The auto parts sector in Colombia is a significant part of the productive chain of the nation’s automotive industry, the fourth largest in the region. It represents 6.2% of Colombia’s industrial GDP and has generated more than 25,000 highly skilled and well-paid direct jobs. Among the items manufactured in the auto parts sector in Colombia are:

• Batteries and wiring: Colombia had a few battery manufacturing companies that produced automotive batteries for various vehicles.
• Tires: Some tire manufacturers had established facilities in Colombia to produce tires for both passenger and commercial vehicles.
• Exhaust Systems: There were companies producing exhaust systems and components for vehicles.
• Seats and Interiors: Colombian manufacturers produce automotive seats and interior components.
• Filters: Some companies manufacture vehicles’ oil, air, and fuel filters.
• Electrical Components: Certain electronic and electrical components for vehicles were being produced in the country.

Other items manufactured in the auto parts sector in Colombia include suspension systems, steering systems, transmission systems, cooling systems, friction material, chemical products, lubricants and fuels, tempered, laminated, and armor glass, chassis frames, air conditioners, rubber and metal parts, and accessories, among others.

The automotive sector, including auto parts manufacturing, had been a target for foreign investment due to Colombia’s strategic location, trade agreements, and market potential within Latin America. International companies often invest in the country to take advantage of lower production costs, access regional markets, and benefit from Colombia’s efforts to foster a business-friendly environment.

Government actions are aimed at capturing investment for the auto parts sector in Colombia

Colombia’s government has been actively promoting foreign investment through incentives, tax breaks, and efforts to improve business efficiency. They have also sought to increase the automotive industry’s competitiveness, including the auto parts sector in Colombia.

According to Luis Ernesto Muñoz, a professor at the Universidad de los Andes, the Colombian industry is in an intermediate state, considering that one of the extremes is the development of the complete vehicle and another is vehicle importation. Based on the above, the industry has two significant markets: vehicle assembly and spare parts manufacturing and sales. These activities are concentrated in Bogotá, Cali and Medellín.

Although at the moment, one of the lines of a smaller scale in generating income in the auto parts sector in Colombia is the manufacture of components or systems with added value. The transition from an “assembly country” to a “manufacturing country” is one of the industry’s most critical challenges. Successfully making the transition could represent an increase in the degree of specialization of the auto parts sector in Colombia.

There are several major players in the Colombian automotive industry

According to the research carried out by Martín Arango Serna, an academic at the country’s National University, the companies that make up the auto parts sector in Colombia are:

• National and international suppliers that supply parts to manufacturers, assemblers, and distributors.
• Parts manufacturing companies that supply both assemblers and distributors.
• Assembly companies of light vehicles, trucks, buses, and motorcycles.
• The distribution companies, whose corporate purpose is the sale of auto parts.
• The freight carriers that move the parts between each of the groups mentioned above.

Colombia currently has eight vehicle assemblers installed and more than 300 companies dedicated to producing auto parts and bodywork. The goal for 2032 is to sell USD 5,129 million in vehicles and USD 5,558 million in auto parts. The vehicle sector in Colombia is recognized worldwide as a “leading edge” sector.

It is considered to be at the tip of the economic and social development spear due to its multiplier effects on a wide range of fields of industrial activity. Its high contributions to innovation and technology transfer make it one of the leading sectors and one of the locomotives for the development of Colombia

The vehicle assemblers with a presence in the country include:

• General Motors Colmotores (Isuzu, Volvo, and Chevrolet brands)
• SOFASA (Renault brand)
• Hino Motors Manufacturing SA (Hino brand – Toyota group)
• Photon
• Non-Plus Ultra Bodies ( its brand, CKD Volkswagen)
• Auto Assembly Company (Nissan brand)
• Navitrans SA (Agrale brand)
• Daimler (Mercedes Benz brand)

Colombia has the largest vehicle spare parts distribution center in Latin America, with nearly 70,000 parts in stock and an investment of US$40 million in infrastructure and spare parts throughout the country to serve all brands of heavy-duty vehicles at different points of care.

