Trade between Mexico and Ecuador remains limited compared to Mexico’s commercial exchanges with other Latin American nations. However, both countries have continued to engage in economic interactions, albeit with fluctuations over the years. During Andrés Manuel López Obrador’s administration, efforts were made to establish a free trade agreement to facilitate commerce, reduce tariffs, and promote investment. Unfortunately, the negotiations stalled, and under the administration of Claudia Sheinbaum, no significant progress has been made to revive them. This uncertainty has created challenges in the Ecuador-Mexico Trade Relationship, particularly for industries that rely on stable trade agreements.
A crucial aspect of diplomatic relations between nations is promoting cooperation and integration, particularly in trade and economic matters. This is especially true for countries within the Latin American region, as stronger trade relations can lead to mutual economic growth, job creation, and diversification of export markets. However, following the diplomatic rupture between Mexico and Ecuador announced by the government of Andrés Manuel López Obrador in 2024, efforts to enhance economic ties were put on hold. The breakdown in diplomatic relations has further complicated trade negotiations, leaving many business sectors uncertain about the future of the Ecuador-Mexico Trade Relationship.
On Monday, Ecuador announced imposing a 27% tariff on Mexican products due to the absence of a Free Trade Agreement with Mexico. This move is expected to impact various Mexican industries that rely on exports to Ecuador. The tariff could make it more expensive for Ecuadorian importers to purchase Mexican goods, potentially reducing trade volumes and affecting businesses that depend on this bilateral commerce. As trade tensions continue, businesses and policymakers must evaluate ways to stabilize the Ecuador-Mexico Trade Relationship to prevent further economic disruptions.
Trade Balance Between Mexico and Ecuador
According to data from Banxico, in 2023, Mexico’s exports to Ecuador reached $595 million, while imports from Ecuador amounted to $228 million. This resulted in a trade surplus of $368 million in Mexico’s favor, highlighting Mexico’s stronger export position in the bilateral trade relationship. Over time, fluctuations have been observed in trade between the two nations, with varying levels of export activity depending on economic conditions, exchange rates, and policy changes.
In 2023, Ecuador’s share of Mexico’s total exports was just 0.1%, a relatively minor figure compared to Mexico’s other trade partners in Latin America. Meanwhile, Ecuador’s contribution to Mexico’s total imports was even smaller, accounting for only 0.038% that year. These figures suggest that while trade exists between the two nations, it remains minor in scale and has significant room for expansion, especially if trade agreements are formalized in the future.
In November 2024, Mexico’s international sales to Ecuador totaled $37.6 million, while its international purchases from Ecuador amounted to $48.1 million, resulting in a trade deficit of $10.5 million. This short-term shift in trade balance may be attributed to Ecuadorian exports increasing due to specific product demand or seasonal factors. These fluctuations underscore the need for a more structured Ecuador-Mexico Trade Relationship that promotes long-term stability and growth.
What Does Ecuador Export to Mexico and Vice Versa?
Understanding what each country exports can help illustrate the trade dynamics between Mexico and Ecuador. According to Data México, in November 2024, the primary product exported from Mexico to Ecuador was medicines, whether mixed or unmixed, formulated for therapeutic or prophylactic use, valued at $5.06 million. Pharmaceutical products play a critical role in Mexico’s exports to Ecuador, as Mexico has a well-developed pharmaceutical industry with a strong presence in Latin America.
Other significant Mexican exports to Ecuador include industrial machinery, automotive parts, and processed food products. These items reflect Mexico’s diverse manufacturing capabilities and role as a supplier of industrial and consumer goods to Ecuadorian businesses and consumers. Mexico City ($12.7 million), the State of Mexico ($8.26 million), and Jalisco ($3.95 million) were the leading regions in terms of exports to Ecuador, highlighting the industrial and economic centers that drive trade.
On the other hand, Ecuador’s exports to Mexico primarily consist of agricultural and seafood products. Ecuador is well known for its banana and shrimp exports, representing a significant portion of what Ecuador sells to Mexico. Other key Ecuadorian exports to Mexico include cocoa, coffee, and flowers, which are highly valued in the Mexican market. The strong demand for these products underscores the role of Ecuadorian agriculture and aquaculture in fueling bilateral trade.
Ecuador’s exports to Mexico include raw materials such as wood and textiles, which Mexican industries utilize for further processing and manufacturing. The exchange of these goods benefits both economies, as Mexico gains access to high-quality raw materials while Ecuador benefits from a stable export market. However, the lack of a free trade agreement continues to pose challenges, as tariffs and trade barriers can limit the full potential of these exchanges. Strengthening the Ecuador-Mexico Trade Relationship through a formalized agreement could alleviate some of these issues and lead to more predictable trade flows.
Ecuador’s Participation in Mexico’s Foreign Direct Investment (FDI)
Beyond trade, foreign direct investment plays a crucial role in the economic ties between Mexico and Ecuador. Between January and September 2024, Ecuador’s Foreign Direct Investment (FDI) in Mexico amounted to $5.63 million, distributed between intercompany accounts ($4.89 million) and new investments ($742,000). Although these figures are relatively small, they indicate a steady flow of investment activity between the two nations.
According to data from Mexico’s Ministry of Economy, from January 1999 to September 2024, Mexico received $137 million in FDI from Ecuador. This investment was allocated to new investments ($107 million), intercompany accounts ($19 million), and reinvestment of profits ($11.1 million). The presence of Ecuadorian investment in Mexico demonstrates a level of economic cooperation that extends beyond trade, with companies from Ecuador seeking business opportunities in various sectors of the Mexican economy.
While Ecuador’s exports to Mexico mainly focus on agricultural goods, seafood, and raw materials, Ecuadorian businesses have also explored investment opportunities in Mexico’s service and manufacturing industries. However, given the modest investment figures, there is potential for further growth if trade barriers are reduced and diplomatic relations improve. Increased FDI could serve as another pillar in strengthening the Ecuador-Mexico Trade Relationship, fostering deeper economic ties between the two countries.
Remittances Between Mexico and Ecuador
Another critical aspect of economic relations between the two countries is the flow of remittances. In the third quarter of 2024, Mexico received $13.6 million in remittances from Ecuador, while Ecuador received $4.65 million in remittances from Mexico. These remittances reflect the movement of people between the two nations, as migrant workers contribute to the economies of their respective home countries by sending money back to their families.
Although remittance flows between Mexico and Ecuador are not as large as those between Mexico and the United States, they still play a vital role in supporting households and local economies. The remittances received in Ecuador help sustain businesses, education, and healthcare expenses for many families, while the funds sent to Mexico support similar economic activities.
Conclusion
While Mexico’s and Ecuador’s trade relationship is relatively small compared to other Latin American nations, it remains an important aspect of economic cooperation between the two countries. Ecuador exports primarily agricultural and seafood products to Mexico, while Mexico exports pharmaceuticals, industrial machinery, and automotive parts to Ecuador. Despite trade fluctuations and diplomatic challenges, both nations have opportunities to expand their commercial ties.
If a free trade agreement is eventually established, it could pave the way for increased trade volumes, reduced tariffs, and more significant investment flows between Mexico and Ecuador. For now, businesses on both sides must navigate existing trade barriers while seeking opportunities to strengthen the Ecuador-Mexico Trade Relationship in the future.