Monthly interview – October 2017

I am talking today with H.E Fernando Jorge Castro Trenti who is since June 2017 Ambassador of Mexico to the Swiss Confederation.

Q1. Ambassador, could you share with us about your diplomatic career? In which countries did you have the opportunity to represent Mexico?

I have been Ambassador to the Swiss Confederation since June 2017 and concurrent Ambassador to the Principality of Liechtenstein. From February 2014 to May 2017, I represented Mexico as Ambassador to the Republic of Argentina. In addition, I have been Federal Representative to the Mexican Lower House during 2012 and 2013 as well as Senator from 2006 to  2012.  I am extremely proud and honored to be in Switzerland.

Q2. Mexico and Switzerland have a very strong business relationship. What are the opportunities that you have identified to enhance the trade between both countries? Which areas / industries / activities will be the focus during the next 12 months?

Mexico and Switzerland have a very strong business relationship indeed. Allow me to pour in some data so we can contextualize the importance of our economic exchanges. Bilateral trade between Mexico and the Swiss Confederation has increased vigorously from 2000 to 2015. Specifically, about 90% of the trade between Mexico and the countries from the European Free Trade Association (EFTA) is done with Switzerland. There are some areas in which we do believe we can strengthen our relations, particularly a) the access of Mexican agricultural products to the Swiss market, (eggs, sugar, juices, tobacco, and chicken, among others), b) the elimination or reduction of trade barriers, c) the inclusion of regulatory equivalence, and d) the support for small and medium enterprises.

For that purpose, we need to focus on the modernization of the Mexico-EFTA free trade agreement so that the outcome of our negotiation can respond to the current international economic conditions. On the areas that I have referred to – and once we have updated our FTA – there will certainly be stronger opportunities to enhance trade.

Another important topic is the cooperation our countries have achieved on the field of education  and vocational training. During the State visit from President Schneider-Ammann to Mexico, the Swiss Alliance for Dual Education was launched and our Secretaries of Education signed a Letter of Intent on Vocational Training. This is particularly important because it will offer Swiss businesses in Mexico the opportunity to officially be engaged in the emerging dual-track education of apprentices.

It is also paramount to work in promoting Mexico as a touristic destination. We want to increase the number of Swiss  visitors  to  Mexico,  as  well  as  cultural  exchange.  As  you might be aware, Edelweiss recently launched direction flights between Mexico and Cancun and we have  signed  a new bilateral Air Transport Agreement

Q3. Last year during the visit of the of Federal President Johann Schneider-  Ammann  to Mexico important topics were  raised including the modernization of  the Mexico-EFTA free trade agreement and the Swiss-Mexican  investment protection agreement. Could you explain to us which benefits/ changes could be expected in this area? How this modernization  could improve the trade between both countries?

That is correct, Federal President Johann Schneider-Amman visited Mexico on November 3-4, 2016 and held a very productive  meeting with President Enrique Peña Nieto with    the main objective of strengthening the bilateral relationship.

President Enrique Peña Nieto stated in the 2013-2018  National  Development  Plan  (NDP) that in order to fulfill the Mexican development objectives  we  need  “close,  mutually profitable and productive relationships with other  countries,  based  on  a vigorous, active and important foreign policy.” Therefore, it comes natural to enhance the relationship with the Swiss Federation.

The two main topics you are referring to are particularly relevant due to current economic and trade environment, so I would like to refer to  them  thoroughly.  First,  regarding  the  Mexico-EFTA trade agreement, you appropriately call it a modernization because, as you know, the Mexico-  EFTA Free Trade Agreement was signed in November 2000 and was  fully  binding  since July 2001. The most important characteristic of the Mexico-EFTA Free Trade Agreement was that it placed Mexico as the first Latin-American country with free trade access to the EFTA country members. But time and economic circumstances have changed since its approval.