The auto parts sector in Colombia has room for growth

The auto parts sector in Colombia has much room to develop further. Its continued growth depends on several factors. Among them are:

• Economic Growth: If Colombia’s economy continues to grow, it could lead to increased vehicle sales and demand for auto parts, benefiting the sector.
• Government Policies: Favorable government policies, such as incentives for the automotive industry or measures to attract foreign investment, could stimulate growth in the sector.
• Regional and Global Demand: Colombia’s auto parts industry might benefit from increased regional and global product demand, leading to more export opportunities.
• Technological Advancements: Embracing advanced manufacturing technologies and staying up to date with industry trends could enhance the competitiveness of Colombian auto parts manufacturers.
• Sustainability and Electric Vehicles: The global automotive industry is shifting towards sustainability and electric vehicles. Colombian auto parts manufacturers might need to adapt to these changes and invest in components and technologies related to electric mobility.
• Supply Chain Integration: Strengthening supply chain integration with original equipment manufacturers (OEMs) and global automotive companies could create new growth opportunities.
• Market Competition: The sector may face challenges from international competition, especially from countries with well-established auto parts industries.
• Infrastructure and Logistics: Improving transportation infrastructure and logistics could facilitate the movement of raw materials and finished products, reducing costs and increasing efficiency.

Free trade zones in Uruguay (abbreviated as “FTZs”) are regions of the national territory designated by the Uruguayan Ministry of Economy and Finance (MEF) for the development of specific industrial, commercial, or service activities. The fundamental attraction and advantage of FTZs is that users are exempt from any national taxes related to their actions in the zone’s confines.

The promotion of free trade zones in Uruguay is in the national interest

The development and promotion of the free trade zones by the Uruguayan government have been proclaimed in the interest of the country, with the objectives of promoting investment, diversifying the national productive network, creating jobs, increasing the skills of the country’s workforce, increasing national added value,  and encouraging high technology and innovative activities. In addition, through the use of free trade zones in Uruguay, the country wants to promote the decentralization of business sectors and regional development.

Uruguay now has eleven free trade zones with various specialties; several are located in the metropolitan region of Montevideo or its environs. Among them are the following:

Aguada Park, Science Park, UPM Fray Bentos Free Zone, Colonia Suiza Free Zone, Libertad Free Zone, Colonia Free Zone, Nueva Palmira Free Zone, Florida Free Zone, Punta Pereira Free Zone, Zonamérica, and the WTC Free Zone.

What activities are allowed in free trade zones in Uruguay?

Although the Executive Power may be required to include activities that it considers beneficial for the national economy or the economic and social integration of the State, existing laws contemplate the following.

1. Commercial or industrial operations

The following industrial and commercial activities can be undertaken in the free trade zones in Uruguay: selling merchandise or articles and logistics operations.

The legislation obliges them to enter the FTZ in which the activity is carried out or in another FTZ to qualify for tax exemptions (both possibilities are included, regardless of whether it is inside or outside national borders).

Logistics operations permitted in free trade zones in Uruguay include conditioning, sorting, grading, distilling, assembling, installing software, and configuring hardware.

Manufacturing facilities may also be set up and operated in an FTZ located in the country.

1. Services

The Law does not establish any restrictions and allows service provision. In this area, the services must be provided within the free zone for consumers or promoters of the free zones or third countries.

Some services can be provided nationally as long as monopolies and government concessions are considered. In this sense, the provision of the following services (within Uruguay) is allowed: international call centers (excluding those whose sole or primary objective is the rest of the national territory), mailboxes, distance education, and electronic signature certificates.

Services provided within an FTZ are also included for the convenience of users of the zones. They can also be leased from the free zones to the non-free territorial limits to companies subject to Income on Economic Activities (IRAE) as long as they do not interfere with monopolies, state exclusivities, or public concessions.

