Germany plans to step up its investments in Mexico
The Western European powerhouse is the seventh leading source of foreign direct investments in Mexico.
German investments in Mexico and its economy extend beyond the highly public and visible ones that have been made by globally renowned automotive and transporation OEMs such as BMW, Volkswagen and Daimler. The Western European nation has also has made a significant presence for itself in Mexico’s pharmaceutical, technology, logistics and chemical industries over the last decade. As is the case with many countries that make investments in Mexico, German businesses see the nation as a growing market worthy of increased economic attention. This is particularly the case with respect to the pharmaceutical industry, due to Mexico’s steadily growing population, as well as the notable progress that has been made in the last twenty years in growing its middle class.
In addition to a growing domestic economy that has not experienced a major crisis since the Peso devaluation of 1994, German business views Mexico as the premier platform from which to export its manufacturers products to the NAFTA zone’s two additional markets, the US and Canada, and as a way of gaining favorable entry for its companies’ products into the many other countries with which Mexico has partnered to eliminate duties and tariffs over the last two decades.
In addition to its advantageous geographic location and orientation towards unfettered trade, in the eyes of German businessmen, further future investments in Mexico are viewed as being particularly attractive as a result of the recent battery of deep reforms that have been implemented by the country’s government. Changes in tax rules and labor laws, deregulation in the telecommunications industry, the opening of the energy industry to foreign gas and oil exploration, as well as structural and qualitative adjustments that have been made to Mexico’s education system make additonal investments in Mexico good long-term bets. According to Johann Hauser, director of the German-Mexican Chamber of Commerce and Industry, “the changes that have been recently made by Mexico’s government in certain key economic and social sectors will result not only in investments in Mexico by German new entrants into the nation’s economy, but will also give companies that presently have Mexican operations to expand upon what they already have in place.”
Germany also represents an important import market for Mexico, with a significant potential for growth. In terms of dollar expenditures Western Europe’s biggest economy is the third largest importer in the world. In 2013, the Germany purchased a total of US $461.3 billion worth of goods from all global sources. The market for Mexican imports to the country will only trend towards growth, as investments in Mexico continue to be made. At this point in time, however, German imports from Mexico make up only a small fraction of its total purchases(.4%). The top five products that Germany imports from Mexico today at present are:
- electronic equipment
- machines, engines and pumps
- medical equipment
Given present conditions and the fact that both nations see each other as key economic partners, investments in German will continue to be made at a steady pace, while Mexico will strengthen its efforts to penetrate Germany’s consumer market with quality products that will be sold at globally competitive prices.