Canada’s trade with Mexico has grown exponentially since a free-trade agreement was enacted in 1994. NAFTA created one of the largest free trade zones in the world and had a positive economic effect on each country involved (Canada, Mexico and the USA). Mexico has grown from a petrol state to an innovative and vibrant economy with above average growth rates and a burgeoning middle class. With over 2,800 Canadian companies now active in Mexico, it has become an important market for Canadian goods and services. At the moment, Mexico’s economy is growing faster than Brazil’s (the B in BRICS) and is a significantly easier market to enter for your exports. In 2011, Mexico’s economy grew by 3.9% while Brazil’s grew at a slower 2.5%.
In 2010, Canada exported over 5 billion dollars to Mexico making it Canada’s 5th largest export destination and 3rd largest import destination. Canadian direct investment into Mexico totaled 4.9 billion dollars with Goldcorp Inc. being one of the largest foreign investors in the country. Mexico is one of the few countries Canada’s share in exports has actually increased in the last decade- a testament to the success of NAFTA.
Canada’s largest exports to Mexico are electrical and electronic equipment, motor vehicles, machinery and agricultural products. Canada’s mining companies are heavily invested in the area, which has led to offshoot industries successfully entering the Mexican market (heavy machinery, etc).
Traditionally, Mexico has had a protectionist business environment but with the opening up of new industries such as telecommunications, seaports, railways, electricity and natural gas distribution it is primed for Canadian investment. With ample support from the Canadian Government (trade offices in Mexico City, Monterrey and Guadalajara) the industries most suited for Canadian investment are (rated by the Canadian Government):
- Automobile and Advanced Manufacturing
- Agriculture, Food and Beverages
- Environmental Industries
- Information and Communications Technology
Like any developing nation there are significant risks to investing in Mexico. Security has been one of the largest issues for Canadian businesses in Mexico. The Mexican Dug War along the Mexican-USA border has forced private companies to hire security to ensure their staff and goods are well protected. These extra costs should be identified early and, with increasing violence, may need to be increased. Mexico also suffers from corruption and a low skilled workforce, which can be deterrents from investing in the country.