Mexico offers Vietnam gateway to Latin American markets

Mexico offers Vietnam gateway to Latin American markets

As one of the two countries that have ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Mexico is considered a gateway for Vietnamese products to the Latin American market. However, Vietnamese businesses have yet taken advantage of opportunities to enter this market.

Opportunities

After two years of implementing the CPTPP, Vietnamese businesses have been provided with opportunities to promote exports to new markets, especially the Latin America. The 2018 CPTPP includes three Latin American countries - Mexico, Peru and Chile, committing them to cut high tariff rates for Vietnamese goods as soon as the trade pact comes into effect, with Chile at 95 percent, Peru at 80 percent and Mexico at 77 percent. In the first quarter of the year, Vietnam’s exports to Mexico, Chile and Peru reached US$931 million, US$321 million, and US$134 million, respectively, recording increases of 17 percent, 12 percent, and 35 percent.

Mexico is a potential market for Vietnamese exports with a population of 127 million and a gross domestic product (GDP) per capita of US$9,946 and is also a gateway for Vietnamese products to the Latin American market. Mexico is also a member of two major trade agreements - the Pacific Alliance and the North American Free Trade Agreement, offering opportunities for Vietnamese firms that make good use of economic linkages and trade incentives.

Vietnamese Trade Counselor in Mexico Luu Van Khang said large American companies have representative offices in Mexico, which Vietnamese businesses can contact to promote trade connections.

Phan Thi Thanh Xuan, deputy chair of the Vietnam Leather, Footwear and Handbag Association, said the CPTPP has yielded positive results for the leather and footwear sector, such as an increased local content rate and an increased proportion of leather and footwear exports to CPTPP member countries. In particular, Vietnam’s leather and footwear exports to the two countries that have ratified the CPTPP in the Americas - Canada and Mexico - have grown strongly. Instead of exporting to a third country and re-exporting to Mexico and Canada, Vietnam’s leather and footwear products can now be shipped directly to the two countries, Xuan said. Most leather and footwear products are destined for export, so Vietnam’s participation in free trade agreements offers great opportunities to expand export markets, strengthen investment attraction and increase production capacity.

Making better use of the pact

According to the Vietnam Chamber of Commerce and Industry (VCCI), Vietnamese exports have only taken advantage of four percent of the CPTPP’s opportunities since its signing in 2018. Most Vietnamese businesses have heard of the trade pact but do not understand it clearly. In addition, they are struggling to meet the CPTPP rules of origin.

Luu Van Khang said that in order to take advantage of opportunities offered by the CPTPP, Vietnamese businesses must develop distribution channels in the Americas.

Nguyen Cam Trang, deputy director of the Agency of Foreign Trade under the Ministry of Industry and Trade, said Vietnamese businesses need to be active in obtaining up-to-date information, change their thinking and improve the competitiveness of their products.

VietNam Economic News