1. Prohibited activities

The Law establishes that ZF users cannot perform certain acts. Weapons, gunpowder, and ammunition are among them. Likewise, the act of “retail trade” is prohibited.

However, the exchange of products and services between users is allowed, as well as commercial operations or services aimed at satisfying the needs of individuals. At the same time, they carry out work activities within them. Free zone restaurants are a good example.

What requirements must be met to operate in a free zone in Uruguay?

1. Exploitation

The operator or promoter of a foreign trade zone in Uruguay can be the government or a private company. In the latter case, it can be a physical or legal person. It must offer the necessary and adequate infrastructure for constructing and operating a free zone in exchange for a fee.

Consequently, the permit fee must be paid once or periodically to the State (the most common arrangement).

It is common for private operators to be, at the same time, the owners of the properties affected by the FTZ. However, the operator does not own the entire region in other circumstances. Still, only the majority of the affected registries have direct authority over the rest of the registries affected by the FTZ.

The application for a license to exploit and develop an FTZ must be submitted to the Ministry of Economy and Finance (MEF) with an investment project demonstrating its economic viability and advantages.

Once the official request is submitted, the examination of the case by the Executive Power can last up to 45 days from the submission date, not including the time for studying the file.

In practice, the application must be accompanied by a face-to-face presentation of the idea to government officials by company representatives.

It is also recommended to provide support material for the introductory presentation and encourage instances of interaction with the authorities throughout the process. Within the scope of the authorization for the deployment of free trade zones in Uruguay, the Executive Authority may require the operator and users to offer guarantees. Said guarantees are established to ensure the chosen rate and the fulfillment of the committed duties.

1. Users of FTZs in Uruguay

Users are those (natural or legal) who have obtained the authority to carry out any of the actions specified in the legislation. To obtain said authority, a procedure must be carried out before the General Directorate of Commerce (Free Zone) under the Ministry of Economy and Finance.

Remember that there are two types of users: direct and indirect. The direct ones are those who enter into a contract to obtain the right to settle with whoever runs the free zone, be it the government or an individual. On the other hand, the indirect ones are those who carry out the lawful act with the help of others.

Contracts can be entered into by both legal persons in their capacity as “future users.” In reality, these are owned by legal entities that acquire one of the following types of companies: Public Limited Companies (SA), Limited Liability Companies (SRL), Simplified Stock Companies (SAS), and “foreign company branches.”

1. Request for authorization of user contracts.

For the General Directorate of Commerce – Free Zones Area to sanction the activity, the contract must be presented between the users (direct or indirect) and those with the right to exploit the free trade zones.

The request must include the following elements: the contract of the parties and the investment plan (including the business plan). In addition, the necessary information must be provided: substantial and complementary activity to be carried out, human resources to be used in the FTZ and details of the employees affected outside it, and any other information that the company deems necessary.

1. Deadlines

The permit granted by the General Directorate of Commerce (Free Zone Area) will have a maximum duration of fifteen years for carrying out industrial operations and ten years for services and commercial activities since it is a direct user.

For an indirect user, the usual term is five years. In both circumstances, it is essential to highlight that the deadlines are renewed upon request to the competent authorities.

Despite the preceding, the Executive Power may allow longer-term contracts. Even so, as the regulation establishes, users must base their decisions on the amount of the investment in fixed capital, the anticipated employment, or other factors that determine a contribution.

1. Workers: A minimum of 75% of employees must be of Uruguayan nationality.

Another criterion for training an FTZ user is that 75% of the entire workforce must be of Uruguayan nationality, whether physical or legal.

The proportion may be reduced depending on the unique characteristics of the task to be carried out and for reasons of public interest.

However, it is worth mentioning that when it comes to service operations, the number of Uruguayans can drop to 50% if the nature of the company requires it.

What are the main advantages of operating in a free zone in Uruguay?

