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Economy

Mexico courting Japanese parts suppliers

TOKYO -- Mexico is trying to lure Japanese autoparts makers. Although the country makes more cars than any other Latin American country, its automakers share a structural weakness -- underdeveloped supporting industries.

Workers attend to a car inside Nissan Motor's plant in the Mexican state of Aguascalientes.

     Mexico lacks the layers of reliable domestic suppliers needed to ensure the car industry's steady, long-term expansion. Concerns about this shaky foundation have been apparent in recent visits to Japan by the governors of some Mexican states.

     The governors tried to persuade Japanese suppliers of car parts and materials to expand into their states.

     At a seminar in Yokohama, just south of Tokyo in Kanagawa Prefecture, held in late October, Carlos Lozano, the governor of Aguascalientes, urged the prefecture's auto suppliers to start operations in his state, where Nissan Motor has a plant.

     The governor said large manufacturers have been developing the country's auto industry and that there are business opportunities in the central Mexican state for small and midsize parts and materials suppliers.

     Mexico has leveraged free trade agreements and its lower labor costs to become the world's seventh largest car producer.

     Still, Lozano is not content with the amount components makers are investing in his state.

     The fact is, his is a countrywide problem. Mexico has failed to develop sufficient supporting industries and has consequently become a massive importer of autoparts and materials.

     Basically, it is little more than a final assembler of expensive imported components.

     A survey by the Japan External Trade Organization found that many Japanese carmakers operating in Mexico are troubled by the difficulty of procuring made-in-Mexico parts.

     "Since Mexico is geographically far away from Japan, secondary and tertiary Japanese suppliers are unwilling to expand into the country," said a senior executive at a Japanese parts maker.

     Western auto parts suppliers are also reluctant to set up shop in Mexico. While leading parts makers like Robert Bosch and Mahle have been aggressively investing in Mexico, second- and lower-tier suppliers from the U.S. and Europe have been less than eager to foray into the country.

     The situation has top officials of many Mexican states traveling abroad.

     Aristoteles Sandoval, governor of the Mexican state of Jalisco, flew to Japan earlier this month to court Japanese suppliers. During his stay, Sandoval visited Kyoto, home to many precision parts makers, as well as Tokyo and Nagoya.

     Since many Japanese companies are uncomfortable about talking business in Spanish, Jalisco has set up a Tokyo office with Japanese speakers on hand to answer inquiries and provide advice.

     Jalisco has also signed a letter of memorandum on business cooperation with Mizuho Bank, which has numerous auto industry clients. Jalisco plans to work with the Japanese lender to help small and midsize Japanese autoparts suppliers to start making their components in the state.

     The governors are somewhat under the gun. The recently struck deal on the Trans-Pacific Partnership trade-liberalizing pact is bound to put Mexico's auto industry up against fiercer competition from emerging Asia.

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