"Mexico's growth is superior to that of Europe"

Mexico is preparing for a presidential election on July 1 Reuters

Expanding Swiss business interests in the Mexican market is one of the top priorities in Latin America for the Swiss government. While Mexico offers huge untapped potential, firms operating there face numerous challenges such as heavy bureaucracy and insecurity.

This content was published on June 27, 2012 minutes
Andrea Ornelas, talked to Rudolf Knoblauch, the Swiss ambassador to Mexico, about trade opportunities between the two countries, especially for small-and-medium-sized businesses. How would you describe Switzerland’s business relationship with Latin America?

Rudolf Knoblauch: Our relationship with Latin America began long before the Second World War. It’s good, but it could be better.

Trade relations with Asia are more dynamic. In Latin America Swiss exports have continued in a traditional vein: large firms export successfully, but small- and medium-sized enterprises (SMEs) are missing. We do not see enough of them in this market. Foreign trade between Switzerland and Latin America has increased significantly over recent years. But overall volumes remain modest despite the huge potential of 600 million consumers. Why is that?

R.K.: Firstly, Asia boasts two extraordinary economies: China and India. Demand in these two countries is impressive, as they want to catch up with everyone else.

This phenomenon doesn’t exist in Latin America, and there are some economies which are worse off than 20 years ago. Nowadays, the countries with the greatest potential are Brazil, Peru and Colombia.

The second thing is that Latin America has always experienced political ups and downs and countries like Mexico have their eyes firmly set on the United States. A free trade accord between Switzerland and Mexico entered into force in 2001. What’s your view on trade relations over the past decade?

R.K.: I don’t think people have taken sufficient advantage of this free trade agreement. I often meet Swiss and Mexican entrepreneurs who are not even aware of its existence. Much more can be done in this respect. Switzerland exports mainly pharmaceuticals, chemicals, watches and machinery to Mexico and imports pearls, refined lead and machines. What sectors offer most potential for both countries in the short and medium term?

R.K.: The Swiss pharmaceutical industry is very present, but it’s a sector where there are still many interesting opportunities for SMEs. There are also opportunities in green technologies, where Switzerland has a lot of experience.

There is also the mining sector, where Mexico has a long tradition, as well as transport and engineering – the application of scientific principles to the design, construction and maintenance of machinery, buildings and communication systems. Latin America is a melting pot of different economic policies. Some countries are rather neoliberal, like Mexico, while others are more protectionist, like Venezuela and Bolivia. How do Swiss investors cope with such a varied playing field?

R.K.: I have lived in Argentina, Mexico and several other Latin American countries, and there have always been potential ups and downs and nationalist tendencies.

Argentina has experienced everything but it’s impossible to say which approach is best. Countries like Brazil and Argentina, which have closed certain sectors, have experienced impressive growth. Mexico has chosen a different model, and has done well in general. Its growth is superior to that of Europe, but mediocre when compared to other countries in the region.

An entrepreneur tends to have more confidence in a country like Mexico, where there is continuity in the economic policy. It is no surprise that Peru and Colombia, which have also pushed for trade liberalisation, are more successful today. Mexico is holding a presidential election on July 1. How do you think Swiss investors will react if there is a swing to the left?

R.K.: If Josefina Vazquez Mota, of the governing National Action Party (PAN), or the front-runner Enrique Pena Nieto of the Institutional Revolutionary Party win, I don’t think Mexico’s economic model will change much.

But if Andres Manuel Lopez Obrador of the leftwing Party of the Democratic Revolution (PRD) wins, I don’t think radical changes will be made to Mexico’s economy either. How do Swiss firms cope with on-going social problems in Mexico such as drug trafficking and insecurity?

R.K.: These are problems that have increase significantly over recent years, partly as a result of the current government’s strategy since 2006. But they don’t create more worries for employers.

For Swiss companies active in Mexico, insecurity is just one of the costs they have to bear. A businessman once told me: "Two years ago I lost two out of 100 trucks with goods. Now I lose five". These things are taken into account in a budget and no one gives up an investment for this reason.

Nonetheless, it’s alarming that 12,000 to 13,000 people die every year due to drug trafficking. But it is also important to remember that the centre and the south of the country do not experience these kinds of problems. The north witnesses more conflict and some big cities like Monterrey are particularly badly affected.

Bureaucratic problems can sometimes be more important for companies. The European press often talk about Mexico’s difficulties and bad news, but this remains an extraordinary market. And the Swiss businessmen who are able to follow the basic rules can make money here and do so with a clear conscience.

Free Trade Accord

A free trade accord between Mexico and the European Free Trade Association (Efta), which includes Switzerland, Liechtenstein, Iceland and Norway, has been effective since July 2001.

Switzerland and Mexico have signed a number of trade agreements: 2001 bilateral accord on farm products; a 1998 memorandum of understanding about trade and economic cooperation; a 1996 agreement on the reciprocal promotion and protection of investments.

Swiss exports to Mexico stood at SFr1.3 billion in 2011, while imports from Mexico amounted to SFr570 million.
Switzerland sells Mexico mostly machines and chemical, pharmaceutical and electronic products, as well as luxury ítems.

Mexico sells Switzerland mostly chemical products, machines, metal ore as well as agricultural and forestry items.

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Born in canton Aargau in 1951, Knoblauch received a PhD in Economics at St Gallen University and has presented Switzerland at various international organisations such as the Organisation for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO).

He has worked as a Swiss diplomat in Venezuela, Nigeria, Benin, Chad, Equatorial Guinea and India.

He has been Switzerland’s ambassador to Mexico since January 2011.

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