Special Report on Mexico: Mission to build a stronger trade link with Europe: UK businesses are showing a growing interest in Mexico. Colin Harding reports

BRITAIN has had a trade surplus with Mexico since 1988, but the figures are insignificant and contribute very little to Mexico's burgeoning trade deficit, which reached dollars 4.4bn ( pounds 2.3bn) last year. Britain accounts for only 0.8 per cent of Mexico's total trade, compared with the US's 70 per cent and 4 per cent with the rest of Latin America.

One of the main reasons for President Salinas's visit, his second in three years, is to widen his options by encouraging more European trade and investment, and to scotch the idea that the North American Free Trade Agreement (Nafta) will be an exclusive, fortress- like arrangement.

There is certainly plenty of British interest in Mexico - the then Trade and Industry Secretary, Peter Lilley, went there in January at the head of a delegation of British businessmen, and Douglas Hurd, the Foreign Secretary, was there in May. A British trade mission is in Mexico now, the second this year. But President Salinas knows that foreign confidence in Mexico's future must be nurtured and developed for the trade and investment to flow.

Mexico imported dollars 274m ( pounds 144m) worth of British goods last year, and exported only dollars 147m ( pounds 77m) worth. By contrast, Mexico sells goods to the value of dollars 40bn ( pounds 21bn) to the US. Invisibles - banking, transport, insurance, financial services - are in some ways a better bet than visible trade. Many British companies have been involved in Mexico's massive privatisation programme; James Capel, the stockbroker, recently lead-managed a dollars 5m ( pounds 2.6m) offering for a Mexican tourism development company, and Commercial Union, after a 10-year absence, has taken a 40 per cent stake in la Republica insurance company. It may be 10 years before British banks are allowed to open subsidiaries in Mexico, but another promising area for invisibles development is air transport: British Airways plans to resume direct services between London and Mexico City next March, more than 10 years after they were suspended. Current plans are for a non-stop 747-400 service three times a week.

The position of British direct investments in Mexico is much stronger: they are second only to the US and just ahead of Germany. US accumulated investments in 1990 totalled dollars 20bn ( pounds 10.5bn), against dollars 1.91bn ( pounds 1bn) for Britain and dollars 1.89bn for Germany. In addition, Cadbury Schweppes recently completed the dollars 325m ( pounds 171m) acquisition of the leading Mexican soft drinks manufacturer and bottler, Aguas Minerales, which has about 70 per cent of the world's second- largest fizzy drinks market. Trafalgar House Construction has set up a 50-50 joint venture with a Mexican developer, Grupo Sitra, to participate in tourism and public works projects.

A number of other British companies are well established in Mexico, and several of them see good prospects for expansion. ICI and Unilever are looking at agri-business opportunities offered by agricultural reforms and the free trade agreement. Unilever bought out Anderson Clayton in 1986, and is well placed to develop its Mexican food-processing operations, while ICI has big pharmaceuticals and fertiliser plants. Tate & Lyle is considering a new sugar refinery, and BT owns 49 per cent of a payphone assembly plant supplying GEC-Plessey equipment to the newly-privatised telephone company, Telmex.

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