Market Information
Latin America and Caribbean

Mexico Export Preparedness Guide

Exporting Agriculture and
Agri-Food Products to Mexico

March 2005

Prepared on Behalf of:
Agriculture and Agri-Food Canada
Written by: Fleishman-Hillard Canada

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COUNTRY OVERVIEW

EXECUTIVE SUMMARY

Canada and Mexico share a relationship which has strengthened since the implementation of the North American Free Trade Agreement (NAFTA), the trilateral agreement between Canada, Mexico and the United States. It has led to the opening of trade and investment between the three countries, as well as contributed to reforms in Mexico's agriculture sector.

• Mexico has a notable presence within the trading community, particularly in Latin America, and has one of the world's most extensive free trade policies.
• The government of Mexico has worked to lessen protectionist measures on areas of the economy such as agriculture and public transportation.
• The Mexican economy is the largest in Latin America and is currently experiencing its longest stretch of rising production since December 2000.
• In January 2003, as scheduled under NAFTA, all customs duties were eliminated on trade of goods between Canada and Mexico, except for tariffs on specific products.

Canada / Mexico

• Canada is Mexico's 2nd largest merchandise export destination, and Mexico is Canada's 5th most important export market overall.
• Canadian exports to Mexico have increased considerably from $1.2 billion in 1995 to $3.3 billion in 2005.
• Canadian direct investment in Mexico reached $2.8 billion in 2004. Mexican direct investment in Canada amounted to $427 million in the same year.
• Canada/Mexico bilateral agricultural food trade has been increasing steadily, reaching over $1.6 billion in trade volume in 2005.
• Canadian agricultural food exports to Mexico totalled more than CAN$1 billion in 2005.
• According to official import stats reported by the Mexican government, in 2005 Mexico imported CAN$540 million of bulk goods from Canada, which represented 47% of the total agri-food imports from Canada.
• In 2005, Mexico imported CAN$461 million of consumer goods from Canada, which represented 40% of the total agri-food imports from Canada.
• Intermediate goods make up the balance of Canadian agri-food exports to Mexico, with 13% of the total, reaching CAN$155 million.
• Top Canadian agri-food exports to Mexico include seeds, meat, grains, cereals, malt, canola oil, frozen French fries and chocolate, among others.

ECONOMY

Mexico has a free market economy, increasingly dominated by the private sector. The number of state-owned enterprises has fallen significantly in the past 20 years, to fewer than 200.

The region encircling Mexico City is the cultural and political hub of Mexico and encompasses one quarter of the population as well as the gross national product (GNP). The northern region of Mexico is characterized by industrial growth which shows a strong resemblance to the southwestern US. The southern region is rich in resources but is lacking in infrastructure.

The Mexican economy has shifted from protectionist to liberal in the past two decades. Still, the energy sector remains under strict government control. Privatization will likely be delayed for petroleum, as it is a major contributor to GDP and considered by Mexicans to be a national enterprise.

The Mexican economy is highly dependent upon exports, and since the demand for Mexican exports has revived, GDP growth has rebounded. Agriculture has also contributed to Mexico's GDP growth. The combination of high international prices, good climatic conditions and more planted acreage has added to Mexico's GDP.

Current situation

The Mexican economy is dominant in Latin America and is currently experiencing its longest stretch of rising production since December 2000. The Mexican peso is vulnerable in the short term, but over the long term, the peso should appreciate against the US dollar.

Economic growth in Mexico stalled in 2001, due to a recession in manufacturing as a result of the slowdown in the US. The Mexican economy's GDP growth has been weak but increasing steadily over the past few years, at 0.8% in 2002, 1.4% in 2003, 4.2% in 2004 and 3.0% in 2005. This reflects the weak US economy. Mexico is more reliant on the US economy than that of Canada. The service and hospitality sector has traditionally been a strong contributor to the country's GDP, accounting for approximately 70% of GDP in 2004.

The official unemployment rate in Mexico for 2005 was 2.1%. This low unemployment rate masks the fact that Mexico suffers from considerable underemployment.