STRENGTH IN NUMBERS

Mexico 2016 | DIPLOMACY | FOCUS: GERMANY-MEXICO RELATIONS

Ties between Germany and Mexico, both economic and diplomatic, are reaching an all-time high with increasing bilateral investment and 2016-2017 marking the Dual Year for the two countries.

German geographer Alexander Von Humboldt once said, “If you could only deem a place in the world as paradise, that would have to be Mexico.” Ever since re-establishing bilateral ties after the Second World War, Mexico and Germany have enjoyed a fruitful and close relationship that has been crucial in the special link Mexico holds with Europe. This year is particularly special for Mexican-German relations, as both countries celebrate the Year of Germany in Mexico from June 2016 to May 2017.

Germany is one of Mexico's most important diplomatic and economic partners in Europe. According to the Secretary of Economy, Germany is Mexico's main trade partner in the European Union (EU), with bilateral trade of more than $18 billion dollars. Germany is also the third-largest EU investor in Mexico, to the tune of around $8 billion dollars. The Mexico-Germany Chamber of Commerce and Industry (Camexa) has 1,700 German companies registered in Mexico, employing over 120,000 people.

Mexican-German trade relations saw a major boost in 2000, when the Mexico-EU Free Trade Agreement came into effect. According to the Mexican Secretary of Economy, bilateral trade has since grown by around 150%, or 8% per year. Germany was one of the main supporters of the agreement within the European bloc. During the 2015 EU-CELAC Summit in Brussels, Mexican President Enrique Peña Nieto and German Chancellor Angela Merkel held a bilateral meeting where they expressed their mutual interest in the treaty's renegotiation on its 15th anniversary.

In the political arena, the countries share long-standing support for multilateralism and free trade and are both active members of organizations such as the OECD, the G20, and the EU-CELAC summits. In 2014, the two countries created the Mexico-Germany Binational Commission at a ministerial level to address topics such as security, environmental protection, science and innovation, education, and culture.

The Dual Year, which has come at a moment of historically strong bilateral relations for the two countries, is expected to boost trade and cooperation even further. German investments in Mexico reached a historic peak in 2015. Given the strength of both countries' automotive sectors, it is no surprise that this has been a major investment focus. Camexa reports that there are 150 German automotive companies operating in Mexico, contributing around $25 billion to the economy annually. In the past two years, the most significant German car producers have announced large investments in the country. Mercedes-Benz unveiled the construction of a plant in Aguascalientes that will employ around 1,500 people once it begins operations in 2018. Audi announced the construction of a new assembly plant in Puebla through a $1.3 billion investment. BMW will invest $1 billion in its first plant in Mexico, located in the state of San Luis Potosí, and Volkswagen has plans to invest approximately $7 billion by 2018.

However, the automotive industry is not the only sector where German investment has played an important role in the development of Mexico's economy. It is expected that a partnership between aerospace clusters from both countries will be signed this year to foster German investments in the sector. In 2014, Mexico participated for the first time in ILA-Berlin, one of the world's three main aerospace fairs, and the Federación Mexicana de la Industria Aeroespacial (FEMIA) signed a memorandum of understanding with its German counterpart, the German Federal Association of Aerospace Industry (BDLI), to strengthen mutual exchanges in the field. Benito Gritzewsky, the President of FEMIA, told TBY that through the Pro-aero plan, Mexico is expected to become one of the 10 largest countries for aerospace development by 2020, with projected export revenues of more than $12 billion.

Logistics, energy, finance, manufacturing, and chemicals are also areas where German investments have a large share in the Mexican market. In an interview with TBY, Jorge Arce, Chairman of Deutsche Bank in Mexico, noted that around 200,000 jobs in Mexico depend on German investments and that the figure will only continue to grow. For DB Schenker, another German multinational, Mexico is one of the country's most important markets globally, accounting for 100 million euros in business annually according to Managing Director Enrique Valera.