s population. Mexico’s annual total exports exceed $300billion US dollars per year while its imports amount to $320 billion, but its trade with Peru amounts to only a marginal fraction of that… $1.41 billion in 2010. According to the Economy Ministry Mexico currently actually exports $974 million a year to Peru (0.3% of total Mexican exports) and makes up 3.4% of Peru’s imports. However, this free-trade agreement was signed in agreement with the forecast that with its implementation that number would increase, more than doubling, in the next five years to $2.7 billion. Ferrari also said Mexico would benefit with creation of new jobs, “At present, trade with Peru creates 23,000 jobs for Mexicans. If the deal is signed, that number could almost double over the next five years with the creation of 17,000 jobs.” Another benefit of the deal is that greater freedom of movement of skilled and educated workers between the two countries will be possible. Citizens in both countries, which share the same language, will now be free to pursue professions and educations in either country as there will be greater recognition of “qualifications and degrees.”

There were limitations in the agreement however. Mexico sought to protect its domestic market by excluding some agricultural goods from preferential status with Peru. It also had concerns with importing meat due to concern that cattle suffered from FMD disease. Mexico excluded 193 products from the deal including coffee, rice, sugar, beef, chicken and dairy products. Nevertheless, Ferrari was quick to point out that they were partnering with a country that had one of the most dynamic economies of South America and has received investment of some $3.7 billion dollars from various firms.

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