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China: a Threat or China: a Threat or an Opportunity to an Opportunity to
Mexico?Mexico?Renato BalderramaRenato BalderramaInstitute of Asia PacificInstitute of Asia Pacific
ITESM, MexicoITESM, [email protected]@itesm.mx
Where is Mexico Where is Mexico Now?Now?
!Mexico !Mexico vsvs China¡ China¡
-
200
400
600
800
1,000
1,200
1,400
1,600
Mile
s d
e m
illo
nes
de
dó
lare
s
China Mexico Corea Indonesia Tailandia Malasia
El tamaño de las economías
Source: World Bank, 2004. www.worldbank.org/data
The size of the economies
1288
214
103 6248 25
0
200
400
600
800
1000
1200
1400
China Indonesia Mexico Tailandia Corea Malasia
Población
Source: World Bank, 2004. www.worldbank.org/data
Population
881,5486,7
470,4
444,4
417,1
401,8
294,4
288,8
219,8
209,8
194,5
193,7
182,4
179,1
100,0 200,0 300,0 400,0 500,0 600,0 700,0 800,0 900,0
Indice de crecimiento economico 1980 = 100
China
Korea
Singapore
Vietnam
Malaysia
Thailand
Indonesia
Chile
Australia
United States
Canada
New Zealand
Japan
Mexico
Crecimiento económico 1980 a 2004
Source: World Bank, 2004. www.worldbank.org/data
Economic Growth 1980 to 2004
Economic Growth Index 1980=100
The IMD WORLD COMPETITIVENESS YEARBOOK The IMD WORLD COMPETITIVENESS YEARBOOK 2004, classifies factors and levels of 2004, classifies factors and levels of competitiveness from 60 countries, locate Mexico competitiveness from 60 countries, locate Mexico in 56 place, measuring the relation between the in 56 place, measuring the relation between the propitious environment to create value in propitious environment to create value in enterprises and the prosperity share to the citizens. enterprises and the prosperity share to the citizens. In just 5 years Mexico has drop drastically, from 33 In just 5 years Mexico has drop drastically, from 33 place in 2000 to 56 place in 2004.place in 2000 to 56 place in 2004.
3336
43
5356
30
35
40
45
50
55
60
2000 2001 2002 2003 2004
Ranking
Mexican Competitiveness
Higher Labor Costs
Source: with OIT data, www.laborsta.ilo.org/cgi-bin/
Sueldos mensuales 1995-2001
121.4
105.094.2
84.176.3
69.161.3
379.49
323.20
174.62193.97
229.84 216.60
264.12
0
50
100
150
200
250
300
350
400
1995 1996 1997 1998 1999 2000 2001
Dó
lare
s
México China
Monthly Salary 1995-2001
MexicoChina
Source: World Bank, 2004. www.worldbank.org/data
Coeficiente de inversion como % del PI B
15.0
20.0
25.0
30.0
35.0
40.0
45.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
China
Sudeste Asiatico
Corea
Mexico
Singapur
Coefficient of Gross Fixed Capital Formation, % GDP
China
Mexico
Inversión Extranjera Directa
-4
-2
0
2
4
6
8
10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
% d
el P
IB
China
Indonesia
Korea, Rep.
Malaysia
Mexico
Thailand
Fuente: World Bank, 2004. www.worldbank.org/data
Foreign Direct Investment
ChinaChina
MexicoMexico
8
9
10
11
12
13
14
15
16
1995
1996
1997
1998
1999
2000
2001
2002
2003
30
35
40
45
50
55
1995
1996
1997
1998
1999
2000
2001
2002
2003
China is number one attracting FDI, competing directly with Mexico…
IED directed a China(Thousands millions of USD)
IED directed to Mexico*(Thousands millions of USD)
* Excluding Banamex-Citigroup operation in 2001
9.4
Source: INEGI, Ministerio de Comercio de China
52.7
37.5
9.5
Source: World Bank, 2004. www.worldbank.org/data
Científicos e ingenieros dedicados a la investigación y desarrollo
0
500
1000
1500
2000
2500
1995 2002
Po
r ca
da
mil
lón
de
pe
rso
na
s
México Corea China
The Economy of The Economy of KnowledgeKnowledge
Scientists and Engineers dedicated to R&D
Per
each
million
pers
on
sP
er
each
million
pers
on
s
0
0.5
1
1.5
2
2.5
3
3.5
% d
e g
asto
s e
n I
&D
resp
ecto
al
PIB
J apon Corea China Mexico Malasia
El reto de la I &D
The Economy of Knowledge The Economy of Knowledge
Source: World Bank, 2004. www.worldbank.org/data
The Challenge of D&R
% o
f in
vestm
en
t in
R&
D o
f th
e G
DP
% o
f in
vestm
en
t in
R&
D o
f th
e G
DP
Exportaciones con alto contenido tecnológico
20.4
34.2
29.1
18.416.7
15
12.712.1
10.1
8.1
31.3
26.226
23.725.6
22.421.722
20.318.8
17.115.3
14.513.4
0
5
10
15
20
25
30
35
40
1994 1995 1996 1997 1998 1999 2000 2001
% d
el P
IB
China Corea Mexico
Source: World Bank, 2004. www.worldbank.org/data
The Economy of The Economy of KnowledgeKnowledge
Exports with High Tech content
% o
f G
DP
% o
f G
DP
Research and Development as a Share of GDP
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Perc
en
t o
f G
DP
Old Data Definition
New, More Comprehensive,
Definition
Source: Barry NaugthonSource: Barry Naugthon
China
How many companies in Mexico do research How many companies in Mexico do research
and developmentand development??
