Caspian Energy Journal Caspian European Club
Friday, 14 October 2016 12:30

Why don’t we establish direct commercial links instead of importing goods through third countries?... – Ambassador of Mexico Featured

Our goal is to maintain continuous commercial and trade relations between the countries


Caspian Energy (CE): Your Excellency, you assumed office a little more than a year ago. What results has your mission achieved? What are your future plans as the Ambassador of the United Mexican States to Azerbaijan?

Rodrigo Labardini, Ambassador Extraordinary and Plenipotentiary of Mexico to Azerbaijan: In one year we have been able to progress in several fields. As you know, Mexico recognized Azerbaijan in 1991 and established formal relations on January 14, 1992. Azerbaijan opened its Embassy in Mexico in the year 2007, but it was a little more than 2 years until 2009, when the first resident Ambassador arrived to Mexico. Mexico opened its Embassy in 2014, and the first Mexican resident Ambassador, myself, arrived on May 2015, less than one year after. This evidences the importance we attach to Azerbaijan. We know Azerbaijan is the most important country in the Caucasus region.

So, what we have done in one year?…  We have developed and strengthened the bilateral relation. First we are making both peoples in Mexico and Azerbaijan aware that the other country not only exists, but that it is a strong and reliable partner, i.e., making Azerbaijanis aware about Mexico and Mexicans aware that Azerbaijan exists. And we have moved beyond simple awareness, by initiating contacts and exchanges between different sectors. Secondly, relations are more than just an aim, they require results. A month after I arrived, I inaugurated a Mexican painting exposition, and between June and December 2015 we held 30 additional cultural activities. Amongst them I highlight the performance of a Mariachi, which is a Mexican musical group. Other events included several tastings of tequila and mezcal –so called the “father of tequila”. We also had a week of Mexican movies. In 2016 we have expanded activities by holding our cultural events not only in Baku, but in the other regions as well, including Ganja, Mingachevir, Gabala, and Shamakhi.


CE: Which features of the cities attracted your attention? To what degree are they attractive for Mexican companies from the standpoint of investments?

Rodrigo Labardini: Each city has its own flavor. Ganja is a large city and important industrial center.  Mingachevir is an important supplier of electricity. The dam itself makes a big impression on all who see the "sweet sea" as locals call the largest water reservoir in the Caucasus. Gabala is a unique place for hosting important cultural events. Noteworthy are the industrial parks being built in Sumqayit. The magic of Sheki, the breathtaking sights of Ilisu, Qakh. They all provide different opportunities and views on Azerbaijan. As we did last year, this year we are identifying niches for opportunities between both countries.  This involves not only promotion of commerce and trade relations, but also of industrial and construction sectors, tourism, cultural, and political links. For instance, if a person wants to buy a 1/4 left screw we are vying to identify the producer of such a bolt and bring them together. This lays solid foundation to start business between them. I am convinced that true plaster that cements the relationship is continuous support of trade between our nations. On September 21, Baku hosted the Second Meeting of the Bilateral Mechanism for Political Consultation to coordinate on future work and precise additional areas of cooperation. This is a part of the work we carry out for development of bilateral relations. This is a part of the work we carry out for development of bilateral relations. Culture is an expression of how each of us resolves our reality and how we do it with the elements that nature provides us. I mention this because coming to Azerbaijan I found that you have tarhun and we have estragon. You use it as a lemonade while we use it as a spice. This is a good example of how we can share and learn together.


One of the two tomatoes in the world is Mexican …


CE: Do you see any real opportunities for cooperation in agriculture?

Rodrigo Labardini: Agriculture is indeed an opportunity.  Mexico has a large agro industry. The land in Mexico is very generous and in several places, there are harvests two or three times a year. We are trying to bring knowledge which may be applied here. Evidence of its agroindustrial developments, are that Mexico the first exporter of guava in the world and the first exporter of tomatoes. One of the two tomatoes in the world is Mexican. One out of three avocadoes is Mexican. But we also want to establish cooperation in other areas.  I foresee great potential automobile production, because Mexico is producing 4 million cars a year and by the year 2020 it will be producing 5 million cars. The largest 19 brands are established in Mexico, including, BMW, Mercedes, Fiat, Audi, Volkswagen, Chrysler, Honda, Toyota, Kia, Mitsubishi.


