THE PACIFIC ALLIANCE: A CORNERSTONE IN THE MODERN ECONOMIC ERABY ILDEFONSO GUAJARDO V.

INTERVIEWS WITH ROBERTO AMPUERO, CHILEAN MINISTER OF FOREIGN AFFAIRS

MARÍA LORENA GUTIÉRREZ, COLOMBIAN MINISTER OF TRADE, INDUSTRY AND TOURISM

ROGER VALENCIA, PERUVIAN MINISTER OF FOREIGN TRADE AND TOURISM

ISS

N 2

007-

1795

9772007

179003

THE PACIFIC ALLIANCEThe Power of Integration

SPECIALFEATURE

DIVERSIFICATION

CONTENTS

08FROM THE CE0’S DESKTOP

THE PACIFIC ALLIANCEThe Power of Integration

cover feature

The Pacific Alliance: a Cornerstone in the Modern Economic EraBy Ildefonso Guajardo Villarreal, Mexico’s Minister of Economy

The Pacific Alliance: an International Integration ModelInterview with María Lorena Gutiérrez, Colombian Minister of Trade, Industry and Tourism

10

12

16

20A Platform for Integration in the Asia-Pacific RegionInterview with Roberto Ampuero, Chilean Minister of Foreign Affairs

An Engine of Development in Latin AmericaInterview with Roger Valencia, Peruvian Minister of Foreign Trade and Tourism

24

26

28

33

36

40

44

Mexico: at the crossroad of tradeBy Juan Carlos Baker Pineda, Undersecretary of Foreign Trade at Mexico’s Ministry of Economy

Venture Capital, Driving Innovation By Alejandro Delgado Ayala, President of the National Institute of the Entrepreneur

The Pacific Alliance: Towards Deep IntegrationInterview with Fabrizio Opertti, Head of the Trade and Investment Division at the Inter-American Development Bank

Advancing Steadily Towards an Investment EcosystemInterview with Ary Naïm, Country Manager for Mexico at the International Finance Corporation

Cover Feature

CAF, A Firm, Long-Term Commitment to the Pacific AllianceInterview with Luis Carranza Ugarte, Executive President of CAF – Development Bank of Latin America

The Pacific Alliance: a View from the Business SectorInterview with Martín Carrizosa (CEAP Colombia), Manuel José Prieto (CEAP Chile), Valentín Diez Morodo (CEAP Mexico) and Mario Mongilardi (CEAP Peru)

MILA, Challenges and RealitiesBy Romina Román

46FIGURES

It aims to:

THE PACIFIC ALLIANCE

The Power of IntegrationThe Pacific Alliance is a deep, innovative, flexible integration process, with a projection to the world and with clear and pragmatic goals.

Trinidad and Tobago

Members

Observers

Candidates to becomeAssociated States

Australia

New Zealand

Canada

Singapore

United States

Uruguay

Argentina

Costa Rica

Dominican Republic

Haiti

Paraguay

Panama

Ecuador

El Salvador

Guatemala

Honduras

Mexico

Perú

Chile

Colombia

Morocco

Egypt

Japan

SouthKorea

China

Indonesia

India

Thailand

Israel

UAE

Sources: International Monetary Fund, 2017/OEE-MinCIT/World Bank and United Nations Conference on Trade and Development, 2016/World Tourism Organization, 2016

223million

inhabitants

8thlargest economy

in the world

38%of GDP of Latin America

and the Caribbean

18,150USD GDP

per capita

41%of FDI in Latin

America, in 2016

48million tourists visit

the region every year

Achieve thedevelopment andcompetitiveness ofits Member States.

Ukraine

Turkey

Spain

UK 17

8

51

10

13

314

16

21

7

19

2312

42522

9

2

15

6

18 11

20

1 Austria

2 Belgium

3 Belarus

4 Croatia

5 Czech Republic

6 Denmark

7 Finland

8 France

9 Georgia

10 Germany

11 Greece

12 Hungary

13 Italy

14 Lithuania

15 Netherlands

16 Norway

17 Poland

18 Portugal

19 Romania

20 Serbia

21 Sweden

22 Switzerland

23 Slovakia

25 Slovenia

Become a projectionplatform to the world, with special emphasison the Asia-Pacific region.

Promotethe socialinclusion of itsinhabitants.

Overcomesocio-economicinequality.