Source: INEGI, National Survey of Employment, Salaries, Technology and training in Manufacture Sector, 2002.
6%
94%SíNo
Why Chinese Why Chinese Competitiveness is a Competitiveness is a
Huge Threat to Huge Threat to Mexico?Mexico?
MEXICAN EXPORT GEOGRAPHYMEXICAN EXPORT GEOGRAPHY
Mexico has 12 Free Trade Agreements signed between 1992 Mexico has 12 Free Trade Agreements signed between 1992 and 2005 with 43 countries. and 2005 with 43 countries. NAFTA is the most important one.NAFTA is the most important one.
One of eight formal employees is directly link with the export One of eight formal employees is directly link with the export sector. sector.
From the 803,902 enterprises registered in Mexico, just 35,111 From the 803,902 enterprises registered in Mexico, just 35,111 export (4.4%). In 2004, their sells were $188,500 mdd (37% of export (4.4%). In 2004, their sells were $188,500 mdd (37% of GDP). GDP).
Year Total Exp (musd)
Oil Exports
% Value (musd)Non oil Exports
% Value (musd)
1980 $ 18,000 58% $ 10,441 42% $ 7,559
2005 $ 200,000 10% $ 20,000 90% $180,000
Micro Small & Medium Biggs
Caract. Annual Exports inferior to $200,000 usd
Annual Exports between $200,000dls and $20 m. of usd
Annual Exports more than $20 m. of usd
Represents 80% of the total export enterprises
12% of the total export enterprises
8% of the total export enterprises
Contribute 0.5% of total exports
12% of total exports
87.5% of total exports
Sectors 90% manufacture 76.8% manufacture 89.2% manufactu
THE SIZE OF THE THE SIZE OF THE ENTERPRISES THAT EXPORTENTERPRISES THAT EXPORT
ENTERPRISES LOCALIZED PER ENTERPRISES LOCALIZED PER FEDERATION ENTITITY FEDERATION ENTITITY (From (From 31states)31states)
Highly ConcentratedHighly Concentrated: (US Border): (US Border)
44 entities represent entities represent 60%60% of national of national exports: Chihuahua, Baja California y exports: Chihuahua, Baja California y Tamaulipas (border) and Mexico City. Tamaulipas (border) and Mexico City.
77 entities represent entities represent 34%34% of national of national exports: Nuevo León, Coahuila, Sonora exports: Nuevo León, Coahuila, Sonora (Border) Jalisco, Edo. de México, (Border) Jalisco, Edo. de México, Puebla, SLP y Querétaro. Puebla, SLP y Querétaro.
2020 entities represent entities represent 6%6% the rest of the rest of national exportsnational exports
ORIENTATION OF EXPORTS PER SIZESORIENTATION OF EXPORTS PER SIZES
Size Dependence of Exports to USA
Diversification
Micro Represent 65%65% of their sells
Of their 30 main destinies, 19 are L.A. countries = to 23.8% exports value.
Small & Medium
Represent 75%75% of their sells
Of their 30 main destinies, 16 are L.A. countries = to 11.7% exports value
Biggs Represent 90.9%90.9% of their sells
Of their 30 main destinies, 14 are L.A. countries = to 5.8% exports value.
Participation in the US market (% accordance with total imports)
0%
5%
10%
15%
20%
25%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Canada
Mexico
Japan China
17.8%
9.4%
Source: Secretaría de Economía, U. S. Census Bureau
10.9%
12.0%
In the USA market, the Chinese participation surpass Japan and Mexico, and was already threaten Canada…
Profit/Lose of participation in US Market (% with respect to 1993 )
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: Secretaría de Economía
…and its penetration speed generates a growing competition for the Mexican products in US market.
