The Hindu : Business : India, Mexico sign investment protection agreement

Online edition of India's National Newspaper
Tuesday, May 22, 2007
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India, Mexico sign investment protection agreement

Climate created for Indian companies taking advantage of NAFTA

— Photo: Rajeev Bhatt

EXPANDING INVESTMENT: Union Minister for Commerce and Industry Kamal Nath (centre), with Eduardo Sojo (right), Minister of Economy, Mexico, and CII President Designate Sunil Bharti Mittal, in New Delhi on Monday.

NEW DELHI: India on Monday signed a ten-year bilateral investment promotion and protection agreement (BIPPA) with Mexico to promote flow of investment to both countries and allow free repatriation of funds by investors.

The agreement, for which the Union Cabinet gave its approval on May 18, was signed by Finance Minister P. Chidambaram and visiting Mexican Minister of Economy Eduardo Sojo Garza-Aldape.

Since Mexico is a member of the North American Free Trade Agreement (NAFTA) — trading block comprising Mexico, the U.S and Canada — the agreement is likely to help Indian companies access these markets as well.

Under the agreement, both countries would accord equal treatment to investors from other country as given to domestic investors and those from any other country.

As per the agreement, both countries will grant the Most Favoured Nation (MFN) status to each other and offer protection to investors, which would include safeguarding their intellectual property rights (IPRs). — PTI

Delhi Staff Reporter writes:

Meanwhile, India and Mexico on Monday signed a memorandum of understanding (MoU) on the establishment of a bilateral "High Level Group" (HLG) that will facilitate investment and economic cooperation between the two nations, besides exploring possibilities of entering into a Preferential Trade Agreement (PTA) to improve bilateral trade.

The MoU was signed by Union Commerce and Industry Minister Kamal Nath and Mexican Economy Minister Eduardo Sojo Garza-Aldape.

"HLG on Trade Investment and Economic Cooperation will not only ensure easing of the flow of trade and investment between the two countries but also look at the possibility of a PTA," Mr. Kamal Nath said after signing the MoU. Inviting Indian industry leaders to invest in Mexico, Dr. Sojo said Mexico, being strategically located as a gateway to North America, was full of opportunities for Indian industrialists.

Complex rules of origin

R. Gopalakrishnan writes from Chennai

Mexico is only one of the many countries with whom India has signed investment protection agreements, especially post 1991, but its significance lies in creating a congenial climate for flow of investment for tapping the world's largest market but at low labour costs.

Indian investment is likely to target especially the Mexican side of the Mexico-U.S. border which offers the unique combination of low wages and access to the U.S. and Canadian markets, besides Mexico's own economy.

None of the free trade agreements India has signed or is negotiating offers this double promise, though the BIPPA with Mexico is not a preferential or free trade agreement.

Conditions that Indian companies aspiring to tap Mexico as a manufacturing base for marketing in the U.S. and Canada would have to fulfil include the complex rules of origin.

These rules, detailed in Art. 401 to Art 415 of NAFTA, not only cover regional value content (or value addition), and transformation of product classification but also stipulate a separate regime for "automotive goods"

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