寄稿

Mexico-Japan EPA. A Success Story
New Investment Opportunities.
Automotive and Energy Sectors.
Dr. Sergio Inclán
Minister. Embassy of Mexico in Japan
Representative in Japan. Ministry of Economy of Mexico

Antecedents
Mexico and Japan share a long history of Friendshipand Economic Relations. The first contacts between
the People of Mexico and Japan can be traced back to
the XVI Century. The first official contacts between
the two countries date from more than 400 years ago,
when a Commercial Mission lead by Tsunenaga
Hasekura arrived to the Mexican cost of Acapulco, anddiscussed with Mexico’s officials on trade relations.
Diplomatic Relations between the two countries
were established with the conclusion of the Friendship, Commerce and Navigation Treaty on November
30th of 1888. The 1888 Treaty, which adopted a reciprocal Most-Favored-Nation Treatment, represented forJapan its first Treaty concluded on an egalitarian basiswith a Western country. The Treaty served as a crucial
legal precedent that allowed the Meiji Government tosuccessfully reviewed unequal treaties that Japan had
concluded previously with Western powers. Following
the conclusion of the Treaty, immigration, cultural andeconomic exchanges between Mexico and Japan began.

Mexico-Japan Economic Partnership
Agreement
Recognizing the long historical friendship, the strong
economic and political relationship, and the high levelof economic complementarity, Mexico and Japan took
a very important decision at the beginning of the XXICentury: To further strengthen their Friendship andEconomic Relationship by negotiating a Free Trade
Agreement (FTA). Negotiations for the conclusion of
a FTA between Mexico and Japan started in November
2002. Japan had not concluded a FTA with any country by that time. After almost two years of an intense
process of negotiations, both countries signed the Economic Partnership Agreement (EPA) on September
17th 2004. The Agreement entered into force on April
1st 2005 after the corresponding ratifications by the42017.3Congress of Mexico and the Diet of Japan.
For Japan, and as it was the case back in 1888
with the conclusion of its first equal Treaty, the EPA
with Mexico was its first Free Trade Agreement fullfledged, with all sectors included according to theWorld Trade Organization disciplines. For Mexico, theEPA with Japan was its first Free Trade Agreementwith a country from Asia, and it further consolidated
Mexico’s FTA Agreements Network with preferential
access to more than 45 countries in the World.
The Mexico-Japan EPA, with 18 Chapters and
177 Articles, is a state of the art Trade Agreement,
since it establishes not only all the disciplines comprising a FTA: Trade and Investment Liberalization;
Market Access Improvement; Investment Protection;
Dispute of Settlements; Government Procurement;
Customs Procedures; Rules of Origin; etc., but it includes a strong mechanism of bilateral cooperation tofurther strengthen the economic relationship, and maximize the trade and investment liberalization;
investment promotion and facilitation; sanitary andphytosanitary measures, etc. Additionally, the EPA includes a very important mechanism for the improvementof the business environment, through the Improvementof Business Environment Committee, where representatives of both Governments and the private sector give
recommendations in order to further strengthen the
Mexico-Japan economic partnership.

Mexico-Japan EPA. A Success Story.
April 1st of 2017 marks the 12th Anniversary of theentering into force of the EPA. As we will describe, asa result of the great efforts by the private sector and
Governments of both countries, the EPA has been a
Success Story for both Countries in the first decade of
its implementation. The EPA has further strengthened
our friendship, bilateral trade, the flow of direct investment, is supporting industries and small and medium
size companies, and is fostering bilateral cooperationin key sectors of their respective economies. Addition-中南米 特集

ally, the EPA is strengthening further the Global
Strategic Partnership between Mexico and Japan.

