The Telegraph
Since 1st March, 1999
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- New Delhi has failed to see which side of its Latin American bread is buttered

India’s relations with Mexico are pregnant with possibilities. This may sound like a cliché, but it is a reflection of this truism that Vijayalakshmi Pandit was once ambassador to Mexico and Octavio Paz, the Nobel prize-winning poet, was Mexico’s envoy in New Delhi. But it is also true that for half a century, Indo-Mexican relations have remained pregnant with possibilities: there has been no offspring, despite a periodic surge in expectations. Hopes soared in 1961, when Jawaharlal Nehru, an admirer of Mexico’s independence in foreign policy and national assertiveness, travelled to Mexico and received in quick reciprocation a return visit to India by President Lopez Mateos. But there was very little by way of follow up.

Expectations were never as high as in the Eighties, when within the span of a single year, Indira Gandhi and President Lopez Portillo exchanged visits. Indeed, it is an accident of history that the turning point in Indo-American relations — the very first meeting between Indira Gandhi and President Ronald Reagan, where India’s courtship of the United States of America began — occurred not in Washington, but in Cancun, Mexico, where Portillo was hosting a summit of world leaders. Giani Zail Singh went to Mexico as president in 1984 and President Miguel de la Madrid to India the following year. Rajiv Gandhi’s visit in 1986 raised similar expectations. Nothing came of it.

India’s foreign policy is replete with examples of lost opportunities. India could have become a member of the Association of Southeast Asian Nations in the Seventies, but Indira Gandhi dismissed the ASEAN then as a grouping of Western stooges. Two decades later, when India managed to become ASEAN’s full dialogue partner, it was as if the southeast Asians, who had by that time emerged as the “Asian Tigers” were making a big concession to New Delhi. Archives now tell tales of how India may have been a permanent member of the United Nations security council during its last reorganization. And of how India refused to heed advice which would have made it a nuclear weapons power recognized under the nuclear non-proliferation treaty.

So it is with India’s ties with Mexico. But dwelling on the history of this relationship is not the issue. What New Delhi ought to do now is dedicate its policy to the goal of upgrading and diversifying relations with Mexico. The opportunity cost of India’s failure to do so will be far higher than when India lost out with the ASEAN in the Seventies and the Gulf states a decade later.

Here are some facts: a lack of public awareness of these has pushed Mexico far away from India’s policy radar. Mexico is the tenth largest country in the world both in area and in population. In a state like India, whose population signals the colossal failure of its family planning and whose size often makes governance a nightmare, this fact about Mexico could be interpreted as a mixed blessing.

But that is only one side of the coin. Mexico is also one of the 12 largest economies in the world. Its gross domestic product is in excess of $ 560 billion, per capita income is about $ 6,000 and in the last five years it has consistently notched up an annual growth rate of over five per cent. Individual prosperity in Mexico is the highest in the Western hemisphere with the exception of the US and Canada. Mexico is the only Latin American country which has been admitted to the Organization of Economic Cooperation and Development, the global club of big economies. It is the seventh largest producer and the fifth largest exporter of crude, but has played its cards in the international oil market with care by not joining the world oil cartel, the Organization of Petroleum Exporting Countries.

In a world where bad news makes it to the front pages of newspapers, it is natural that many Indians will associate Mexico’s economy with the country’s huge debt crisis in 1995, the bank collapses and unemployment that year and the international bailout which overcame the crisis. But it has been a different story since the North American Free Trade Agreement considerably integrated the economies of Mexico, the US and Canada. Mexico now has foreign currency reserves in excess of $ 35 billion, single-digit inflation and unemployment of just two per cent. Its currency is stable in a region where national currencies are sometimes so lacking in saver’s confidence that the US dollar is the unofficial unit for monetary transactions. Every year, for the last five years, Mexico has received foreign direct investment averaging $ 11 billion annually.