1. Tax regime

The main advantage of working in free trade zones in Uruguay is that users are exempt from all national taxes.

There are exceptions: single contributions to social security and legal monetary advantages created in favor of non-state public law persons of social security (for example, donations from the University Professionals Fund).

1. Particularities for foreign workers

The Law allows foreign workers who work in the free trade zone to indicate in writing their desire not to participate in the Uruguayan welfare system. The user is not obliged to make the contributions required under this premise.

1. Non-tax benefits

The legislation allows government agencies that offer supply inputs or services to users of free zones to establish promotional prices. In the same way, in the free zones, the monopolies of state services in the industrial and commercial fields will not govern.

In the same way, the entry and exit of the free zones for securities and national and foreign currencies would be free.

For more information on free trade zones in Uruguay, contact LATAMFDI.

Foreign direct investment in Latin America and the Caribbean increased by 55.2% in 2022 over its 2021 level, thus reaching its maximum historical value. This is according to a report published on July 10, 2023, by the Economic Commission for Latin America and the Caribbean (ECLAC).

According to the report, Latin American and Caribbean countries received approximately US $225 billion of foreign direct investment (FDI) in 2022. This figure represents the highest dollar value since records have been kept. This influx of FDI has been achieved due to “the growth of all investment components, especially the reinvestment of profits and the rise in the service sector in the region.”

Recovery and opportunities for investment in Latin America and the Caribbean

The study recalls that foreign direct investment in Latin America and the Caribbean had not exceeded US $200 billion since 2013.

“This dynamic is consistent with the post-pandemic recovery, and it is unclear if it will remain at similar levels in 2023,” the document considers. However, this annual report also recorded an increase in the weight of these flows in regional GDP, coming to represent 4.0%,” the ECLAC study specifies.

“The challenge of attracting and retaining foreign direct investment in Latin America and the Caribbean that effectively contributes to the sustainable and inclusive productive development of the region is still more relevant than ever,” said ECLAC Executive Secretary José Manuel Salazar-Xirinachs, who presented the main conclusions of the study at a press conference in Santiago de Chile.

“There are new opportunities in an era of reconfiguration of global value chains and geographic relocation of production in the face of changing globalization,” he stressed before emphasizing that the challenge is to “maximize the contribution of FDI to development” with “aggregation policies of value and promotion in value chains, development of human resources, infrastructure and logistics, and construction of local capacities,” he indicated.

Brazil is the leader in foreign investment in Latin America and the Caribbean

According to the report, almost all the countries of Latin America and the Caribbean received more foreign direct investment in 2022, with Brazil, which received 41% of the regional total and ranked fifth as a global FDI destination at the top followed by Mexico (17%), Chile (9%), Colombia (8%), Argentina (7%) and Peru (5%).

Costa Rica, for its part, was the primary recipient of foreign direct investment in Central America, while in Guatemala, these flows registered a significant drop in 2021 but returned to their historical average the following year.

The United States and the EU are the leading investors

At the regional level, 54% of foreign direct investment in Latin America and the Caribbean entered the services sector, although the manufacturing and natural resources sectors rebounded.

As for investors, the United States (38% of the total) and the European Union (17%, excluding the Netherlands and Luxembourg) led the investment inflows. Along the same lines, FDI from countries in the same region of Latin America and the Caribbean significantly jumped from 9% to 14% of the total.

“The variation in FDI inflows was also positive in the Caribbean, driven mainly by higher investments in the Dominican Republic, which was the second recipient country after Guyana,” according to the ECLAC study.

In 2022, the amount invested abroad by Latin American transnational companies, known as translatinas, reached historical levels: 74.7 billion dollars. This is the highest figure recorded since statistics began to be compiled in the 1990s.

On the other hand, the amount of FDI project announcements for investment in Latin America and the Caribbean grew by 93% in 2022, totaling close to one hundred billion dollars.

