MercoPress. South Atlantic News Agency

Mexico and Japan sign free-trade accord.

Mexico and Japan capped two years of intense negotiations Friday by concluding a broad economic pact that eliminates trade barriers and aims to boost bilateral investment activity.

The Economic Association Agreement, known here as the AAE, was signed at the National Palace by Mexican President Vicente Fox and visiting Japanese Prime Minister Junichiro Koizumi.

The AAE includes a free-trade agreement, Japan's first with a country in the Americas and only its second overall, and a chapter devoted to protecting and encouraging profitable investments.

Fox said the agreement "will mark the beginning of a new era" because "under the impetus of this important instrument, a promising horizon will open to increased trade and investment." Fox said that the positive expectations generated by the AAE talks gave rise to a 28-percent increase in bilateral trade so far this year. He said that with the signing of this new agreement, the two countries have each gained a strategic partner to act as a "bridge" - Mexico would become a bridge to North and South America for Japan, and Japan would become Mexico's bridge to Asia.

The Japanese prime minister praised the "sound and mature" relations of friendship and cooperation between his country and Mexico and said that the AAE would open "a new page" in bilateral relations.

Touting the AAE, the Mexican Economy Ministry said this week that within 10 years Japan may be pouring some $1.3 billion into Mexico annually, a huge increase over the $97.67 million it invested here in 2003.

Japan is the world's eighth-biggest investor, having sunk some $26 billion into projects abroad over the last decade, most of it in other Asian nations. But Mexico has become an alluring destination for Japanese firms, especially since the 1994 signing of the North American Free Trade Agreement, which linked Mexico's economy with those of Canada and the United States, Japan's largest trading partner.

Japan has invested some $3.36 billion in Mexico in the last decade, accounting for 2.6 percent of the Latin American country's total intake of foreign direct investment over the period.

Mexican authorities see the AAE as an excellent opportunity to realize the nation's export potential and attract more investment, which would in turn boost output, create jobs and foster economic competitiveness.

Coming in addition to NAFTA and an accord with the European Union, the signing of the AAE with Japan allows Mexico to boast trade agreements with the world's three leading economic powers.