Mexico’s Partner

50

51

54

56

The Pacific Alliance and the Internationalization of Mexican Footwear Industry

Marhnos, partnering construction

Konekte: a Story of Easy Assembly and Commercial Success

Grupo Hada, an Effervescent Colombian Success Story

Grupo Alpha: Diversified Services that Translate into Leadership

Business in a can

Huichol Jewelry: From Remote Mountaintops to Fashion Runways

58

60

94

Negocios ProMéxico

PROMÉXICOPaulo Carreño King

CEO

Diana Itziar Gómez JiménezHead of the Communications Department

itziar.gomez@promexico.gob.mx

Isabel Vieyra JiménezDirector of Publications and Content

isabel.vieyra@promexico.gob.mx

Felipe Zúñiga AnayaEditor in Chief

felipe.zuniga@promexico.gob.mx

Advertisingnegocios@promexico.gob.mx

EDITORIAL BOARDIldefonso Guajardo Villarreal

Ambassador Agustín García-López Loaeza

Juan Carlos Baker Pineda

Alejandro Delgado Ayala

Ambassador Alfonso de Maria y Campos Castelló

Fernando Ruiz Huarte

Luis Miguel Pando Leyva

Claudia Ávila Connelly

Francisco Javier Méndez Aguiñaga

Cecilia Sayeg Seade

Ana López Mestre

Luis Rubio Freidberg

Gabriela de la Riva

Jaime Zabludovsky

Silvia Núñez García

María Cristina Rosas González

Ulises Granados Quiroz

Romina Román Pineda

Marco Erick Espinosa Vincens

Negocios ProMéxico es una publicación editada por ProMéxico:Camino a Santa Teresa número 1679, Colonia Jardines del Pedregal, Delegación Álvaro Obregón, CP 01900, Ciudad de México.Teléfono: (+52) 55 5447 7000. Portal en Internet: www.gob.mx/promexicoCorreo electrónico: negocios@promexico.gob.mxEditor responsable: Felipe Zúñiga Anaya (alta en trámite). Reserva de derechos al uso exclusivo: 04-2017-083018164200-102Licitud de título: 14459, licitud de contenido: 12032, ambos otorgados por la Comisión

Calificadora de Publicaciones y Revistas Ilustradas de la Secretaría de Gobernación. ISSN: 2007-1795. Negocios ProMéxico año 11, número III - IV se imprimió un tiraje de 4,000 ejemplares. Impresa por Libros en Demanda S de RL de CV. Las opiniones expresadas por los autores no reflejan necesari-amente la postura de ProMéxico. Queda estrictamente prohibida la reproducción total o parcial de los contenidos e imágenes de la publicación sin previa autorización de ProMéxico. Esta es una publi-cación gratuita; está prohibida su venta y distribución comercial.ProMéxico is not responsible for inaccurate information or omissions that might exist in the infor-mation provided by the participant companies nor of their economic solvency. The institution might or might not agree with an author’s statements; therefore the responsibility for each text is from its author, not the institution’s, except when stated otherwise. Although this magazine verifies all the in-formation printed on its pages, it will not accept liability derived from any omission, inaccuracy or mistake. July — August 2018.

Download the PDF version and read the interactive edition of Negocios ProMéxico at: promexico.mx/en/mx/revista-negocios

This publication is not for sale.Its sale and commercial distribution are forbidden.

Mexico, Its Partners and Trade in Uncertain TimesBy Zirahuén Villamar

Mexico and the European Union: a Strategic PartnershipBy Mauricio Escanero, Head of the Mission of Mexico to the European Union and Ambassador to the Kingdom of Belgium and the Grand Duchy of Luxembourg

Mexico: a Strategic Partner for the European UnionInterview with Klaus Rudischhauser, European Union Ambassador to Mexico

Poland Recognizes Mexico’s PotentialInterview with Pawel Wozny, Charge D’affaires of Poland in Mexico

Mexico and Portugal, a Promising FutureInterview with Jorge Roza de Oliveira, Portuguese Ambassador to Mexico

The United Kingdom and the Pacific Alliance, Champions of Free TradeBy Duncan Taylor, UK Ambassador to Mexico

New Zealand Props up Bridges with MexicoInterview with Mark Sinclair, New Zealand Ambassador to Mexico

Singapore, a Door to AsiaInterview with Francisco Ríos, International Enterprise Singapore Regional Director

Mexico and Japan: 130 Years of Diplomatic RelationsBy María Cristina Rosas

Mexico and South Africa: 25 years building “Ubuntu Diplomacy” By Ana Luisa Fajer Flores, Mexican Ambassador to Southafrica

International Cooperation Projects in North America and EuropeBy Miguel Ángel Leaman, Marianela Pérez-Frías, Abril Ramírez and Alejandra Pérez

62

66

68

70

72

74

76

79

82

86

88

Special Feature: Diversification

Negocios ProMéxico

SPECIAL FEATURE

MEXICO, ITS PARTNERS AND TRADE IN UNCERTAIN TIMES

Mexico needs to diversify its trade, but rather than adding more free trade agreements to the mix, a more viable solution will entail developing a better profile as a partner in integration processes that hinge on other values.

