Mexico & Cuba Increase Economic Cooperation

Mexico and Cuba recently announced several new agreements in an effort to strengthen ties and improve relations. While the countries had a strained relationship under Mexico’s two previous administrations (2000 – 2012), a recent formal state visit by Cuban President Raul Castro to Mérida, Yucatán marked the rapprochement of ties between the countries. Both Castro and Mexican President Enrique Peña Nieto welcome the prospect of initiatives to strengthen the investment climate as Cuba attempts to modernize its economic model.

During Castro’s three-day visit in early November, Mexico and Cuba signed five cooperation agreements. Under the first, both nations agreed to jointly combat human trafficking and re-establish the tools needed to guarantee legal, safe and orderly migration between them. Recently, there has been a marked increase in the number of Cuban migrants arriving in Mexico driven by fears that the normalization of U.S. – Cuba relations will change laws that currently allow Cubans who reach U.S. soil to get automatic residency permits. Many are now choosing land routes through Latin America, rather than the trip across the Florida Straits, to enter the U.S. The remaining Mexico – Cuba accords will promote education (primarily in literacy), diplomacy, tourism and fishing.

Also planned are joint efforts to increase investment from Mexico to Cuba. Total trade between Mexico (Cuba’s third most important trade partner in Latin America) and Cuba in 2014 was approximately US $374 million, a small sum compared to the US $500 billion in two-way business last year between Mexico and the U.S. Analysts believe Mexico’s geographical proximity and its historically close ties with Cuba put the country in prime position to capitalize on a market of roughly 11 million people. In September, leading Mexican beverage and retail company Femsa announced it was considering expanding its business to Cuba and cement maker Cemex is following suit.

Additionally, Mexican construction firm Grupo Tradeco sees significant room for growth in Cuba’s infrastructure sector. The island’s infrastructure issues present an enticing opportunity for companies interested in developing highway, communications, and hydraulic infrastructure. Mexico already has several investment projects in Cuba’s port of Mariel (located in the northwestern region of the country). Of the seven companies that received approval to develop the mega-port, two are Mexican.

Despite these areas of optimism, Mexican companies must manage their expectations accordingly. The Cuban government’s control of the island’s economic and political life, as well as human rights concerns, raise questions regarding Cuba’s overall investment climate. That being said, Mexico sees an opportunity to increase trade and strengthen its bilateral relationship with the Caribbean nation, eager to stake its claim as Cuba’s principal bridge to Latin America.

Authored by: Alex Trueba

Sources: Business Standard, Financial Times, Fox News Latino, LA Times, Latin One, Latin Times, Mexico News Daily, Reuters, The Washington Post, Yahoo News