IDB presents study that identifies opportunities for Mexican trade diversification

MEXICO CITY, Mexico – Mexico should take full advantage of its large network of free trade agreements to diversify its overseas sales and reduce its heavy dependence on the North American market, according to a new study whose conclusions were released today.

The study, carried out by the consulting firm IQOM Inteligencia Comercial, which is headed by two top former Mexican negotiators of the North American Free Trade Agreement (NAFTA), was commissioned by the Inter-American Development Bank (IDB) in order to enrich discussion in the country of the importance of trade diversification.

“Over the past 25 years, Mexico has assembled a network of trade agreements, has attracted foreign investment, and has achieved great success in highly competitive areas of business,” said Veronica Zavala, the IDB’s Representative in Mexico. “The country is well placed to continue expanding into new markets.”

The IQOM report includes a comprehensive examination of Mexico’s foreign trade over the past quarter century, starting with the country’s entrance into GATT in 1986, continuing with adoption of NAFTA in 1994, and numerous other trade agreements that today gives it preferential access to markets in 46 countries in the Americas, Europe and Asia. Thanks to these efforts, Mexico’s foreign trade grew more than six-fold between 1993 and 2015.

However, trade has remained heavily concentrated with the United States and Canada, the country’s partners in NAFTA. Today, around 81 percent of Mexico’s exports go to the U.S., and that number rises to 84 percent if Canada is included.

The report, which will be available in the coming months, identifies 130 industrial, agricultural and agro-industry products in which Mexico is highly competitive, which represent 59 percent of the country’s exports, and which could be successful in other markets. Those products include automotive vehicles and parts, and electrical equipment (including monitors, telephones, motors, speakers and parts). They also include machines and mechanical apparatus (including computer processors and memory, refrigerators, air conditioners, compressors), optical and medical equipment, other manufactured goods, as well as minerals and packaging.

The study also identifies countries and regions that already are customers for those products, but where there is considerable potential to increase sales. Among the countries and regions are Canada, New Zealand and Australia, Norway, Japan, the member countries of the Pacific Alliance (Peru, Colombia and Chile), several countries in Central America and the Caribbean, and the Middle East.

To help achieve the trade diversification goal, the researchers recommend that the government and the private sector seek ways to improve distribution channels, reduce the cost of transporting goods, and overcome non-tariff barriers.

Authors of the study are Herminio Blanco, Jaime Zabludovsky and Sergio Gómez Lora. Blanco was Mexico’s Secretary of Trade and Industrial Development from 1994 to 2000, and before that was Undersecretary of International Negotiations and the chief NAFTA negotiator. Zabludovsky was assistant NAFTA negotiator, and Gómez Lora represented Mexico in international trade negotiations for nine years.

Paolo Giordano, principal trade economist for the IDB, offered comments on the report and noted that Mexico has been one of the top trading nations in Latin America for some time, its exports growing 30.4 percent from 2010 to 2015, accounting for nearly 40 percent of total exports from Latin America and the Caribbean in 2015.