For the first time since 2010, the hydrocarbons sector (coal, oil, and gas) received the most investment, with 24% of the total, followed by the automotive sector (13%) and renewable energy (11%).

Energy transition

The ECLAC study also identifies energy transition as one of the sectors that can boost economic growth and therefore recommends that the countries of Latin America and the Caribbean prioritize it in their economic agendas and make it a significant driver of productive transformation in the region.

“FDI can play a key role in accelerating the energy transition, facilitating technology transfer, and enabling emerging technologies. Governments must lead the coordination of strategies for the success of the energy transition in the region,” stresses the Commission in its report.

One of its central functions is to develop long-term policies that promote investment in Latin America and the Caribbean in renewable energy sources so that the transition is fast and safe and does not leave the region behind in a context in which energy from clean sources is a competitive factor,” notes the study.

“However, ECLAC also warns that in this process, the importance that the non-renewable energy sector still has for some countries in the region should be considered, especially in terms of income generation to meet social demands, productive development, and energy security” the report concludes.

The Pacific Alliance comprises Chile, Colombia, Mexico, and Peru. It is a mechanism for economic and trade integration based on four pillars: free movement of goods, services, capital, and people. It is an innovative, flexible integration strategy with clear, pragmatic goals consistent with member companies’ development models and foreign policies.

The Pacific Alliance (PA) was established in April 2011 by Chile, Colombia, Mexico, and Peru through the Framework Agreement, which entered into force in July 2015, and its commercial protocol, which entered into force on May 1, 2016.

What are the goals of the Pacific Alliance?

The Pacific Alliance seeks to build, in a participatory and consensual manner, an area of deep integration to move progressively toward the free movement of goods, services, capital, and people.

It exists to promote more significant growth, development, and competitiveness of the economies of the participating parties, intending to achieve greater well-being, overcoming socioeconomic inequality, and the social inclusion of its inhabitants.

It seeks to become a platform for political articulation, economic and commercial integration, and projection to the world, with particular emphasis on the Asia Pacific region.

Who participates in the Pacific Alliance?

Member Countries (4): Colombia, Chile, Mexico, and Peru.

Observer States (61):

America (14): Argentina, Canada, Costa Rica, Ecuador, El Salvador, the United States, Guatemala, Haiti, Honduras, Panama, Paraguay, the Dominican Republic, Trinidad and Tobago, and Uruguay.

Africa (2): Egypt and Morocco.

Asia (12): China, Korea (South), the United Arab Emirates, India, Indonesia, Israel, Japan, Kazakhstan, Pakistan, the Philippines, Singapore, and Thailand.

Oceania (2): Australia and New Zealand

Europe (31): Armenia, Austria, Belgium, Azerbaijan, Belarus, Croatia, Denmark, Czech Republic, Finland, France, Germany, Georgia, Greece, Hungary, Ireland, Italy, Lithuania, Norway, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Romania, Serbia, Sweden, Switzerland, Turkey, and Ukraine.

Associated States (1): On January 26, 2022, within the framework of the XVI Summit of the Pacific Alliance, the FTA between Singapore and the Pacific Alliance was signed. When entered into force, this will make Singapore the first Associated State of the Alliance.

The Pacific Alliance is negotiating with three other Observer States that are candidates for Associated State status. These countries are Australia, Canada, and New Zealand.

The next candidate with whom negotiations will begin to become an Associated State is South Korea. Ecuador requested to start negotiations to acquire this same category, but its entry could occur in the category of Member Country.

How does it work?

In the Pacific Alliance, there are different decision-making bodies whose decisions are always made by consensus.

Summits bring together the presidents of the Member States. It is the highest decision-making body of the Pacific Alliance, in which the progress of the mechanism is evaluated, and instructions are given on its future work.

