Fran O'Sullivan: Challenge to ride Mexican wave

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Visit by John Key comes at an economic sweet spot for a country officials hope will hold opportunities for NZ firms.

New Zealand's challenge is to ride the Mexican wave as the country extends its economic revolution to agriculture. Photo / Supplied
New Zealand's challenge is to ride the Mexican wave as the country extends its economic revolution to agriculture. Photo / Supplied

Prime Minister John Key will be plugging a "new era" in the relationship between New Zealand and Mexico when he meets President Enrique Pena Nieto at the Castillo de Chapultepec in Mexico City today.

New Zealand's challenge is to ride the Mexican wave as the country extends its economic revolution to agriculture. The Key visit comes at a sweet spot in Mexico's economic development.

Its new President has urged political parties to set aside their ideological differences and work together for Mexico.

The upshot is a political pact to transform the agriculture sector which New Zealand officials hope will provide plenty of business opportunities for our agritech companies as well as our big producers as Mexico modernises.

New Zealand is also looking to the long-term strategic game.

Unfortunately, Primary Industries Minister Nathan Guy in an otherwise upbeat address yesterday missed the opportunity to position New Zealand in its strategic relevance as part of the Asian regional growth dynamic.

Being portrayed as a small but efficient Pacific nation at the bottom of the world (even if true) doesn't really cut it when it comes to the sophisticated spruiking which will be necessary to boost New Zealand's image to a country which its top officials admit their citizens know little about.

As an aside, New Zealand could take lessons from the Mexicans when it comes to promoting their own country's rapidly changing brand.

But when it came to New Zealand's value to Latin America, Guy was on firmer ground.

"I truly believe New Zealand is the best in the world at what we do - we have the assurance systems to trust our goods and products," he said. "We are here in Mexico with all this experience and energy to engage with you. In my opinion governments only do so much to increase trade."

The potential gains from a strategic push underline just why Key has taken 10 days out of his programme to visit Latin America.

The massive projected growth in global population together with rising incomes is expected to push world food demand up 70 to 80 per cent by 2050.

This is a big incentive not just for New Zealand, an efficient food producer, but also for Mexico with which the Key-led trade mission wishes to forge partnerships to meet the growing global demand for high-quality safe food in a sustainable way.

As Guy told the business audience, with global growth come global opportunities - we have to take them.

Key himself didn't arrive in Mexico City until late last night.

But during a series of business sessions yesterday it was apparent that Mexican officials and business leaders have already welcomed New Zealand's intention to signal a collaborative approach as the two countries "move forward together in the Asia-Pacific region".

There were the expected sensitivities around the Trans Pacific Partnership negotiations, which Mexico joined for the first time in Auckland last December.

But Mexican officials were sanguine.

Their country already has 12 free trade agreements covering 44 countries giving them access to 1.2 billion consumers and two-thirds of global GDP.

In other words, they get it.

Mexico is bustling under its new President, who is not afraid to upset powerful domestic players to increase the country's economic performance.

Key will be the first foreign leader on Pena Nieto's dance card - which will give his visit added cachet.

Mexico is already the world's 12th-largest economy and aims to be in the top 10. Its annual economic growth rate is bumping along in the 3 to 4 per cent range.

This is not at the level of Asia's fastest-growing economies. But the growth prospects are sufficiently huge to beg the question why New Zealand hasn't made a concerted push before to tap this market.

The problem is Mexico is a land of contrasts.

On the one hand there is vast poverty (Pena Nieto has launched a crusade against hunger) yet it is also a manufacturing base and home to many of the world's top brands in sectors ranging from aerospace to electronics.

It has had a stable investment grade for a decade and sports record foreign reserves which are twice public debt levels. It is focused on maintaining its hard-won economic gains after the currency crises that brought it to its knees two decades ago.

It joined the Gatt in 1986 and is now a proponent of free trade, making Mexico one of the most open economies.

An emerging markets index published by the Economist ranks the country as "extremely competitive on a global scale".

The omens for Key's bilateral talks with Pena Nieto are good.

An official from Mexico's Ministry of Agriculture stressed the importance his country has attached to the New Zealand relationship.

"Our President has instructed us to strengthen the relations we have with all countries of [the] world and to strengthen and recover its leadership role."

It was refreshing to hear him talk about how the world's borders no longer exist and say Mexico could go as far as it wants.

Speaking on behalf of his President, the official noted it would be the first time the Mexican media will meet a representative of another country, which he said was an indication of a very good future relationship.

But he cautioned that while there were a lot of agricultural opportunities, Mexico had to acknowledge there was a lot of poverty in the countryside.

Mexico produced 50 per cent of its food, which was below the recommended 70 per cent level set by the FAO.

In the past agriculture was more than 16 per cent of Mexico's GDP; it is now around 3.2 to 3.5 per cent.

"We have the crusade, but have to have the food. What are we to distribute? This is the big challenge."

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

Read more by Fran O'Sullivan

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