Three areas will obtain the main advantages out of the modernization:

  1. Access to an increased goods and services market, investment and governmental procurement. Almost three quarters of the Mexican agricultural and food exports to Switzerland still pay some sort of tariff. We fully understand how sensible the topic is, and we are hopeful that we can mutually agree on removing some trade barriers, case by case, in order to increase welfare to both of our countries. Additionally, we expect to have access to  the Swiss market  in  products such  as egg,  sugar,  juices, tobacco, and chicken, among others. We also expect to have a better understanding and cooperation between customs authorities to nurture transparency.
  2. Compliance to the best international standards and practices regarding rules of origin, sanitary and phytosanitary certificates, technical barriers to trade and intellectual property. We need to consider how productive chains have evolved in order to apply, in a proper way, the rules of origin, while strengthening certification and verification procedures. In addition – and this is very important – we want to go in deep in topics such as transparency, specific trade concerns’ solutions, regulatory cooperation and sector-specific resolutions. There is a very important topic here, and I, as Mexican, feel very proud of it, which is Regulations of Intellectual Property Rights (IPRs). The protection level that Mexico confers to IPRs allows us to ask and propose a level of commitment far more evolved than the one agreed at the time the Mexico-EFTA free trade agreement was first signed. Mexican laws have significantly evolved in this topic due to all the negotiations of different international treaties that Mexico has

And, finally:

  1. Greater economic cooperation, particularly through the Mexico-Switzerland Chamber of Commerce and Industry. President Schneider-Ammann attended its founding ceremony. It is noteworthy mentioning that over 800 Swiss companies are established  in México and generate more than 50,000 jobs in México.

Now, let me refer to the investment protection agreement. Switzerland is the main source of foreign direct investment within the EFTA countries and the 9th overall. In March, 1996 the introduction of the Agreement on the Reciprocal Promotion and Protection of Investments (ARPPI) allowed Mexico to be trusted as a resourceful and secure investment country. During the first round of negotiations of the modernization of the Treaty, the parties agreed to review the Agreement.

All being said, the current modernization can increase trade by establishing rules and procedures that can promote larger exchange volumes and provide certainty for government, investors and citizens of both countries.

Q4. Due to the Mexican privatization of different sectors, opportunities for foreign providers arise, which specific industries  /projects would you identify for  Swiss  Companies? For Swiss investors? In general what would you recommend to the Swiss companies when considering Mexico as a potential business partner?

Swiss capital has been mainly invested in the manufacturing industry, science, and financial services. There were almost 900 firms with Swiss capital by June 2016. The main investing projects have been launched by Nestlé and Holcim-Apasco.

One of the achievements of the government of President Peña Nieto has been the structural reform program that started in 2012. The reforms that he has promoted can be divided in six different  areas: 1) Labor, 2) Economic Competition, 3) Financial, 4) Telecommunications 5) Energy and 6) Education.

Mexican oil and gas sector modernization has been a focus of this government, and its liberalization was eagerly expected by investors due to its key role for investment opportunities. This structural reform allowed private investment from domestic and foreign investors in Mexico. One key point is that the energy reform is designed to attract investment by allowing auctions of fields. It also provided licenses, production-sharing and profit-sharing opportunities. In addition, there is the opportunity to bid for service contracts directly or in association with Petroleos Mexicanos (The Mexican State owned petrol national company).

This modernization should not be minimized since the energy sector has been a government-led public-only sector since its expropriation during the 1930’s. The reform has included investment in human capital as well as the creation of specialized institutions. The energy sector offers very profitable opportunities for Swiss companies and investors. I am certain that Swiss technological firms have very good opportunities to prove expertise on the area of oil and gas. Nonetheless, there are opportunities indirectly related, say any good or service that is needed for the expansion of the sector or for everyday activities can produce a profitable opportunity for Swiss or Mexican capital, or even for a joint venture.