Pro
fit
Los
e
Canadá
México
Japón
China
Categorization of Manufacture Branches according with the type oCategorization of Manufacture Branches according with the type of Trade f Trade competition between Mexico and Chinacompetition between Mexico and China
Textiles and cotton fabrics
Electric Appliances
Stereos and Audio equipmentElectric Generators and accessories
Process products of iron and steel
Furniture and home devicesKitchen tools and devices
TVs and VCRsMotors y its parts
Computer appliancesSport ShoesTelecommunications equipment
Complete and assembly trucks
Computer boards and Typewriting machines
Writing and drawing devices
ComputersNew and second hand Autobuses
Sintetics and cottonCloth and Textiles
General Equipment Instruments of Mesurament and Control
Automobile Accessories and its parts
Toys and entertainment products
Home AppliancesIndustrial Machinery
Automobile
(4)(3)(2)(1)
Branches of Chinese Dominium (due in part for the EZZs and FDI)
Mexican competitiveness in Branches of Chinese dominium (China is growing)
Chinese competitiveness in Branches of Mexican dominium (red warning)
Branches of Mexican Dominium (no threat short and medium run)
Fuente: aregional.com
In 2003In 2003
There is 81 countries that goes faster There is 81 countries that goes faster than México entering the US market. than México entering the US market. MéxicoMéxico is the country that has lost more is the country that has lost more presence in the US market among its main presence in the US market among its main suppliers. suppliers.
ChinaChina in just 12 months (2004-05) won 1.64 in just 12 months (2004-05) won 1.64 percentage points of participation in US percentage points of participation in US market. The strongest participation has been market. The strongest participation has been in the Automotive and Auto parts industry. in the Automotive and Auto parts industry.
Of the Of the top 10 Mexican companiestop 10 Mexican companies, half , half belongs to the belongs to the Automotive industryAutomotive industry: GM, : GM, Daimler Chrysler, Delphi Automotive, Nissan Daimler Chrysler, Delphi Automotive, Nissan & VW. Together in Mexico concentrate & VW. Together in Mexico concentrate earnings of $38,145 musd, almost ¼ of the top earnings of $38,145 musd, almost ¼ of the top 100 Mexican companies. This 5 automotive 100 Mexican companies. This 5 automotive reported together global earnings of $622,931 reported together global earnings of $622,931 mdd, a number similar to Mexican GDP.mdd, a number similar to Mexican GDP.
Exports to USA in 2005 (millions usd)
ChinaChina CanadaCanada MexicoMexico
January 17,864 21,726 12,106
May 19.050 23,056 14,406
July
(% of change w/ July of 2004)
21,28321,283
21.2%
20,60720,607
3.4%
12,742
4.2%
Source: US Trade Department
… … AND THIS THREAT IS AND THIS THREAT IS GOING TO GOING TO
INCREASE…!!!INCREASE…!!!
40
24
8
5
15
Triangular Trade Flows 2003
Bilateral Deficits
China with:
Taiwan $40 B.
Korea $24 B.
Japan $15 B.
Malaysia $8 B.
Thailand $5 B.
US with China:
$120 B.
(US Dept. of Commerce)
$120 B$120 B.
(Deficits are shown according to statistics of the importing country.)
Source: Barry Naughton
How is Mexico How is Mexico confronting the confronting the
Chinese Chinese “Phenomenon”?“Phenomenon”?
Is there a Mexican Is there a Mexican “FOX” Strategy?“FOX” Strategy?
LEGAL FRAMEWORK OF MEXICO-CHINA RELATIONLEGAL FRAMEWORK OF MEXICO-CHINA RELATION Before and during Fox Administration (1973-2005)
AgreementsAgreements SignedSigned In to ForceIn to Force
Before Fox, from 1973 to 2000 (27 years) were some agreements in: tourism, trade, scientific and technological and agriculture cooperation. 1973 (1), 1978 (1), 1986 (1), 1993 (3), 1997 (1) and 2000 (1)
Total 8 Total 8
Air transportation 17/08/2004 Pending
Sea traffic and transportation 24/01/2005 Pending
Mexico as a Chinese tourism destination 24/01/2005 Pending
Sanitary Measures 24/01/2005 24/01/2005
Credit Lines for bilateral enterprises 24/01/2005 24/01/2005
Mexican avocado export to China 24/01/2005 24/01/2005
Chinese apple export to Mexico 24/01/2005 24/01/2005Source: Ministry of Foreign Affairs Legal Advisory
VISITS AND MEETINGS DURING FOX ADMINISTRATION VISITS AND MEETINGS DURING FOX ADMINISTRATION DATE (8)DATE (8) PARTICIPANTSPARTICIPANTS AGREEMENTS AGREEMENTS
Jun/2001 (In China) Fox & Hu Jintao 1st Official visit to China.