Bilateral Trade
Since the EPA was signed, bilateral trade has increased
84.2% from USD12.75 billion in 2004 to USD23.49
billion in 2016. During this period, Mexico’s exports
to Japan increased 164.9%, from USD2.16 billion to
USD5.74 billion. In the same period Japanese exports
to Mexico increased 67.7% from USD10.58 billion to
USD17.75 billion.
In 2016, bilateral trade reached USD23.44 billion
with an increment of 6.2% compared with 2015.
During 2016, Mexico’s exports to Japan registered
USD5.74 billion last year, with an increment of 21%
compared to 2015. Japanese exports to Mexico reached
USD17.75 billion in 2016 with an increment of 2.2%
compared to the previous year.
Thanks to the EPA, Mexico is for Japan it’s mostimportant trading partner in Latin America.
Japan is for Mexico its fourth largest trading partner just after its NAFTA partners, the US and Canada,
and China. Moreover, Japan has become the second
most important market for Mexico’s exports of agriculture, fisheries, and beverage products just after theUS, accounting for USD1.01 billion in 2015.
As a very positive result of the EPA, the composition of Mexico’s exports to Japan has been changing.
Mexican exports of manufactured and added value
products to Japan have been increasing, serving as evidence of the crucial role of the automotive, energy,
electric, chemical etc., in the bilateral trade. Moreover,these industries are helping to increase and diversify
our trade and to link global supply chains in which
both countries are involved, benefiting both countries.
Additionally and after more than ten years, Mexico
has resumed its export of oil and petroleum products
Mexico - Japan Trade, 1993 - 2016.
USD Billion
25

Mexico's Exports to Japan
15

Japan's Exports to Mexico 2.6
2.1

2.8

USD 23.4

4

3.2 3.8

4.4 4.2 4.3 4.7

5.7

3.5
2.8

17.6 17.5 17.7
16.4
15.3
16.5 17.1 17.3
16.3 15
2.6
13.1
USD 5.1
11.4
10.6
1.4 2.1 1.9 1.6 1.9
9.3
5 1.2 1.4
8.1 7.6
6.5
5.1
3.9 4.8 4 4.1 4.3 4.5
0

2.4

2.3

2.1

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

10

Japanese Investment into Mexico.
Legal Certainty and Protection.
The EPA contains state of the art provisions that givecertainty and legal protection to the flow of direct investment. The EPA states in Article 1 as one of themain objectives: To increase investment opportunities
and strengthen protection for investments. Investment
Chapter 7 of the EPA recognizes important principles
for investors of both countries: National Treatment(Article 58); Most-Favored-Nation-Treatment (Article59); and General Treatment (Article 60). Additionally,
Article 63 allows all transfers relating to investment
activities including but not limited to: Profit; dividends; interest; capital gains; royal payments, etc.
As we will now describe, the economic and political stability of Mexico, the EPA with Japan and its
important provisions giving legal certainty and protection to investors, and Mexico’s vast FTAs Network,
have further consolidated the country as an important
Accumulated Japanese Investment into Mexico, 2005 - 2016.

EPA
Signed20

to Japan, being the number one sector in our exports to
the Japanese market.
Mexico’s main products exported to the Japanesemarket in 2016 were oil and petrochemical products,
salt, minerals, auto parts, machinery, electronic components, optical instruments, chemicals, agriculture
products and other commodities.
Main Japanese products exported to Mexico lastyear included motor vehicles, auto parts (cylinders,gear boxes, chassis, machinery and mechanical appliances, specialized steel), precision tools andinstruments, electronic boards, etc. More than 90% ofJapanese exports to Mexico are capital and intermediate goods that are required by Mexico’s industries toinsert them in the global value chains in order to export later on finished goods to the different markets inthe world.

Source: Representative office in Japan of Ministry of Economy of Mexico,with data of the Bank of Mexico and the Ministry of Finance of Japan

USD Million
16,000

USD 21.66 Billion
1,132.21
1,445.86
696.5314,00012,0002,146.00

10,000
8,000
6,000
4,000
2,000
0

3,661.58
1,769.00

EPA

1,739.40
790.1 443.4

562.5 190

1,152.50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Representative office in Japan of Ministry of Economy of Mexico