BY ZIRAHUÉN VILLAMAR*

SPECIAL FEATURE

62

PH

OT

O A

RC

HIV

E

63July | August 2018

SPECIAL FEATURE

Mexico’s economic relations with the rest of the world have evolved in recent decades, not solely due to the will of its very capable political and economic actors, but because it has skillfully exploited opportunities that have come in the wake of global transformations, namely politi-cal liberalism and the liberalization of trade. Today, the world order has unexpectedly taken an about-turn compared to the openness that defined it from the 1990s onwards. This brings with it major challenges for Mexico, which will have to adapt to new terms in its relations with its partners, old, new and prospective.

The story goes that the last global transfor-mation of the 20th century —the end of the Cold War— was interpreted by Mexico as a chance to forge closer economic and political ties with Europe, which was where many of the more sig-nificant changes were taking place. Historically, the United States has been Mexico’s main trading partner —by a long shot. In 1993, the year before the North American Free Trade Agreement (NAFTA) came into force, the United States received 82.7% of Mexico’s total exports and accounted for 69.3% of its imports. Judging from the reaction of certain European leaders to the Mexican government’s advanc-es, Europe was more bent on pursuing its in-tegration process with its Eastern neighbors. Mexico would first have to join a regional North American effort if it were to become an attrac-tive partner to Europe in the future. In short, as was the case with transatlantic f lights, to get from Mexico to Europe required entering North American airspace.

Free trade negotiations between Mexico and what was by then the European Union (EU) kicked off in the late 1990s. In 1997, an agreement was signed that was exceptional for both parties in that it provided for free trade with an overseas partner, but it was also a document that ref lected the essence of European integration, i.e. it was a political project. The Global Economic Partnership and Political Cooperation Agreement came into effect in mid-2000, one of its goals being to diversify Mexico’s trading partners and an-other to position the country further up glob-al value chains. In 2001, during its first full year in force (and assuming the EU had the 28 members it has today and not the 15 it had at the time, because the figures for the 12 that joined later are insignificant), the European Union accounted for just 3.4% of Mexico’s total exports and 9.9% of its imports. That same year, seven years after the coming into force of NAFTA, Mexico’s exports to the United States

had increased (88.5%), while its imports had declined only slightly (67.6%).

The tenth anniversary of the coming into force of the Global Agreement was an excel-lent occasion to celebrate growth in trade and investment flows and highlight Mexico’s politi-cal importance as a global partner of the EU (it was unilaterally recognized as a Strategic Partner by the European Council in 2008 and the Joint Plan of Action within the framework of the economic partnership in 2010). To the extent that the economic realities of globaliza-tion set in, attention was drawn to emerging trade and investment issues and the need to modernize regulatory frameworks, which, as tends to be the case, rarely keep step with prac-tices. That same year, Mexican exporters found themselves forced to reflect on the need to re-duce their dependence on the United States, for reasons that had more to do with economic se-curity than trade logic.

The European Union

and the Pacific Alliance

are clear examples of

economic relationships

we need to continue

cultivating, because

they too are on the hunt

for new associates.

FREE TRADE NEGOTIATIONS BETWEEN MEXICO AND THE EUROPEAN UNION (EU) KICKED OFF IN THE LATE 1990S

PH

OT

O A

RC

HIV

E

Negocios ProMéxico64

SPECIAL FEATURE

In 2013, Mexico and the European Union publicly announced their intent to undertake a long overdue modernization and improvement of their trade agreement. For several years, both parties had been signing free trade agree-ments with third countries and their bilateral relationship needed to take into account the terms agreed to in these other arrangements. Negotiations began in 2016. At the same time, in the United States (the main trading part-ner of both Mexico and Europe and a pillar of global economic, political and security systems) a candidate who sympathized with neither the form nor substance of liberal values was run-ning for president. In November 2016, follow-ing the results of the US elections, Mexico and the European Union reaffirmed their commit-ment to continue revising their bilateral agree-ment and in doing so sent the entire world a message: the multilateral trade system and its liberal principles serve a political purpose in a world order that is best preserved. Mexico greeted Europe’s gesture as one of partnership

and the news came as a relief in light of mount-ing tensions with its main trading partner and neighbor. In 2017, on the 20th anniversary of the signing of the Global Agreement between Mexico and the European Union, Mexico’s fears proved founded when the US government demanded a renegotiation of NAFTA, leaving the country with the titanic task of agreeing on the future rules of economic relations with its main trading partner, which also happens to have the most complicated political leadership in the world.