CE: You have very big market for this…

Rodrigo Labardini: We have a large market with almost 2 millions square kilometers and over 120 million people. About 21 million persons live only in Mexico City, with more than 8 million vehicles, 5.5 million cars and 2.5 million buses. Both production and market have grown very importantly due to improvements and developments in the electronics industry. It has also pushed the drive for producing and exporting automobiles. Mexico is the largest exporter of automobiles to the United States. Electronics has grown as well in other fields., Mexico is the world's largest producer of flat TV's. Mexico is the third producer of cell phones in the world. We are also the first producer of refrigerators. Thus, there are very many areas in which we could share experience.


CE: Do you see prospects for creation of such production in Azerbaijan due to introduced reforms?

Rodrigo Labardini: Introduction of reforms is a very positive process. They are enabling progress and development in the country. We recognize Azerbaijan and President Ilham Aliyev on tackling these issues. Reforms will modernize Azerbaijan and further impulse its accession into WTO. The reforms are also enhancing the environment for investment and sharing expertise and know-how.


We have free trade relations with 45 countries


CE: How would you assess the investment climate in Azerbaijan? Which problems and advantages do you see?

Rodrigo Labardini: I have been observing positive changes. Measures are favorable for trade and development. They are also strengthening banks. And we may benefit each other from shared experiences. For instance, on mercantile issues, a cheque in Mexico has six months of validity, which allows for more dynamic commercial operations. The investment area has well in industrial sectors as well. I would note the logistics potential of the Port of Alat. Logistics is an important part of Mexico, which has become a world logistic hub, with access to both Oceans. This has contributed to Mexico's accelerated growth. We have free trade relations with 45 countries reaching over 75% of the world’s GDP. This means that if you get into Mexico you can reach three quarters of the world's market. Mexico’s foreign trade in 2015 was over 800 billion dollars. This volume means that over 1.5 million dollars are commerced by Mexico every minute of the year. I.e., if this conversation lasts for an hour, over 90 million dollars have been traded by Mexico. Thus, I am certain we can determine the best avenues to exchange between Mexico and Azerbaijan, and into value added production chains. If a bolt is needed, bring it from some other place and use it to produce 5 million cars, plasma TVs, etc.  That’s something we can share and learn. I see Azerbaijan is doing something similar, becoming a hub itself. In logistics we see the development of the North-South Transport Corridor, the contemporary Silk Way and the Port of Alat. This is impressive developments. They will make trade routes comet to Azerbaijan, particularly because once they are fully operational, they will make more expensive entering costs of alternate routes. These are areas where we can share knowledge and experience. Logistics and roads are linked and become fundamental for trade and development. Mexico has over 350,000 km of highways. Once I was driving a highway with four lanes both ways. My wife was unnerved with the high volume of trucks. But as I told her, this is a bright side of things, because it represents a high volume of goods shipped both ways, i.e., increased trade. We have a tight cooperation with the USA on these issues. Over 6 million jobs in the USA depend on trade with Mexico. The Mexico-USA border is the most intense in the world with over one million persons and 400,000 vehicles crossing it daily.


CE: Mr. Ambassador, Mexico is a long way from here, as you noted. What should be the conditions of transportation across the Caspian Sea, Great Silk Way and the North-South Corridor so that such countries as Mexico could benefit from it? What kind of policy should be carried out to arouse interest for cooperation in producers who stay far from each other?

Rodrigo Labardini: The Silk Way may very well connectivity between both Mexican and Azerbaijani hemispheres. A railway stretching from Europe to China could connect with Mexican imports and exports because Mexico has coasts on both Oceans. It would need to take into account tariffs, prices and agreements between producers and sellers. But they are starting to know each other. According to Azerbaijani statistics, in 2014 there were 7.1 million dollars in bilateral commerce, but it grew to 22.2 million in 2015. This growth of 211.72% is indicative of how both countries are reaching out to each other. According to Mexican statistics it grew more than eleven-fold, from 877 thousand dollars to 10.2 million. We know see that some two-thirds of bilateral commerce Mexico-Azerbaijan is being done through third countries. Several Mexican exports are sent from Mexico to UAE (Dubai), Turkey, Germany, Canada, and the USA. And they are re-exported to Azerbaijan. These include, for example, beer (Mexico is the largest beer exporter in the world), fish (hake), tequila, electronics and oil-related equipment. Why not pursue a direct link and save transport costs and benefit the consumer? We are also promoting relations in other fields, such as air and space, telecommunications, and electronics.