2017.35

destiny of Japanese Direct Investment.
In the 1990s Mexico undertook a far reaching
Trade Liberalization process by concluding FTAs. The
most important catalyst of the process was the North
American Free Trade Agreement (NAFTA) which entered into force in 1994, and later on FTAs with Latin
American Countries, the European Union, the European Free Trade Association, and an EPA with Japan in
2005. Mexico’s Trade Liberalization has been successful. Mexico is now an important player in the World’s
Trade and it is the number one exporter of Latin America. Moreover, Mexico ranks top in Latin America in
the World Bank’s Doing Business 2016 Report, and
top in Japanese companies’ perception for exploringnew business in Latin America in the JBIC’s FY2016
Survey Report. Due to the Japanese Trade-oriented Investment and Market-oriented Investment models,Japanese companies are now taking more advantage of
Mexico’s preferential access to the most important
markets in the world, competitive human resources,
and its strong business environment. As a result, Mexico has become not only an important destiny forJapanese direct investment, but an important platform
for Japanese companies’ production and a gateway of
their exports to the most important markets in theworld.
Since the EPA entered into force in 2005 until
2016, there has been an unprecedented flow of Japanese Direct Investment into Mexico. During that
period, Japanese companies have announced major
investment projects in Mexico worth more than
USD21.66 billion in several key Mexican economy
sectors including but not limited to: Automotive; Energy; Infrastructure; Electric and electronics;
Metallurgic; Agroindustry, among others.
Japan has become the most important source of
foreign direct investment from Asia into Mexico.
Moreover, Japan is now the third most importantsource of foreign direct investment into Mexico worldwide.
Since the entrance into force of the EPA and a
result of its regulations protecting the flow of capital,
increasing business opportunities and new investment
projects, the number of Japanese companies established in Mexico has increased 209%, from 326
companies established in 2005 to 1008 in 2016.

Importance of the Automotive Industry in
the Economic Relationship
Antecedents
Japanese Original Equipment Manufacturers (OEMs)
have been operating and contributing to Mexico’s Au6

2017.3

tomotive Industry for more than 50 years now. Nissanstarted operations in May of 1966 with its First plantin Cuernavaca, Morelos, Mexico. A Second plant was
built in Aguascalientes, Mexico, starting operations in
November of 1982.
Honda started production of motorcycles in Jalisco, Mexico, in 1971. Later on Honda started the
production of vehicles and auto parts in 1996.
Toyota Motor Sales de Mexico initiated operations in April of 2002. Later on, Toyota Motor
Manufacturing initiated operations in Baja California,
Mexico in 2004, for the production of Tacoma for the
US market.
Japanese Investment in the Automotive Industry.
Since the EPA was concluded in 2005, Japanese Direct
Investment into Mexico has been more heavily concentrated in the Automotive Industry. All major
Japanese OEMs and their suppliers have announced
major investment projects for the production of automobiles and products in related sectors such as
electronic components, specialized steel, plastic,chemicals, etc., serving North America (Mexico, US
and Canada) Europe, and Latin America.
In 2011, Mazda announced an investment of
USD770 million for the construction of its First plantin Mexico. Mazda de Mexico started production of
Mazda 3 in its new plant in Salamanca Guanajuato,
Mexico, in January of 2014. The plant has a production capacity of 200,000 units.
In January of 2012, Nissan announced an investment for USD2 billion for the construction of its
second plant in Aguascalientes, Mexico. In Novemberof 2013 the new plant of Nissan was inaugurated witha production capacity of 175,000 units.
Additionally in 2014, Nissan announced anotherinvestment project in Mexico, together with Daimler
AG, worth USD1.2 billion for the construction of aplant for the production of high end automobiles, Infinity and Mercedes Benz. The new Nissan-Daimler
AG plant in Mexico will have a production capacity of
300,000 units per year when it reaches full capacity.
In 2012, Toyota Motor Corp. announced a newinvestment project in Guanajuato for production of automobiles in the Mazda Plant within the framework of
the Investment and Supply Agreement between the
two Japanese OEMs. In April of 2015, Toyota announced another new investment for approximately
USD1 billion to build a new plant in Guanajuato. The
new plant will have an annual capacity of 200,000
units, starting production in 2019.
In February of 2012, Honda announced an investment of USD1.2 billion for the construction of its

