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China’s Growing Long-term Commitment to Mexico

20 January, 2014

Mexico’s Riviera Maya located on the country’s Caribbean coast has become a new focus for Chinese investors, thanks to its fabulous location, growing popularity among international travelers and easy access to the U.S. and Canada. Also, according to KPMG, which is a respected audit, tax and advisory firm dedicated to understanding industry-specific issues and opportunities,Mexico remains one of the most affordable locations in the entire world from which to do business.

Perhaps most notably,China has invested upwards of $1.5 billion in the region for its newest Dragon Mart location, which is currently under construction and set to open late 2012 in the Cancun area. The only other location for a Dragon Mart is currently in Dubai. The Cancun facility will comprise an impressive 840,000+ square meters and will offer a wide variety of Chinese products, allowing buyers to place orders and make purchases without making the arduous trek all the way to China.

“I believe such a large-scale trading site is highly necessary in Latin America,” stated Hao Feng, who is chairman of Chinamex Middle East Investment & Trade Promotion Centre,Ltd. “Most of Mexico’s imports currently come from Japan,India,South Korea and the U.S.,which can cost about three to five times more compared with Chinese goods.”

Fact is, the Dragon Mart Cancun represents the single largest capital investment ever undertaken in the Mexican state of Quintana Roo, according to a recent article in Forbes magazine. China has committed to investing a comparable amount in Mexico as it has in the U.S. due to its confidence that Mexico’s economy is on the rise, and Chinese businesses want to be ready to cash in on the growth.

As a result, other Chinese businesses are taking notice and are becoming increasingly interested in what Mexico has to offer. In fact, three of China’s largest car manufacturers have announced plans to open facilities in Mexico, including Geely, Zhongxing Automobile and the Changan Automobile Group.

China is already Mexico’s largest export market outside of North America, and according to a recent report by Reuters, both countries recently announced more than $560 million in new investment deals that will mutually beneficial bilateral commerce.

Also of note, the Associated Press recently covered China’s latest move to invest in the Americas, writing about the purchase of major U.S. cinema chain AMC Entertainment Holdings for $2.6 billion by Chinese conglomerate Dalian Wanda Group Co. This is significant for Mexico because it shows just how significant China’s recent commitment of $1.5 billion in Dragon Mart Cancun really is. And the recent Chinese acquisition of AMC also has certain ties to Mexico, namely through the company’s wholly owned subsidiary Grupo Cinemex, which operates dozens of theatres in Mexico City and other parts of the country, many of which show films in English.

Interestingly, many international and especially English-speaking investors don’t realize the significance of the Chinese commitment to Mexico, because the first article published about Dragon Mart Cancun contained a misprint, stating the amount to be only $150 million, instead of the actual number, which is around $1.58 billion. The reality is that its opening, and the subsequent 5,000-plus Chinese residents expected to come with the new development – will add a dramatic boost to real estate in Cancun and throughout the Riviera Maya

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Topics: Economy