CE: Will the expansion of the Panama canal help to increase goods turnover?

Rodrigo Labardini: Commerce may undoubtedly benefit. Albeit, marginally because Mexico has access both to the Pacific and Atlantic coasts. It’s shorter to cross Mexico than to take a Southern route to the Canal. It will be easier to connect the Silk Way with Mexico's free trade hub through East and West. Mexico recently signed the TPP, which will assist in these endeavors.


CE: The canal can be used in foreign trade of gas liquids…

Rodrigo Labardini: The Canal can certainly be used for such purpose. On energy, Mexico has undergone an important structural reform. Some mistakes were made in the past. Not enough investment was made into the gas industry, due to lower yields (60%) vis-a-vis oil production (between five and six-fold). In 2000 Mexico imported 3% of its gas needs, and by 2014 Mexico imported 30% of its gas needs. Gas is imported from USA. The reform was monumental in changing the industry. Today, Mexico is open for exploration and joint exploitation. This is an another area where we can share knowledge and best practices, because Azerbaijan has 25 years dealing with product sharing agreements, whilst Mexico is beginning.


We could share and learn experience in PSAs, tourism, hedging, commerce, and many more issues…


CE: Mr. Ambassador, Mexico has managed to hedge its risks over the past two years which lets her gain profits for the second year in a row. The figure totaled $6.4 bln last year. About $3 bln is expected to be gained this year. No European producer, the State of Texas and other producers have managed to do it yet…

Rodrigo Labardini: Mexico hasbeen hedging oil since 2000, so we have been doing this for the past 16 years. It was a difficult concept at first, but we should see it as an insurance for daily activities. I.e., when you buy a car, you get insurance for when a mishap occurs, it is part of using the car. Same happens with oil.


CE: Mr. Ambassador, how did you manage to get $6.4 bln from $1bln?

Rodrigo Labardini: Practice, experience. The Mexican Secretariat of Finance tries to get hedge around summer. Of course you pay attention to prices and markets and many other factors involved. While Mexico has hedged oil since 2000, it was only used in 2009 and in 2015, very likely this year as well. In 2015, oil was hedged at 79 dollars per barrel, when the market price for the Mexican mixture was at 48.


CE: How did you manage to carry out hedging for 2017? Is there any information?

Rodrigo Labardini: Work in this direction is underway. It’s something we can also share and learn, as with any other topic, including deep-sea-drilling. Just the same way we can share experiences in tourism and commerce. As I have said before, awareness and familiarization of our respective daily activities will let us share. If we share, we learn and grow together.


Combining business with tourism…


CE: What kind of ecological standards are applied in Mexico?

Rodrigo Labardini: Mexico has stringent regulations on the environment. Ecology is very much a part of Mexico and its industry, taking large strides to have green facilities and production processes. This includes the oil and electric industries and the whole production system. It cannot be otherwise, with Mexico holding over 12% of the world's biodiversity. Last July, a Mexican delegation came to Baku and they started conversations with oil institutions here. Once they met, they started to talking shop: upstream, corrosion, downstream, etc. But they were speaking one language: oil, environment and cooperation. Another area which is very linked to the environment is tourism, wherein Azerbaijan is rapidly developing. Mexico is one of the ten most visited countries in the world with over 32 million visitors in 2015, the first country in luxury tourism and receives 23% of romance tourism (tourism for a person's endearing moments, such as weddings, honeymoons, renewal of vows, etc.). Tourism is about 9% of Mexico's GDP and some 11% of our jobs depend on tourism as well. Azerbaijan is strongly developing tourism and we can share and learn. One example is a programme called Pueblos Magicos – Magic Towns. These are places which are unique and magic, offering not one form of tourism but several at the same time: colonial constructions, amazing food, breath-taking views, pyramids, museums, beaches, mountains, etc. Mexico has over 15 million indigenous people, who speak their own languages: 68 of them in all of Mexico's territory. And with all this in mind, we are trying to develop business-tourism. I.e., when a person travels to Mexico, she can make business contacts on her first or two days, followed by one or two weeks of leisure, and meet once again business counterparts at the end of each week, thus facilitating the possibility of concluding a contract. It is a combination of business with tourism.


Thank you for the interview

 Interview made by Emil Mammadov, Sabina Mammadova

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