中南米 特集

Second Plant in Guanajuato with a production capacity of 200,000 units. In February of 2014 Honda began
production of the Fit model mainly for the North
American market.
Since the signing of the EPA and due to the major
projects announced by the Japanese OEMs and their
suppliers, Nissan, Honda, Toyota and Mazda have increased production in Mexico by 301.2%, from346,626 units in 2004 to 1,390,738 units in 2016.
Mexico’s Automotive Industry.
Investment Opportunities.
Mexico is the seventh largest producer of automobilesin the world. In the last twelve years, Mexico’s production has increased 130%, from 1,507,175 units in2004 to 3,465,615 units in 2016.
Mexico is the fifth largest exporter of automobiles in the world. In the last twelve years, Mexico’sexports of vehicles increased 153% from 1,094,306
units in 2004 to 2,768,268 units in 2016. Additionally,
sales in Mexico of automobiles reached 1.6 million in2016, with an increment of 18.6% in comparison with2015.
As a result of the leading OEMs new major projects and expansions of production in Mexico, there are
an increasing number of investment opportunities forTier 1, 2 and 3 companies to further strengthen the
supply value chain, supplier capacities, and the development of the local supply chain. Due to the increasing
production of automobiles in Mexico, including now
high-end vehicles as well, there are more business opportunities and growing demand for: Specialized steel;plastics; molding; foundry; forging; machining; aluminum die casting; plastic injection; semiconductors;
design and engineering; and human capital. There arealso business opportunities for the transfer of technology, materials and components for auto parts
manufacturing in accordance with Japanese OEM’s
specifications.

Importance of the Energy Sector in the Economic Relationship.
Antecedents
During the 1970s important events took place in thebilateral economic relationship. From the first oil crisis in 1973, Japan was probably the most affectedindustrialized country. Japan’s dependency of crude
oil at that time from the Middle East, the region in
conflict, represented 77.5%. Moreover, Japan’s dependency on oil supplies from OPEC countries
represented 92.9%. Due to this scenario, Japan had totake measures to cope with the situation. The Adjust-Japanese OEM’s Production in Mexico, 2004 - 2016.
Units
1,400,000

1,390,738
139,427

Toyota1,200,000

149,235

Mazda

1,000,000

Honda

h
rowt

%G

301.2

253,988

Nissan800,000
600,000
346,626
400,000

848,088

200,000
02004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Representative office in Japan of Ministry of Economy of Mexico,with data of AMIA

ment of Supply and Demand of Oil Law and the
National Law of Emergency Measures were enacted.
Additionally, the Energy General Council delivered aReport in 1974 stating that the supply and demand of
crude oil would be uncertain. With this analysis, threemain policies were established in Japan: 1) To achievea stable supply of energy; 2) To diversify its imports ofoil and natural gas; 3) To create an industrial structure
aimed to conserve energy and increase energy use efficiency. In 1978 a new conflict in the Middle East
started and as a result of the production and exports
cuts, the second oil crisis began in 1979.
Meanwhile, Mexico started a period of economic
recovery in 1976. There is no doubt that the most important element of the beginning of the economic
recovery was the discovery of important oil fields by
PEMEX. During the 1970s Mexico became an important oil producer and exporter outside OPEC.
With these scenarios, Japan revised its policy towards Latin America giving a more relevant place toits political and economic relationship with Mexico.
As a result, Mexico and Japan started negotiations on
the possibility of supplying Mexico’s oil to Japan. In
June of 1978 PEMEX and Mitsubishi Corporation
signed an Agreement to send samples of crude oil toJapan. In September of 1978, the Chairman of the Japan Economic Federation (Keidanren) visited Mexicoand continued negotiations for the supply of oil with
Mexico’s official. These negotiations gained momentum with the visit of the President of Mexico to Japanin October of 1978. The Presidential visit produced
concrete results for increasing trade, investment, scientific and cultural exchanges and the supply of
Mexico’s oil to Japan began. This change of views andperceptions from both countries had a strong and rapid
impact on the economic relationship.

