Mexico-China fund for infrastructure spending
By Adina Moloman
Sources: South China Morning Post, Reuters, Maquila Portal
China’s trade relationship with Mexico is anticipating growth.
China is Mexico’s second biggest trading partner, behind the United States but Chinese FDI in Mexico is a little bit discouraging.
Mexico is making an effort to modify its highly negative bilateral trade balance with China since the two countries governments are discussing the creation of a joint fund for investment in infrastructure in Mexico, including ports, highways, railways and airports. The size of the fund is still under discussion, but according to Sergio Ley Lopez, former Ambassador of Mexico to China, the fund is of US$3 to US$5 billion.
According to ProMexico, from 1999 to date the investment made by China in Mexico has been marginal, around US$300 million. To have an idea of how high is trade deficit with China, we have to look at Mexico’s selling goods to china, only last year they were for a value of 5 billion dollars comparing to 55 billion dollars purchasing goods from the same trade partner.
According to Mexican officials this fund doesn’t include energy and telecommunication projects, instead it is aiming for more Chinese involvement in high-speed railway and water projects in Mexico. Even so, this doesn’t exclude that Chinese companies are eager to participate in Mexico’s energy reform.
There are at least two Chinese transnational companies in an advanced stage of discussions to enter the Mexican market through renewable energy projects, specifically wind farms.
There are different theories why China didn’t invest in manufacturing in Mexico industries and other sectors, some of them are mentioning Mexico’s government’s failure to grant trade benefits, the lack of support for joint venture investments with Chinese capital, China’s trade practices that have not been very transparent, etc.
Chinese investment in Latin America, especially in energy and infrastructure sectors is rising rapidly, with more than US$550 billion of infrastructure projects according to the United Nations statistics. A United Nations study predicts that China will surpass the European Union as Latin America’s second-largest trading partner in 2016. China is already the biggest trading partner of Brazil, Chile and Peru.
