Canadian companies continue to invest in Mexico, although trade has contracted

By Diane Lindquist
mexbiznews.com

While the global economic downturn has prompted some Canadian exporters to pull back on trade with Mexico this year, other Canadian companies are moving ahead with investments in a variety of ventures in the country.

“It’s impacted trade,” Rosalind Wilson, director of the Canadian Chamber of Commerce, said of the crisis.  “It hasn’t impacted investment.”

As a result, Canada has climbed from Mexico’s No. 5 foreign investor to its No. 2 investor, behind the United States.

“It’s mainly because of mining,” Wilson said. “It’s our fastest growing sector. There’s been significant investment from Canadian companies, particularly gold and silver.”

A total of 74 percent of foreign investment in mining in Mexico, she noted, is of Canadian origin.

Although Investment in new explorations and mine expansions in the country is expected to drop 25.3 percent to $2.73 billion (U.S. currency) this year compared with a year ago, several Canadian companies are forging ahead.

Goldcorp, for instance, is keeping to its plan to spend $1.5 billion on work at the Peñasquito mine in Zacatecas. Operations at the mine, likely to start in January, are expected to boost Mexico’s gold production 33 percent.

Overall investment by foreign businesses in Mexico has slipped significantly with the economic crisis, however.

While companies put a total of $22 billion into Mexican ventures in years past, the total for 2009 is expected to fall between $13 billion and $14 billion. In the first half of the year, the amount reached slightly less than $10 billion.

More than 2,000 Canadian companies registered to do business in Mexico, said Wilson, and they are active in some of the country’s most significant and strategic sectors.

Scotiabank is the seventh largest of Mexico’s banks. Earlier this year, Nicole Reich, the banks chief executive for Mexico, told Reuters it is interested in expanding its business in the financial sector through acquisitions, possibly in insurance or fund management.

Autoparts supplier Magna International Inc. occupies a major position in the country’s automotive sector.

In the energy sector, TransCanada Corp. was the successful bidder earlier this year on a contract to build, own and operate a $320 million pipeline to carry liquefied natural gas from a terminal under construction near Manzanillo on Mexico’s Pacific Coast 193 miles inland to Guadalajara.

And, Bombardier’s world-class manufacturing facility at Queretaro, which included a pledge to build a new aerospace university nearby, is the showpiece of Mexico’s emerging aviation and aerospace sector.

Business between Canada and Mexico has expanded at a brisk rate since 1993 when the two countries joined with the United States to forge the North American Free Trade Agreement.

At the end of 2008, Canada’s exports to Mexico had taken a 704 percent leap over the value of goods sold to Mexico before Nafta took effect 16 years ago.

Last year, trade between the two countries reached $9.5 billion, an 18.5 percent increase over the previous year.

The global economic crisis has changed the trade picture this year, although to what extent isn’t clear since data has yet to be compiled, Wilson said.

“Will it snap back?” she asked. “I certainly hope so.