Over the past couple years, something big has been cooking between India and Mexico; something that might lead to stronger trade ties between both economies and fan the flames of Mexico’s growth in IT services exports.
Mexico and India are traditionally positioned as competing entities in global IT outsourcing. Nevertheless, public authorities in Mexico have pointed to a growing collaboration between both economies, aiming to increase their presence in the global tech services market.
Mexico’s Foreign Relations Secretary (and potential presidential candidate for 2024) Marcelo Ebrard launched a diplomatic tour through India in early 2023, visiting New Delhi and Mumbai and meeting with top executives from some of India’s biggest companies in the pharmaceutical, manufacturing and tech sectors.
Encuentro con Rajesh Gopinathan, CEO de Tata Consultancy, empresa que ya está presente en Guadalajara y la Ciudad de México y ahora va a Monterrey. Acordamos un programa de formación técnica "up scaling" a gran escala. Muchos empleos vendrán!!! pic.twitter.com/zrLCXamTbW
— Marcelo Ebrard C. (@m_ebrard) April 1, 2022
Ebrard addressed his constant presence in India and events related to investment by Indian companies in Mexico during the opening of TCS’ new offices in Monterrey, in late May. Though he didn’t give too many details, he did signal both countries expect to cultivate a tighter trade relationship over the next decade, with the tech services sector being a focal point.
“You might be wondering: why is the Foreign Relations Secretary attending an event of this sort? […] We [Mexico and India] have grown closer through trade,” Ebrard stated during the event.
“It allows us to join this trend of an economy of data and ideas, which is the economy of the future. That’s why I’m here,” he explained. “It’s the result of a common design, between Mexico and India, for the future. It’s not only a decision made by a single company, with support from [Nuevo Leon’s] state government.”
Tighter Trade Ties
Though far from the levels of trade attained by Mexico with the US, Canada and Japan, its relationship with India has fostered an important growth in their trade flows over the past decade.
Total trade (imports + exports of goods and services) between Mexico and India reached US$10.2 billion in 2021, a 264% increase compared to the volumes achieved in 2010 (US$2.8 billion), according to data compiled by Mexico’s Economy Secretariat. Mexican authorities expect that number to grow even further in the next decade.
“India is already Mexico’s ninth biggest trading partner. It will soon be the seventh biggest, and eventually the fifth, over the next 15 years,” Ebrard pointed out during the TCS event.
#Mexico Minister of Foreign Affairs,H.E. Marcelo Ebrard,currently on India visit, called on along with a high level delegation.Discussed strengthening existing cooperation and ways of extending it to new areas like digital health,genomics &biotechnology,green revolution,Space etc pic.twitter.com/CrMe1IJHYM
— Dr Jitendra Singh (@DrJitendraSingh) March 31, 2022
“Mexico is also strengthening its presence [in India]. I recently visited Mumbai and met with TCS’ CEO [Rajesh Gopinathan]. We’re having a stronger presence there, striking more and more agreements,” he added.
As of today, Mexico is India’s biggest trading partner in Latin America, even above Brazil. At a global scale, nevertheless, the country ranks 28th among India’s trading partners.
“India is already Mexico’s ninth biggest trading partner. It will soon be the seventh biggest, and eventually the fifth, over the next 15 years”—Marcelo Ebrard, Mexico’s Foreign Relations Secretary
In a similar fashion, despite the rapid growth in trade flows between Mexico and India, that relationship amounts only to 1% of Mexico’s total trade, which is dominated by the US with more than 80% of the country’s total trade flows.
Mexico has yet to sign a free trade agreement with India. The closest thing to an FTA between them is an investment protection agreement signed in 2007. No plans have been announced by either government for an FTA.
A Stronger Presence
Echoing the arrival of several Chinese manufacturing firms wanting to make the best out of the US-Mexico nearshoring/friendshoring initiative, many Indian tech firms are setting up shop in Mexico with an eye on the US market. Several sources have told NSAM that the flow has been steady for years.
Effectively all of India’s top tech players have operations in Mexico: TCS, Infosys, Tech Mahindra, NIIT, Aptech, Wipro, BirlaSoft and Hexaware, among others. Most Mexican firms have yet to make the trip to India, though, with Softtek being the only one with a presence there.
More Indian tech firms might be on the way. The India-Mexico Business Chamber (IMBC) is working on a “CEO meeting” which will bring together top executives from Indian tech companies and “key government officials” from Mexico, as well as representatives of the Mexican IT industry. The reunion aims to “further foster the collaboration and knowledge exchange between both countries”.
It was an honor to meet H.E. Ms. Alicia Barcena,Hon'ble Minister of Foreign Affairs of Mexico @SRE_mx
As an important country in LAC,India is committed to deepening our multi-faceted Privileged Partnership & we look forward to strengthening this relationship under her leadership pic.twitter.com/gGDoDNEChr
— India in México (@IndEmbMexico) July 12, 2023
Back in 2021, India’s Council for the Promotion of Electronic and Software Exports and the Mexican Electronics, Telecommunications and Information Technologies Chamber (CANIETI) signed a memorandum of understanding (MoU) to promote trade. Similarly, the Indian Federation of Chambers for Commerce and Industry signed a MoU with the Mexican Council for Foreign Trade (Comce) to “promote the trade relationship between Mexico and India”. Both MoUs received the blessings of their respective federal governments.
As of today, Mexican companies have invested approximately US$810 million in India. Indian companies have invested around US$3 billion in Mexico.
What the Future Holds
According to Marcelo Ebrard, then TCS CEO Rajesh Gopinathan laid out why the company (and India in general) has shown so much interest in Mexico over the past couple years. It all comes down, Ebrard explained, to Mexico’s potential for nearshoring and its already tight relationship with the US.
“They [TCS] want to be a part of it [that growth]”, the foreign secretary assured during the TCS event.
The Mexico-India trade relationship has undoubtedly grown tighter over the past decade, and the current administrations in both countries seem interested in taking that relationship even further over the next decade.
Nevertheless, Mexico can’t depend on its nearshoring appeal alone to keep that interest going. FDI flows have been strong for Mexico post-COVID, but the boat has been rocked through the last five years by friction between Washington and the Lopez Obrador administration. There are also issues of insecurity, corruption and mid economic performance.
Mexico will also have to step up its game in matters of English proficiency among its population and the amount of tech graduates being pumped out by its universities. Even tech strongholds such as Guadalajara are having a tough time catching up with the increasing demand for engineers, depending on out-of-state hires and, in some cases, recruiting from Central and South America.
Along the past three decades, the story surrounding Mexico’s economic performance has been one of potential. Potential, unfortunately, which has yet to crystalize in a manner similar to that seen in China, India and other emerging economies.
Hopes remain high for the future of its trade relationship with India. Yet, there’s a lot of work to be done before both economies can claim success.