by BDI President Dieter Kempf
There is a phrase of Humboldt that aptly describes the relationship between Mexico and Germany: “If there was one place in the world you could call paradise, it would have to be Mexico.” It should come as no surprise, then, that our two countries have enjoyed close ties for centuries, in culture and education, and in industry too.
In the past, countless industries flourished as a result of these close ties. According to Mexico’s Secretary of the Economy, there are more than 2,100 German companies operating in the country. Cooperation between Mexican and German industry grew strong in many sectors, including automotive industry, machinery, electronics and electrotechnical industry, chemical and pharmaceutical industry and business software. Not only large companies such as Bosch, Siemens and Volkswagen are active in Mexico, most of the German industrial companies engaged in the Mexican market are small and medium-sized companies and family-owned businesses.
In my view, these results can be attributed mainly to the proximity of Mexico’s and Germany’s industrial sectors. I currently preside over the Federation of German Industries (BDI), which promotes the interests of my country’s industrial sector, representing 35 industrial organizations in different sectors, including the automotive industry, one of the most emblematic in the bilateral relationship between Mexico and Germany. Our counterparts in Mexico have been invaluable partners in strengthening the ties between our industries.
Germany owes its economic success largely to the strength of its industrial sector. Manufacturing accounts for some 23% of the creation of Germany’s gross value — one of the highest percentages in Europe and the world in general. Mexico, in turn, ranks among the world’s leading exporters of mid- and hi-tech goods and services, while its manufacturing sector produces 80% of total exports, constituting a major driver of the domestic economy.
The BDI has published a document summing up the ideas we are implementing in Germany to promote an industrial policy that serves to spur our economic development in the wake of the Covid-19 pandemic. Our industries need an energetic industrial policy that shores up global value chains, coupled with innovation and a long-term outlook.
At this moment in time, it would be a mistake to recur to protectionist policies or to isolate ourselves, as this would almost certainly threaten supplies. On the contrary, the way to foster the economic development of our industries is to strengthen global value chains and promote environmental protection, digitalization and innovation in the industrial sector, while putting the health and lives of our citizens first at all times.
Germany and Mexico need to continue to work together for open markets worldwide. Especially at a time when US trade policy is based on “America first” and the global economy is being weakened by the coronavirus pandemic, we need more multilateralism and a well-functioning WTO – not less.
It is important we get the productive wheels of the industrial sector turning again as soon as the development of the pandemic allows it. In this regard, coordinating the efforts of the public and private sectors will be essential to reactivating the economy. Economic policy should be drawn up by a country’s government in conjunction with its companies and may offer investment incentives for private enterprise. Lowering tax rates, including income tax, temporarily reducing VAT, and streamlining procedures for the approval and opening of companies are measures that could pay off in Mexico.
Just as important is the creation of a long-term strategy for the future of industry by the public and private sectors. In Germany, we are proposing a plan to increase public investment, upgrade infrastructure, reduce corporate taxes, provide more funding for research and development and implement an ambitious long-term joint vision outlined in our “2030 National Industrial Strategy”.
The Mexican counterparts of the BDI – CONCAMIN, CCE and COPARMEX – are coordinating their efforts to strengthen the value chains between our respective countries and continue promoting business and investment that fosters local added value and the country’s economic development in general, creating well-remunerated jobs and encouraging the transfer of technology in the process.
Mexico plays a strategic role as Germany’s business partner and sister country. It is no coincidence Humboldt called this “paradise”. I visited Mexico in October 2019 to attend Industrial Transformation Mexico, the first Hannover Messe event in Latin America. It was a great experience. The hospitality in Guanajuato was overwhelming. I’m convinced that we will manage to even further deepen our excellent cooperation in the time to come.