The signing of the Acuerdo de Asociacion Economica (AAE) between Mexico and Japan just over ten years ago has stimulated prodigious Japanese investments in Mexico.
.Having negotiated and signed the NAFTA with the United States and Canada in 1994, as well as a similarly broad comprehensive free trade agreement with the European Union in 1997, when it began negotiations with Japan in 2004, Mexico was one of the most prolific free trading nations in the world. The full implementation of the Economic Association Agreement, or, in Spanish, the Acuerdo de Asociacion Economic (AAE), in 2005 paved the way for the significant flow of Japanese investments into Mexico that have been made over the course, most notably, of the last several years.
At the time of the signing of the AAE, Japan had signed only one prior free trade agreement. That accord was with its Asian neighbor, Singapore. From Mexico’s perspective, the government of then president, Vicente Fox, saw a free trade agreement as being especially significant in terms of the opportunities that it would present for Mexican agribusiness. In 2004, Japan was importing approximately sixty percent of the foodstuffs that its population was consuming. Government economists estimated that the enactment of the Acuerdo de Asociacion Economic would help to create a US $35 billion market for Mexican exporters. When the agreement was signed it covered three hundred agricultural products, and it was the first time in history that the Japanese government had negotiated such an expansive deal covering the agricultural sector of its economy. Unlike in the time prior to the AAE, Mexican producers were now able to export significant quantities such as pork and orange juice to their economic partner in the Far East under preferable, or no, tariff and duty conditions.
From the Japanese perspective, prime minister Junichiro Koizumi, saw the entrance into a trade agreement with Mexico by his country as an opportunity to participate more fully in the latter’s growth as an emerging industrial economy by exporting much needed Japanese manufactured exports to market, and by encouraging Japanese investments in Mexico in key industries. One of the central gains made by Japan vis a vis its entrance into a free trade accord with Mexico was Mexico’s agreement to lift tariffs on the import of all Japanese manufactured steel by 2014. In broader terms, Japanese foreign minister, Yoriko Kawaguchi, viewed the AAE as a means by which Japan could make up for losses suffered in the Mexican market as a result of free trade agreements that the NAFTA’s southernmost signatory had inked with the United States, Canada and the European Union during the ten years prior.
Japanese investments in Mexico since 2005 have totaled approximately US $5.8 billion. Six hundred of the more than eight hundred firms of Japanese origin operating in the Mexican manufacturing sector are related to the production of automobiles and auto parts. In 2011, Mazda and Honda announced the construction of plants in Mexico, while, during the same year, Nissan made public that it would add a third plant to its Mexican automotive assembly capacity. Additionally, in 2014, Nissan announced the formation of a Mexican joint venture with Daimler, and Toyota confirmed that it would go ahead with plans to build a second facility on Mexican soil. Two way trade has between Mexico and Japan has, by volume, increased by almost a factor of two.
Athough since the signing of the Acuerdo de Asociacion Economica in 2005, has resulted in Japanese investments in Mexico that affect many segments of its economy, the Far Eastern nation’s most active area of economic participation, by far, is in the automotive industry. Japanese capital that has flowed into the Mexican economy has done much to enable Mexico to take its place in the top ten of automotive producing countries in the world. Mexican government figures reveal that, in 2012, Japanese automotive companies producing in Mexico were responsible for twenty-eight percent of the country’s total car production, 14% up from 2011, manufacturing more than 802 thousand units. Over the course of the next decade, due to the flow of continuing Japanese investments in Mexico these
numbers will rise.