Another very important sector that could provide profitable opportunities due to its attractiveness and potential development is telecommunications. Mexico has already lowered the costs of fixed and mobile telephony and has opened the field for investments. Furthermore, the telecommunications reform addressed the development of the optic fiber network, as well as the development of the digital public television network and new transmission rules.

With new ground for investment in telecommunications and the secondary laws giving certainty to firms, investors and consumers, Swiss companies and investors can expect projects ranging from consulting service to IT developments and attractive investments with great outcomes.

Mexico is a very attractive country, being the second largest economy in Latin America just after Brazil. I would urge Swiss companies to consider the legal framework that is being developed to provide certainty. In spite of its recent natural disasters Mexico is growing and has the potential to become a developed and leading economy on the long run due to its natural resources, human  capital and legal framework. On this regard, I would like to emphasize the importance of the education reform because better human capital is the only path to long run development. With a better educated population, there are new sources of demand of goods and services that can be satisfied by Swiss companies. Furthermore, with a growing market, the trade and investing opportunities will increase as economic growth impacts the population and allows for a greater purchasing power and increased welfare. This is the goal of both President Peña Nieto and all of us who want to see Mexico at its best. That is why I invite Swiss companies to consider Mexico as a potential and attractive business partner.

Q5. The talks for the renegotiation of the NAFTA officially started on 16 August. Mexico  goals for a new agreement will be prioritizing free access for goods and services and greater labor market integration. Considering that Swiss companies have large production in Mexico, in which extend do you consider that changes in the NAFTA could affect Swiss companies?

President Peña Nieto has stated that Mexico is renegotiating with Canada and the United States of America in a serious and constructive way. The three countries, as stakeholders, are interested in obtaining a profitable agreement. Let us remember that any agreement, can be good and not end as  a zero-sum game. In a recent phone call between President Trump and Prime Minister Justin Trudeau, both agreed that it will be better for Mexico, USA and Canada together to end the modernization of NAFTA toward the end of this year.

Let us first consider that trade has been profitable for every party, and as we have seen with the Mexico-EFTA Free Trade Agreement, there is common ground for opportunities. Now, with better trade integration through a modernized NAFTA, the possibility for accessing bigger markets for goods and services at lower cost will increase business and employment opportunities. Specifically, consider the case of a Swiss company with Mexican employees: due to a better legal sound basis for business and trade, the possibility for exporting its products to USA or Canada will be very profitable, and could led to a virtuous cycle for all people involved. With greater demand of products and maintaining costs – or even reducing them – profits will be greater. This will enable the company stakeholders or investors to get more profits, employees could be better paid and new jobs may be created.

The potential trade benefits are there. The Mexican government is taking into account the interest of all stakeholders in Mexico. We are aware of the attention that this negotiation process represents for many of them including Swiss companies. Let me say again here that Switzerland is the 9th foreign investor in Mexico. The importance of a Mexican-Swiss partnership is, without doubt, paramount.

Now, let us consider the scenario of a greater labor market integration. As we know, this is a controversial topic. Nonetheless, we need to realize how profitable and mutual reinforcing a more integrated labor market could be. Naturally, we need an educated population. An integrated labor market allows mobility for skilled workers and higher wages due to their education. This mobility can also create technological spillovers in new sectors, since incoming workers bring new technical skills, experience and improved work procedures. Therefore, productivity can be raised by integrating the labor market. On this regard, the Swiss Alliance for Vocational Education and Training might plays an important role.

Keeping in mind that the Mexican government is working towards a developed Mexican economy, the modernization of NAFTA, as well as the Mexico-EFTA free trade agreement, can strengthen these spillovers, eventually increasing company profits, employees’ wages, and people welfare. I think every company in Mexico, either Swiss or Mexican, can greatly benefit from a sound legal structure and environment that increases trade and economic relations.

Finally, I would like to thank the Swiss Confederation on behalf of the Mexican population for their support to Mexico after the September 19th earthquake. The assistance of a Swiss team of civil engineers has been very helpful in order to evaluate potential structural damages on Mexican buildings.