The Council of Ministers brings together the Ministers of Foreign Affairs and Ministers of Foreign Trade of the Member States to verify compliance with the Presidential Mandates. The Council defines the political guidelines of the Pacific Alliance in its relationship with third States or integration schemes, establishes the working groups that it deems appropriate to achieve the objectives, and carries out the actions of the Alliance, among others.

The High-Level Group (GAN) brings together the Vice Ministers of Foreign Affairs and Vice Ministers of Foreign Trade. It carries out periodic and detailed monitoring of compliance with the Alliance’s commitments, as well as the work of the Technical Groups.

National Coordinators bring together the national coordinators of the Alliance countries. The functions of this group are the same as those of the GAN, but its monitoring tasks are carried out permanently. The National Coordinators are in charge of consolidating a work agenda with the observer States, third States, and other regional forums, emphasizing Asia-Pacific.

Technical instances: the Pacific Alliance has thirty technical instances in charge of executing the different presidential mandates in matters within their respective competencies, often in coordination with other instances. The Cooperation Council is in charge of monitoring cooperation with the Observer States.

Presidency Pro Tempore (PPT): The PPT of the Pacific Alliance rotates annually in alphabetical order. Mexico has exercised the PPT since the XVI Summit, which took place on January 26, 2022, in Bahía Málaga-Buenaventura, Colombia. Subsequently, the PPT was delivered to Peru at the beginning of 2023, within the framework of the XVII Summit of the mechanism.

Why is the Pacific Alliance important?

• The Alliance, as a process of deep integration, has set itself challenging goals, which have been fulfilled based on the Mandates issued by the heads of State. 
• The Pacific Alliance is one of the most innovative integration strategies in the region, as it is an open and flexible process with clear, pragmatic goals consistent with the development models of the participating nations.
• In only 11 years of existence, the Pacific Alliance has achieved significant results in all the process objectives, advancing progressively towards the free circulation of goods, capital services, and people, making it an international benchmark in terms of integration. The Pacific Alliance is consolidated as the eighth largest economy in the world, with a population close to 230 million inhabitants, attracting nearly fifty-six million tourists each year and 38% of the FDI that reaches Latin America. Additionally, it represents approximately 40% of the region’s GDP, which, on the one hand, makes it an attractive market for global trade, and, on the other, it strengthens its capacity for international insertion.

Main Achievements of the Pacific Alliance

• Eight shared Embassy locations (Algeria, Vietnam, Azerbaijan, Ghana, Hungary, Ireland, Morocco, and Singapore).
• Carrying out significant joint activities for trade, investment, and tourism promotion.
• Integration of the stock markets in the Latin American Integrated Market (MILA), constituting the financial arm of the Alliance.
• The Business Council of the Pacific Alliance (CEAP) has been an important initiative of the private sector to give recommendations to governments to build a useful work agenda for business facilitation.
• Two thousand eight hundred thirteen students from four countries have benefited through the Academic and Student Mobility Platform.
• Elimination of tourist and business visas between the four countries.
• The signing of an Inter-institutional Agreement for a Vacation and Work Program promotes cultural exchange between the young people of the Pacific Alliance countries.
• Subscription of a Consular Assistance Agreement allows nationals of the four countries to receive consular assistance in states without diplomatic or consular representation of their country of origin.
• Short-stay visa exemption for foreigners residing in member countries of the Pacific Alliance.
• Subscription of 9 Joint Declarations with the Observer States, regional integration blocks, and international organizations to strengthen relations and specify cooperation activities on issues of mutual interest: Canada, Spain, Japan, Singapore, Association of Southeast Asian Nations (ASEAN), Eurasian Economic Commission (EEC), Mercosur, European Union, and OECD.
• Strategic Vision of the Pacific Alliance for the year 2030, which focuses on four axes to achieve an Alliance: more integrated, more global, more connected, and more citizen, with ambitious and achievable goals in line with the Sustainable Development Goals of the United Nations Organization.
• Presidential declarations on Gender and Women’s Empowerment, Sustainable Management of Plastics, Regional Digital Market, and Creative Economy seek to implement concrete actions that strengthen and give special impetus to these issues in the Pacific Alliance.
• The Declaration of Bahía Málaga-Buenaventura includes the new mandates for the Technical Instances that make up the mechanism and are part of the road map or work plan of Mexico as Pro Tempore Presidency of the Alliance during the period 2022-2023.
• An FTA was signed with Singapore, which, once it enters into force, will make this country the first Associated States of the Pacific Alliance.
• Negotiations are ongoing with Australia, Canada, and New Zealand, aimed at accessing the category of Associated States, and the start of the talks with Korea was announced.

