India vs. Mexico: competition for investment8/12/2022
India and Mexico are, without a doubt, two of the most important emerging economies in the international landscape and, separately, each one in its region. Historically, both countries have had commercial relations sustained by mutual understanding and cooperation in different areas.
In this sense, the commerce between the two nations took a big step forward in 2018, when it passed for the first time $10,000 million dollars in mutual exchange: $4,923 million dollars in Mexico exportations and $5,231 million dollars in articles imported from India.
With these numbers, the Asian country raised to the 9th position as a commercial ally for Mexico that, at the same time, took the 1st place as the main commercial ally for India in Latin America and the Caribbean Sea (taking the place of Brazil), and the 2nd regional ally in all the continent, just beside the United States.
In these circumstances, there’s a dilemma for the investment sector to take the most intelligent decision for making a business grow, thinking in terms of production: taking it to the nearest country or going overseas. It’s a nearshore vs. offshore decision.
In this article, we compare Mexico’s nearshoring and India’s offshoring, considering aspects such as the economic perspectives, infrastructure competitivity, available talent and workforce, communications, and areas with growth potential.
India is the 5th largest economy in the world, according to Investopedia. In 2019 it had a gross domestic product of US $2.94 billion, more than the United Kingdom or France.
In terms of per capita purchasing power parity, the Asian country is 3rd globally, although it is the 2nd country with more population in the world (1,339 million people), only behind China.
Among the strengths of this economic powerhouse, we can mention:
- It has the fastest-growing services sector in the world, which contributes to 60% of the economy and 28% of the employment. Industry (23%) and agriculture (17%) follow it.
- It has a limited dependence on exportations.
- High national savings rates.
- Favorable demographics.
- Rising middle class.
In the meantime, Mexico’s economy occupies the 15th global position, with a gross domestic product of US $1.27 billion dollars. We can mention some of the most outstanding features of this economy:
- The tertiary sector (services) is also the most important for the national economy of the country, representing near to 63% followed by industry (33%) and agriculture (4% and in stand by for almost 20 years).
- Main commercial ally for the United States of America, over Canada and China.
- 11th petroleum producer in the world.
- 11th place in the world’s population ranking (129.2 million people), with almost 60% of the economically active population.
- Mexico has a network of 12 free trade agreements which allows the country to access 46 different markets around the world.
Status of investment and exchange
The main growing areas for investment in India and Mexico are information technologies (IT), the pharmaceutical industry and the automotive industry, three areas where India is highly competitive.
The total investment is calculated at more than US $3,000 million, with more than 180 Indian enterprises that have activities in their own country, including joint ventures of TI/software leaders (TCS, Infosys, Wipro, NIIT, BirlaSoft, HCL, Aptech, Hexaware, Patni, etc.) and pharmaceuticals (Hetero Labs, Sun Pharma, Dr. Reddy’s Laboratories, Torrent Pharmaceuticals, etc.).
Exportations from India to Mexico are mainly of vehicles and automobile parts, organic chemical products, aluminum products, electrical machinery and electronic devices, iron and steel products, gems, ceramics, and jewelry.
On the other way, Mexican investments in India are calculated at about US $1,000 million and concentrate mainly on home investments, multi-cinemas, infrastructure, automobile parts, food processing, and cement.
Some Mexican brands that stand out in the Indian market, there are Nemak, Metalsa, Mexichem, Tremec, Great Foods & Beverages, RuhrPumpen, Cinepolis, Kidzania, and Bimbo group.
India’s imports are mainly petroleum (75% of all imports, being the 3rd market for Mexican oil production), electric products and machinery, electronic devices, automobiles, and vehicle parts.
Nearshoring in Mexico vs. Offshoring in India: pros and cons
Indian enterprises consider Mexico as an important place for investments, due to its proximity Latin American market and, most, to the North American market, with the free trade agreement between the United States of America, Canada, and Mexico.
Indian regime, with prime minister Narendra Modi in charge, has started an aggressive plan for attracting foreign investments, with plans like “Make in India”, which allows 100% of foreign participation in almost all economic activities.
In the next chart we can look at the features each country has as a potential place for investors:
Ease of doing business(World Bank Index)
|60th in the world
1st in Latin America
|63th in the world
1st in Southern Asia
|Transports and communications (with main cities in the USA and every country)||2-3 hours’ time difference
1-8 hours’ travel in airplane
|10-13 hours’ time difference
10-25 hours’ travel in airplane
|Workforce development (World Economic Forum)||69th in the world
(125,000 engineers and technicians each year)
|103th in the world
(1.5 million engineers each year)
|Global competitivity (World Economic Forum)||48th in the world (64.9 qualification)||68th in the world (61.4 qualification)
Finally, both countries match in viewing main potential areas for economic exchange, there are software, IT, pharmaceutical products, engineering products, renewable energies, biotechnology, vehicle parts, and minerals.
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