The Case For Increased Israel - Mexico Commercial Relations


As Mexico seeks to diversify its trade relationships beyond NAFTA markets and ever-globalizing Israeli companies continue to seek new customers for their products, both countries would be well served to explore opportunities for greater commercial interaction. The presence of existing trade agreements, current political and economic developments, and increasing commercial momentum between Latin America and Israel create an opportune moment to explore new possibilities.


Already existing commercial and cooperation agreements between Mexico and Israel provide frameworks from which to increase business relationships. Recognizing the potential for greater commercial activity, Mexico and Israel ratified a Free Trade Agreement (FTA) in 2000, effectively liberalizing 99 percent of bilateral trade between both countries. In the years following the agreement, Israel and Mexico have taken additional steps to solidify their commercial relationship, including signing a Tourism agreement in 2011 and an R&D Agreement in 2014. Most recently, in 2017, in an effort to facilitate bilateral trade, both countries agreed to further cooperate on customs related issues. Driven by the FTA, trade between both countries increased by 300 percent in the first fifteen years of the agreement. 


Current political and economic developments lend themselves to facilitating increased commerce between Mexico and Israel. As a result of the recent U.S. Presidential election, Mexico finds itself in the middle of a what may be a long and drawn out process to renegotiate and update the North American Free Trade Agreement (NAFTA), its largest and most important trade pact. As a result, Mexican policymakers and private sector actors have begun to look to other markets to ameliorate potential consequences. Not surprisingly, China, the world’s largest market by population and a country with which it does not have an FTA, has been at the top of Mexico’s list. Nonetheless, Mexican policymakers and the private sector should take advantage of the existing FTA with Israel to aggressively seek greater opportunities with the country. Conversely, Israel is rapidly producing world-class companies seeking global expansion. As relates to Latin America, Israel currently boasts preferential access in other parts of Latin America through its FTA with the Mercosur trade block, of which Brazil, Israel’s largest trading partner in the region, is a key member. Yet, the current political crisis and accompanying economic uncertainty in Brazil should provide Israeli businesses with motivation to further diversify their regional operations. Mexico, with its expanding economy and proximity to the U.S. market should be a natural partner to pick up the slack.


Increased Mexico – Israel economic activity would be in line with existing momentum for greater interaction between Israel and Latin America. Besides Mexico, other countries in the region have also been responsive to establishing greater commercial linkages with Israel.  In addition to having access to Argentina, Brazil, Paraguay, and Uruguay, through its FTA with Mercosur (Venezuela is currently suspended), Israel has also inked FTA’s with Panama and Colombia. Additionally, Guatemala, El Salvador, and Uruguay have negotiated Bilateral Investment Treaties (BIT) with Israel; often first steps towards greater bilateral trade and many times the precursor to FTA negotiations. In 2015, seeking greater cooperation in the field of innovation,  the region's Inter- American Development Bank signed a cooperation agreement with Israel. Similarly, in 2016 Chile and Israel signed an R&D Agreement seeking to "connect startups, technology, and research in a variety of fields."  While greater economic relations with the region as a whole are positive and hold much promise, Mexico, often thought of as the gateway to Latin America, possesses the largest population and largest economy of the Spanish speaking countries in the region. With its proximity to the U.S. market, arguably, it is Mexico that holds the most potential for Israeli producers seeking to expand their consumer base.


As a result of existing Israel-Mexico bilateral trade, consumers from both countries are becoming better acquainted with the benefits of increased commercial interaction. Mexican agricultural producers have been quick to adapt Israeli irrigation technology to their operations and Israeli medicines and electronics are available for purchase on the shelves of Mexican retailers. Recognizing Mexico’s potential as a "springboard to the U.S. market", in 2016 Israeli firms invested $2 billion dollars in the country. On the flip side, Mexican exports to Israel have included cement, agricultural and mining products, machinery, and consumer goods. Perhaps not surprisingly, Israel is now Mexico’s largest trading partner in the Middle East.


To date, the Israel – Mexico FTA and subsequent agreements have yielded considerable benefits for both countries. Nevertheless, current conditions could serve as impetus for greater commercial interaction between Mexico and Israel. Private sector actors and policymakers would be well served to capitalize on existing opportunities, create new avenues for cooperation and investment, and summarily increase the Israeli – Mexican trade relationship. The timing couldn’t be any better.