The last Pacific Alliance Summit

The XVI Summit of the Pacific Alliance took place in Bahía Málaga-Buenaventura, Colombia, on January 26, 2022.

On January 26, the XVI (sixteenth) Summit of the Pacific Alliance was held in Bahía Málaga – Buenaventura. The Presidential Declaration and a Declaration for Strengthening the Creative Economy (Orange Economy) were signed at this Summit. Likewise, the Implementation Plans of the Roadmap of the Declaration on the Sustainable Management of Plastics and Gender Equality were approved. These initiatives contain concrete actions to strengthen these issues in the region. Regarding trade, the FTA was signed with Singapore, and the commitment to start negotiations with Ecuador for its entry as a Member country and Korea for its entry as an Associated State was established. Similarly, the Regulatory Cooperation Annexes on household cleaning products and medical devices were adopted. These accords will facilitate their commercialization in the four countries.

Recent treaties and/or declarations

• Declaration of Bahía Málaga-Buenaventura, December 26, 2022.
• Presidential Declaration for the Strengthening of the Creative Economy.
• Joint Declaration between the Pacific Alliance and Singapore.
• Free Trade Agreement between Singapore and the Pacific Alliance.

The Pacific Alliance is a regional integration initiative in Latin America that promotes economic and political cooperation among its member countries. It was established on April 28, 2011, and its founding members are Chile, Colombia, Mexico, and Peru. Since its inception, the Alliance has become a significant regional economic and trade bloc. Overall, the Pacific Alliance is an essential initiative in Latin America, fostering economic development, cooperation, and integration among its member countries while promoting their interests on the global stage.

Mexico has been characterized as one of the most open economies in Latin America and the world since there are Mexican trade agreements with more than 46 countries.

For this reason, it has established itself as a benchmark for other developing regions, favoring businessmen with tariff preferences under the treaty to which they are subscribed.

The following article will mention the main Mexican trade agreements in force in 2023, highlighting their importance on the international scene and their implications for the country’s economy.

What are international trade agreements?

The Government of Mexico defines a trade agreement as “an agreement established by two or more countries under the protection of international law and to improve their relations in economic and trade terms.”

The alliance can be bilateral or multilateral, but it always includes reducing or eliminating tariff and non-tariff barriers, such as import quotas, sanitary and phytosanitary matters, or technical trade barriers.

While in the free trade agreement (FTA), rules and guidelines are established for exchanging products and services, leaving aside obstacles such as taxes or rates on imports and exports. The idea is to consolidate markets for the national products of each country, presenting competitive offers.

According to the Mexican Government, the treaties are designed to promote international investment flows and provide certainty to the operations carried out by foreign businessmen.

What are the most important Mexican trade agreements?

Currently, Mexico has 14 current international trade agreements signed with 46 countries, 32 agreements for the promotion and reciprocal protection of investments with 33 countries, and nine limited-scope agreements within the framework of the Latin American Integration Association (ALADI). Additionally, it is a member of the Trans-Pacific Partnership Agreement.

Although the Mexican trade agreements are valuable for our country, some are more relevant. This is either because they are entered into by more than one nation or because of their implications. Those that stand out among them include the:

Free Trade Agreement United States – Mexico – Canada (USMCA). It is the best known and most relevant for Mexico because the commercial relationship between the countries of North America is essential for continued technological and economic growth.