It is natural to ask the question: why should India care if far away Mexico is doing well' After all, India’s exports to Mexico constitute just 0.17 per cent of that country’s total imports. Mexican exports to India have hovered around a mere $ 60 million. There are no direct shipping links between the two countries, credit is expensive and a language barrier makes doing business with Mexico extremely daunting.

When Omar Abdullah, the minister of state for external affairs, was in Colombia in February, he presided over an extended brain-storming session with Indian envoys in the region on raising India’s profile. Articulate and personable, Abdullah makes an impression abroad even if he has been unable to make the same impression with his own electorate back home. In Bogota too, both the Indians he interacted with and his Colombian hosts were full of praise for the young minister. But the brain-storming did not deal with a fundamental problem which India faces in Latin America. New Delhi’s resources are spread too thinly all over the region to be able to make any impact in any country or reap dividends for its efforts on a sustained basis.

Conventional wisdom in export promotion councils and bodies like the Indian Trade Promotion Organization dictate that the country should take part in trade fairs, buyer-seller meets and the like by rote. Although ideology has given way to pragmatism and self-interest in foreign policy to a very large extent in South Block, this is yet to be reflected in many aspects of economic diplomacy. Third world considerations often dominate decision-making on business promotion abroad.

So, it was vainly hoped that as a result of the brain-storming presided over by Abdullah in Bogota, India would perhaps decide to concentrate its resources on a few countries in Latin America instead of making its presence felt in all 34 states of the region. Such planned targeting would bring results.

For purposes of decision-making in New Delhi, Mexico is now clubbed with the rest of Spanish-speaking America. Ideally, for Indian economic diplomacy to succeed in Mexico, that country should be delinked from Latin America and the Caribbean, be it in South Block, commerce ministry or trade and business promotion organizations. Following NAFTA, Mexico is now economically more linked to the US and Canada than to its Hispanic neighbours. It is now the second biggest trading partner of the US after Canada. It makes eminent economic sense for New Delhi to look at Mexico as an extension of the US and Canadian markets.

Formidable challenges notwithstanding, Indian businessmen have proved that if they are given the right incentives and encouragement, they can produce results in Mexico. Although trade with India is minuscule, considering the total volume of Mexican trade, recent years have shown promising results in numbers. Indian exports to Mexico have grown exponentially, touching $ 288 million at the last count. Mexico is already India’s biggest market in Latin America. India also has the biggest surplus with Mexico for any country in the region.

The case for paying more attention to Mexico as a long-term partner for India’s economic diplomacy is buttressed by Mexico’s free trade agreements with 35 countries. In addition to NAFTA, these cover the European Union, the European Free Trade Association, and in continental America, Venezuela, Colombia and Chile. Mexico is soon expected to benefit from similar arrangements with Japan and Singapore. It does not, therefore, come as a surprise that there are 50-odd joint ventures in Mexico with entrepreneurs of Indian origin. Between 1994 and 2000, investment by persons of Indian origin in such joint ventures brought $ 1,600 million into Mexico by way of investment. The dominant of such investments is in steel, where the Indian tycoon, L.N. Mittal, bought a Mexican steel plant and is running it successfully.

Although New Delhi is still a long way from such innovative thinking, what these PIOs have realized is that if their idea is to enter the US or Canadian market, it makes sense to set up a joint venture in Mexico instead of either in Canada or the US, where costs are prohibitive. By comparison, Mexico is still cheap. Indeed, even for exports to Europe, it makes sense to establish a joint venture in Mexico from where the German or British markets could be penetrated, thanks to Mexico’s free trade agreements.

The external affairs minister, Yashwant Sinha, and Arun Shourie, the new commerce minister, will have an opportunity to explore these options when they meet Mexico’s foreign minister, Jorge Castaneda, in New Delhi this week, notwithstanding some recent clouds over political aspects of Indo-Mexican ties. Castaneda’s visit was postponed earlier.

At the time of writing, there was uncertainty whether Castaneda’s visit would go through even this time. That uncertainty sadly reflects New Delhi’s inability to see which side of its Latin American bread is buttered or to discriminate and woo countries which can add content to bilateral relations.

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