Paradoxically, it has turned out to be easier to cross the Atlantic than the Rio Grande. In April 2018, after ten rounds of negotiations be-tween Brussels and Mexico City, the European Union and Mexico announced an agreement in principle on their renegotiated transatlantic bond. It was a feat of economic diplomacy that reaffirmed respect for the principles of coop-eration within multilateral frameworks amidst the uncertainty created by calls for unilateral “solutions” —even from within the European

In April 2018, after ten

rounds of negotiations

between Brussels

and Mexico City, the

European Union and

Mexico announced an

agreement in principle

on their renegotiated

transatlantic bond.

CREATED IN 2011, THE PACIFIC ALLIANCE, FORMED BY CHILE, COLOMBIA, PERU AND MEXICO, IS A FLEDGLING INITIATIVE

PH

OT

O A

RC

HIV

E

65July | August 2018

SPECIAL FEATURE

Union itself, which would soon have to deal with its first desertion following the exit of the United Kingdom. It will be a while yet before Version 2.0 of the agreement is ratified and comes into force. The experts say we could be looking at 2020 or 2021.

Progress on the negotiating front comes at a time when trade with Europe has grown in both real and relative terms —in 2017, the European Union represented 5.6% of Mexico’s total exports and 11.6% of its imports—, while Mexico has managed to diversify its imports (46%) from the United States and, to a lesser extent, its exports (79.8%). It should, however, be acknowledged that there is an additional success story of diversification behind these figures: due to its participation in global value chains, Mexico has significantly upped the quality of its exports by increasing exports of manufactured goods to the detriment of com-modities, namely agricultural goods, as trade statistics with the European Union reveal. That said, Mexico needs to continue diversifying its economic and political partners.

Agents of economic diplomacy and eco-nomic interest groups in Mexico are now focus-ing their efforts on strategies to grow business in a not-very-optimistic short-term scenario for global trade and investment. In 1990, we looked to the United States to help us groom a profile more attractive to European eyes. In 2017, after almost three decades of partnership with the EU, we began turning our gaze beyond the Atlantic and toward the Pacific Basin, the shores of Latin America and East Asia in search of alternative partners and allies.

Created in 2011, the Pacific Alliance, formed by Chile, Colombia, Peru and Mexico, is a f ledgling initiative compared to the two cases we have already discussed. In terms of trade, it is barely relevant (accounting for 1.58% of exports and 0.89% of imports in 2017), yet its growth rates point to economic potential, as do the areas of cooperation its members have advanced in. For example, Mexico and Chile are already full members of the Organization for Economic Co-operation and Development (OECD), Colombia is in the process of joining and Peru is not a member, but complies with some of the organization’s mechanisms.

The other integration process Mexico has joined is even more recent. Signed in February 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is still in the process of being rati-fied and has yet to come into force. The agree-ment boasts 11 members—Australia, Brunei

Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam— and is descended from another free trade initiative, one that would have been the most ambitious in history in terms of global trade coverage if it had materialized: the Trans-Pacific Partnership (TPP), which the US govern-ment decided to back out of in early 2017. This year, Mexican exports to CPTPP members rep-resented 5.4% of its total exports, with imports coming in at 10.6%. Once again, it is evident di-versification is concentrated on the import side.

Last year, 93% of Mexico’s exports were made within the framework of free trade agreements compared to 67% of imports. This disparity points to a concentration of exports to one single partner. The other difference is called China. Mexico does not have a trade agreement in place with China, which makes up 17.6% of its imports and 1.66% of its exports. Instead, it applies the rules of multilateralism laid down by the World Trade Organization (WTO).

But this is not an appeal to the mercantil-ism-inspired protectionist logic the US govern-ment currently champions. On the contrary, one of the few economic policy stances the po-litical forces that contended for the presidency of Mexico on July 1 all agreed on was the need to continue defending multilateralism and trading freely on global goods, services and fi-nancial markets.

Mexico needs to diversify its trade. It is a subject that has been amply studied and the solution is still in the pipeline, but it’s going to take more than adding more free trade agree-ments to the mix, which, albeit necessary are not sufficient. One way Mexico can improve its profile as a trade partner is by participating in integration processes that hinge on other val-ues. The EU and the Pacific Alliance are clear examples of economic relationships we need to continue cultivating, because they too are on the hunt for new associates, having realized that their primary and longstanding partner has more unknowns than certainties to offer. The international economic order is changing and no one is sure in which direction it is head-ed. A compass appears to be guiding us across the Atlantic and along the Pacific coast.

*Economist specialized in global governance, member of the Mexican Council on International Affairs (Comexi) and the German Council on International Relations (DGAP). He is a Political Sciences PhD candidate.

The other integration

process Mexico has joined

is even more recent.

Signed in February 2018,

the Comprehensive and

Progressive Agreement

for Trans-Pacific

Partnership (CPTPP)

is still in the process of

being ratified and has

yet to come into force.