In 2020, the agreement replaced the North American Free Trade Agreement (NAFTA) that entered into force in 1994. New provisions included more rigor in verifying the country of origin for the textile, chemical, and automotive industries.

A chapter on digital trade was also included, in which customs duties are not imposed on digital products, in addition to cooperating on key aspects of cybersecurity.

Free Trade Agreement Mexico – European Union (TLCUEM). This Mexican trade agreement has been in force since July 2000. Germany, Austria, Belgium, Denmark, Spain, Finland, France, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, the United Kingdom, Sweden, Cyprus, Slovenia, Malta, the Czech Republic, Hungary, Poland, Estonia, Slovakia, Latvia, and Lithuania participate.

It seeks to promote trade between Mexico and the countries of the European Union, as well as to establish a legal framework for economic relations in both blocks.

The TLCUEM’s goals are eliminating tariffs for most products and protecting intellectual property, competition, transparency, and economic cooperation.

Free Trade Agreement Mexico – European Free Trade Association (EFTA). The Mexican trade agreement was signed in 2001 by four European countries: Iceland, Liechtenstein, Norway, and Switzerland, to strengthen the relationship between the signatories in political and economic terms.

Mexico-Israel Free Trade Agreement. This accord was signed in 2000 to intensify trade and the economy by easing taxes and import restrictions from both countries.

Mexico-Uruguay Free Trade Agreement. Its purpose is regional economic integration and to constitute a more extensive and secure market for goods and services produced in their territories.

Mexico-Panama Free Trade Agreement. This Mexican trade agreement was signed on April 3, 2014, and entered into force in July 2015.

This agreement has worked on the country’s economic integration with Central America, reinforcing legal security in international transactions and consolidating new markets for Mexican exports.

• Another relevant agreement is the FTA with Central America signed in 2011 between Mexico and Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

The signing gave way to an agreement with better conditions and a balance between commercial commitments, the expansion of world trade, and international cooperation.

• There is also the relationship between Mexico, Peru, Colombia, and Chile through the so-called Pacific Alliance, in which thirty-two observer countries participate.

The four nations account for 38% of the GDP of Latin America and the Caribbean. This makes it a very beneficial cooperation between the signatory nations. Only in 2010, this group exported close to 445 billion dollars worth of goods.

• Likewise, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TIPAT), or CPTPP for its acronym in English, is in force.

This agreement was concretized among eleven Pacific nations, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, with some Asian and American regions.

The group of countries accounts for more than 14.9% of world trade and 13.5% of GDP. Hence, Mexico maintains the FTA with several nations individually.

Benefits of Mexican trade agreements

Mexico’s trade agreements are profitable for the nation’s economy and companies and consumers.

As mentioned at this blog post’s beginning, foreign trade is key to development. Hence, Mexico has signed to date 14 trade agreements that promote the exchange of goods and services with other countries.

Among the benefits of Mexican trade agreements are:

• Cost reduction for consumers, company market expansion, increased competitiveness, and job creation.
• Lower tariff barriers can hinder the flow of goods and services.
• Prívate investment promotion.
• The mprovement of the regulations that protect intellectual property, electronic commerce, and employability.
• Greater options for goods and services in a country for consumers and companies.
• The further promotion of business competitiveness by achieving the development of innovative technologies and practices.
• The strengthening of regional economic integration.
• The opening of greater access to broader markets.
• The promotion of competitiveness and access to a greater variety of products and services.
• Support for the removal of standards and trade barriers.
• The promotion of the exchange of technology.
• The creation of long-term stability for investors, which can also promote jobs in export industries.

In their totality, Mexican trade agreements have generated a significant impact on the country’s economy and its relations with other nations.

Although the agreements have received some criticism and faced some challenges, they have generally strengthened new trade and investment opportunities through the negotiation of positive commercial terms between Mexico and its economic partners.