2017.37

Japanese Investment in the Energy Sector.
Mexico’s Energy Reform
Since the Mexico-Japan EPA came into force in 2005,
Japanese companies have been winning more public
biddings for energy projects with PEMEX and CFE,and concessions for water treatment and infrastructure
for an amount of approximately USD5. 26 billion until
2016. The EPA has been a key element for the increasing participation of Japanese companies in this sector
in Mexico like Mitsui & Co, Mitsubishi Corporation,
Sumitomo Corporation, Mitsubishi Heavy Industries,
Mitsubishi Hitachi Power Industries, Toshiba, Chubu
Electric Power, etc., and with the important financial
support of JBIC in some of the projects.
Mexico, a non-OPEC country, is one of the tenlargest oil producers in the world. Similar to what happened back in the middle of the 1970s, we believe
Mexico and Japan have a new opportunity with the energy sector to improve and consolidate their economic
relationship further. On December 23rd 2013, Mexico’s Energy Reform formally became law following
the approval in Congress and the ratification by the
majority of Mexico’s States Legislatures. The objective of the Energy Reform is to increase thecompetitiveness and efficiency of the energy sector tocontribute to Mexico’s sustainable economic growth.
The reform modified three articles of the Constitutionof Mexico, allowing domestic and foreign private investment together with PEMEX and the Mexican
utility company CFE.
Mexico’s Energy Reform is generating high expectations in the international markets and amongleading energy’s companies worldwide. The Energy
Reform represents a great opportunity for Japan tomore actively participate in Mexico’s energy sector,
and diversify its sources of energy within the framework of its own Energy Reform.
There are increasing investment opportunities in
Mexico’s energy sector:
Upstream: Exploration and production of hydrocarbons.
Midstream: Transportation and storage; expansion ofpipelines; liquefaction terminals; compression and regasification of natural gas.
Downstream: Refinery (production of gasoline anddiesel, commercialization of gas, diesel, natural andLP gas; distribution network and storage of gasoline
and diesel).
In July of 2014, the Prime Minister of Japan paid
an official visit to Mexico, and together with the President of Mexico highlighted the positive results of the
EPA between both countries. Within the framework of
the visit, 14 MOUs were signed between institutions
8

2017.3of both countries, several of them in the energy sector
with PEMEX, JBIC and JOGMEC, with the objective
to increase cooperation in the energy industries of bothcountries.
In November of 2014, the Information Center for
Petroleum Exploration and Production sent a representative of the most important Japanese companies inthe energy sector to Mexico to explore new business
opportunities in the country within the framework of
the Energy Reform. In the same year, the Japan Electric Power Information Center sent Mission to Mexico
to evaluate and explore business opportunities for its
members in the energy sector in Mexico.
After these visits, several seminars on investment
opportunities in the energy sector have been organizedin Mexico City and in Tokyo.
On December 2016, the Japanese company INPEX, together with PEMEX and Chevron, weresuccessfully awarded an exploration license for an important block in the Trion field of the Gulf of Mexico.
This concrete result with the participation of a Mexican, Japanese and US company is relevant, since it
was the first deep water lease auction in Mexico within
the framework of the Energy Reform.
Mexico is one of the most open economies and isamong the largest exporters in the world. The country
has become a successful player in the global economy,
and it has consistently continued free trade policies formore than two decades.
Mexico and Japan have shared a global vision
based on the principles of friendship, commerce andcooperation for more than 400 years. There is no doubtthat the first decade of the Mexico-Japan EPA has
been a success based on the results described above.
Both countries are neighbors in the Asia-Pacific region, the most dynamic in the world, with more
economic growth expected in the future. Based onthese principles of free trade and increasing cooperation in key sectors of both economies including but notlimited to: Automotive; energy (oil and gas); electric
power plants; electric-electronics; chemical and metallurgic; mining; metal mechanic; infrastructure;
agroindustry; steel; and new sectors like Aerospace,
Biotechnology, telecommunications, IT, renewal energy and clean technologies, will further strengthen the
Economic Relationship.
Finally, we firmly believe that increasing cooperation, investment and joint venture projects among
companies of both countries, particularly in the energy
sector, will be a catalyst for a new era of the Global
Strategic Partnership between Mexico and Japan, stated in a Joint Declaration by the Leaders of bothcountries, in the XXI Century.