Most of
Eric Farnsworth's talk at the GBD event on October 24 -
The Dragon Goes Shopping, 2013 - focused on China's trade and investment relationships with the countries of South America, especially Brazil, Chile, Argentina, Venezuela and the Caribbean island of Cuba. We highlighted those comments yesterday.
Mr. Farnsworth also talked about China's relationship with Mexico. There, he said, the Sino-Latin chemistry wasn't quite so dynamic, at least not in the early years. With the exception of oil - largely off-limits - Mexico doesn't have the same storehouse of natural resources that drew China to the other major Latin American countries. And there was the competition issue, with both Mexico and China vying to sell manufactured goods into the United States.
But, Mr. Farnsworth said, "That is beginning to change." Here is a little more of what he said, including today's featured quote:
"Why is that changing? For several reasons. One is because China is beginning to understand that as Latin America slows - and there are some complicated political issues across the region - it also needs to diversify its contacts in the Western Hemisphere. China also sees what is going on in terms of the potential for energy reform in Mexico. And to the extent that energy reform actually takes place in a meaningful way in Mexico and [Mexico] allows in foreign investors, the Chinese companies will be able to play in that. Again, [this] goes back to what is driving this relationship, [which is China's] desire for commodities, and ... locking in long-term access to goods ... certainly plays into that strategy.
"You also have two, new, relatively young leaders. Both came to power at essentially the same time. Enrique Peña Nieto last December; Xi Jinping last spring. And already, those presidents have met no less than four times in six months, four times, including exchange visits. And their cabinets have met multiple times beyond that. There is clearly a political drive right now in both countries to put Mexico and China together."
One of those meetings was President Xi's visit to Mexico in early June. Accords were signed dealing with food, energy, mining, infrastructure, and education. Plans were laid for President Peña Nieto's visit to China next year. For the last few decades, China and Mexico rightly saw each other as competitors, with similar products competing for space on U.S. shelves.
Things are different now. That was explained in the Wall Street Journal's June 4 article on President Xi's visit to Mexico. Paraphrasing the former Mexican official who negotiated the NAFTA,
Jaime Serra Puche, the authors of that piece explained the situation this way:
"Rising wages in China have led to higher labor costs there, while high oil prices have made transportation more expensive. It is now cheaper to land many products in New York from Mexico than from China."
By Mr. Serra Puche's calculations, the transportation costs alone would add as much as a 12 percent tariff.
