4T drives away foreign investment but attracts Chinese companies

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Despite going against the regulations of the T-MEC, signed by 4T, the investments of the People’s Republic of China are on the rise in Mexico.

April 28, 2021, (EL PAIS).- The attacks on foreign companies are already a hallmark of the presidency of Andrés Manuel López Obrador since he has repeatedly said that they came to Mexico to “loot” and sign “leonine” contracts that “abuse” the treasury.

In particular, it has referred to Spanish energy companies and Canadian mining companies, to the extent of generating diplomatic friction, however, Chinese companies have been quietly conquering ground in Mexico, they do not suffer from presidential hostility, on the contrary, they have won government contracts.

Since AMLO’s victory in July 2018, private investment in Mexico has been falling and the government’s anti-business rhetoric has been a factor.

Obrador canceled the permit for the privately-owned Constellation Brands brewery, through a “consultation,” and this has led many companies to leave the country or halt their investment plans.

Meanwhile, direct investment by Chinese companies has been climbing. According to a study published on March 31 by academic Enrique Dussel, from the China-Mexico Studies Center (Cechimex) of the UNAM Faculty of Economics, last year Mexico was the largest recipient of Chinese foreign direct investment in Latin America, above Chile and Brazil.

The CDMX government announced in November 2020 that the winning consortium of the contract for 37 billion pesos to rehabilitate a Metro line was the Chinese company Innovación Tecnológica Cinotec.

A year ago, the federal government announced that the winner of the tender for the construction of the first section of the Maya Train Project was the Consorcio Mota-Engil México in association with China Communications Construction Company (CCCC), in a proposal that amounts to 13.4 billion pesos, and this consortium is also expected to participate in section five of the train.

Ignacio Martínez, a researcher at Cechimex, assures: “Chinese investment in the country is not large, but it is very important” because “although these are not large projects in the hydrocarbon sector, they are very important projects for the country. There is a lot of presence of Chinese companies that go unnoticed ”.

Martínez has mentioned the Asian giant’s investments in automotive components and the aerospace sector in states such as San Luis Potosí, Chihuahua, Querétaro, Nuevo León and Jalisco.

However, no announcements are made of these Chinese investments, “it is not public information, although it is not covered up”, it is not widely disseminated. “In some cases, the name of the Mexican company that wins a bid is announced and little is said that it is accompanied by a foreign (Chinese) company.”

CCCC, the winning company of the first section of the Maya Train, was sanctioned by the World Bank for carrying out fraudulent practices in the Philippines, and its disqualification ended in 2017, so the government of the 4T said that it cannot be excluded from a tender to companies “with no valid sanctions.”

The Chinese Dialogue magazine documented other records of CCCC, including the suspicion of corruption in a railway work in Malaysia and the indictment of a subsidiary of the government of Bangladesh for alleged payments of illegal commissions.

In Tanzania, the company was also accused of corruption in the construction of a port, and in Brazil, prosecutors investigated whether the company profited from the sale of irregular property titles as part of the works of a second port.

The energy sector has been the hardest hit since the arrival of AMLO, who has sent initiatives to Congress, one on electricity and the other on hydrocarbons to return control of the market to state companies.

Renewable energies have been the focus of both presidential attacks and those of Manuel Bartlett, director of the CFE, who has lashed out against them, arguing that they are not reliable and are not unexpensive as they presume.

For this reason, the purchase of Zuma Energía, one of the largest wind farms in the country, by the Chinese company State Power Investment Corporation for an undisclosed amount was surprising.

Claudio Rodrígez-Galán, a lawyer from the Thompson & Knight firm, specialized in electrical matters, assured that there is something that other investors are not seeing, or “China is seeing something, or knows something, that investments that are not Chinese did not see”, or on the contrary “there is something that they did see and that is why they decided not to invest”.

López Obrador’s policy has been to align himself with the leftist governments of Bolivia, Argentina, Venezuela, and Cuba, adds the lawyer, “it may be a direct antecedent that the current geopolitics is clearly focused on governments that, although they are not communist, They are of a progressive social ideology”.

Alfonso Romo, leading the Office of the Presidency, at a conference in 2019, when NAFTA was being renegotiated, revealed that the Donald Trump administration asked Mexico not to accept Chinese investment in strategic projects.

For his part, Armando De Lille, a lawyer at Baker McKenzie specialized in international trade, considers that Chinese investment in Mexico is unstoppable, as he points out that China is one of the major players in the global market. It is an unbeatable economic force now for any country. “I don’t see a way that it won’t get its hands in all the attractive markets, and Mexico is one of them,” he asserts.

And, remember that the expectations for at least one decade were that Chinese investment would reach the country in large volume, comparable to that made by US companies, today the source of the largest foreign direct investment in Mexico.

But he assures that it will not happen so easily, because Asians “would like a free zone where they can invest in manufacturing and marketing with absolute freedom and without paying taxes”, as they do, for example, in the free zones of Costa Rica and other countries where they operate under a special economic regime.



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