Oct/2001 (In China) Fox & Hu Jintao IX APEC Summit at Shanghai, China
Jun/2003 (In France) Fox & Hu Jintao G-8 Summit at Evian, France.
Oct/2003 (Thailand) Fox & Hu Jintao XI APEC Summit at Bangkok, Thailand.
12/dec/03 (In Mexico) Fox and PM Wen Jiabao
After 32 year of diplomatic relations, accordance to establish the 1st Binational Permanent Commission (a dialog at the highest level)
16 -17Aug/2004
(In China) Derbez and PM. Wen Jiabao
1st Binational Commission meeting Several areas: trade, tourism, science, traffic, etc.
Jan/2005 (In Mexico) Fox andV.P. Zeng Qinghong
Following up the agreements signed 2004 and discuss the Hu Jintao’s visit and
12-15Sept/05
(In Mexico) Fox & Hu Jintao
Hu Jintao’s visit to North America. 1st Visit to Mexico (and Canada) New consular office in Guangzhou Hu Jintao proposed to Mexico the
establishment of a “Strategic Strategic PartnershipPartnership””
Total Trade Mexico-China (millions of usd$)Total Trade Mexico-China (millions of usd$)
Year Total Trade % Export Import Balance
1993 431.2 -4.3 44.8 386,4 -341,7
1997 1,293.3 62.1 45.9 1,247.4 -1,201.5
2000 3,083.2 50.6 203.6 2,879.6 -2,676.0
2001 4,309.0 39.8 281.8 4,027.2 -3,745.5
2002 6,730.3 56.1 455.9 6,274.3 -5,818.4
2003 9,863.9 46.4 463.0 9,400.8 -8,937.8
2004 14,867.0 66.3 467.0 14,400.0 -13,933.0
2005 15,500.0* 34.7 500.0 15,000.0 -15,000.0
Source: SE and BM (* estimated)
20032003
CountryTrade (MD)
%
USA252,640.
4275.1
%
ChinaChina 9,547.28 2.8%
Japan 8,306.67 2.5%
Germany 8,076.27 2.4%
Canada 7,124.75 2.1%
Korea 4,119.32 1.2%
Spain 3,770.42 1.1%
Brazil 3,675.17 1.1%
TaiwanTaiwan 2,797.46 0.8%
Italy 2,764.21 0.8%
SubtotalSubtotal 302,821.302,821.9797
90.090.0%%
TotalTotal 336,302.336,302.5050
100100%%
Source: SRESource: SRE
19971997
CountryTrade (MD)
%
USA 176,187 80%
Japan 5,490.0 2.5%
Germany 4,621.1 2.1%
Canada 4,124.2 1.9%
Spain 1,916.7 0.9%
Korea 1,899.4 0.9%
FranceFrance 1,612.3 0.7%
Italy 1,599.4 0.7%
UKUK 1,579.4 0.7%
Brazil 1,572.3 0.7%
SubtotalSubtotal 200,601.200,601.88
91%91%
TotalTotal 220,045.220,045.00
100100%%
Mexican most important Mexican most important Trade PartnersTrade Partners (Total trade) (Total trade)Comparison 1997 and 2003Comparison 1997 and 2003
19971997
CountryExport (MD)
%
USA 94,184.
885%
Canada 2,156.1 2.0%
Japan 1,156.3 1.0%
Spain 939.0 0.9%
Chile Chile 842.3 0.8%
Germany 718.7 0.7%
Brazil Brazil 703.0 0.6%
VenezuelVenezuelaa
675.0 0.6%
UK 664.2 0.6%
ColombiaColombia 513.3 0.5%
20032003
CountryExport (MD)
%
US146,758.
4688.8
%
Canada 2,898.46 1.8%
Germany 1,800.53 1.1%
Spain 1,511.03 0.9%
SwitzerlaSwitzerlandnd
699.29 0.4%
Aruba Aruba 685.58 0.4%
HollandHolland 603.82 0.4%
Dutch A.Dutch A. 567.93 0.3%
UK 556.82 0.3%
Japan 544.56 0.3%SubtotalSubtotal 102,552102,552.7.7
93%93%
TotalTotal 110,236110,236.8.8
100100%%
SubtotalSubtotal 156,626.156,626.4848
94.794.7%%
TotalTotal 165,342.165,342.5050
100100%%
Mexican most important Mexican most important Export MarketsExport MarketsComparison 1997 and 2003Comparison 1997 and 2003
Mexican most importan Mexican most importan Import MarketsImport MarketsComparison 1997 and 2003Comparison 1997 and 2003
19971997
CountryImport (MD)
%
USA 82,002.2 75%
Japan 4,333.63.9%
Germany 3,902.33.6%
Canada 1,968.01.8%
Korea 1,831.01.7%
Italy 1,326.01.2%
China 1,247.41.1%
FranceFrance 1,182.41.1%
Taiwan 1,136.51.0%
SpainSpain 977.70.9%
SubtotalSubtotal 99,907.199,907.1 91%91%
TotalTotal 109,808.109,808.22
100100
20032003
CountryImport (MD)
%
USA105,881.
9661.9%
China 9,070.40 5.3%
Japan 7,762.11 4.5%
Germany 6,275.74 3.7%
Canada 4,226.29 2.5%
Korea 4,028.11 2.4%
BrazilBrazil 3,250.06 1.9%
Taiwan 2,692.10 1.6%
Malaysia 2,644.09 1.5%
Italy 2,506.68 1.5%
SubtotalSubtotal 148,337.148,337.5454
86.8%86.8%
TotalTotal 170,960170,960 100%100%Source: SRE
Participation in EU market (% with respect to total imports)
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.45%
0.50%
0.55%
0.60%
0.65%
0.70%
0.75%
0.80%
Mexico (Right scale)
Source: Eurostat
In Europe happened the same phenomenon: Chinese participation is high and its speed of penetration surpass Mexico’s
China (Left scale)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
China
México
Accumulate increment in the UE market participation
(respect to 1993, percentage points )
FINAL CONSIDERATIONSFINAL CONSIDERATIONSChina as a potential China as a potential
Opportunity?!!!!Opportunity?!!!!
Chinese investment in Mexico (thousands of usd$)Chinese investment in Mexico (thousands of usd$)
Year Annual Accumulated
1994 1,476.3 1.476.3
1996 10,068.8 16,960.9
1998 11,388.8 33,263.3
2000 10,770.6 49,018.1
2001 2,257.3 51,275.4
2002 2,451.5 53,726.9
2003 5,655.3 59,382.2
2004* 3,833.0 63,215.2* Until MarchSource: SE
TWO MEXICAN VISIONSTWO MEXICAN VISIONS1.1. The only solutionThe only solution for the Mexican Economic for the Mexican Economic
Problems is to be more close to the North Problems is to be more close to the North American Economy. J. Serra Puche: “We have to American Economy. J. Serra Puche: “We have to increase our approach to USA”.increase our approach to USA”.
2.2. There are other solutions:There are other solutions:a)a) To take advantage of other Agreements in To take advantage of other Agreements in
order to diversify the Mexican Exports and order to diversify the Mexican Exports and bring more FDI. For example: UE, Mercosur, bring more FDI. For example: UE, Mercosur, etc.etc.
b)b) Approach to Asia-Pacific: w/Approach to Asia-Pacific: w/Japan:Japan: there’s already there’s already a Free Trade Agreement.a Free Trade Agreement.
ToTo China, offering:China, offering: The Mexican Geographical positionThe Mexican Geographical position The NAFTA benefits: Tariffs and other benefits The NAFTA benefits: Tariffs and other benefits BAASC: Anti-Smuggling and Contraband CertifyBAASC: Anti-Smuggling and Contraband Certify Mexican FTA’s with 43 countries (UE, Central Mexican FTA’s with 43 countries (UE, Central
America, South America, Japan, etc). America, South America, Japan, etc). More than 20 years in manufacturing experience.More than 20 years in manufacturing experience.
THANKS!!!!!!THANKS!!!!!!
Dra. Lourdes Dieck at MEXICAN Dra. Lourdes Dieck at MEXICAN SECRETARY OF FOREIGN AFFAIRS SECRETARY OF FOREIGN AFFAIRS (SRE & SE). (SRE & SE).
Dr. Victor Lopez Villafañe at the Dr. Victor Lopez Villafañe at the CENTER FOR NORTH AMERICAN CENTER FOR NORTH AMERICAN STUDIES, ITESM.STUDIES, ITESM.
Dr. Clemente Duran at the CENTER FOR Dr. Clemente Duran at the CENTER FOR COMPETITIVENESS, UNAM.COMPETITIVENESS, UNAM.
Dr. Barry Naugthon, at the ASIA Dr. Barry Naugthon, at the ASIA PACIFIC CENTER, UCSD.PACIFIC CENTER, UCSD.