Emerging Market Economy: Mexico
Introduction
The success of any business will be greatly determined by the environment in which the operations are carried out. The legal, political and economic conditions of a given country are some of these determining factors, especially for emerging markets (Lassar, Haar, Montalvo and Hulser 135). Consequently, the management of any multinational corporation that intends to expand its operations into a given country must have an understanding of the economic and political factors in the country. While there are countries that have undergone industrialization and have developed markets, there are those that have not attained that state, but can be considered as emerging market economies. Mexico is one of these emerging markets given the economic stability that has been recorded since the late 1990s (Heyman 31). Mexico is a federal constitutional democracy in the continent of North America. The country contains thirty-one states and the federal district that houses the national government offices. The office of the president is currently held by Enrique Pena Nieto who came into power on December 1, 2012 as the 57th president. The country was colonized by Spain and gained her independence on September 27, 1821 after eleven years of war for independence. The Mexicans had affirmed themselves sovereign towards the end of 1810. This colonization made Spanish the most spoken language in the country and still remains at the top.

Political Risks Mexico follows a political system and government structure that was outlined in the 1917 constitution. The country has a presidential system where the citizens are charged with the responsibility of electing their leader. The elections apply direct popular votes with the rule of simple majority. This president serves a fixed term of six years and is not eligible for reelection into this office once the term ends. As mentioned above, the current president is Enrique Pena Nieto. His election victory represents a comeback for the party, PRI, which had ruled this country for several decades (Country Report 3). The constitution provides for a distribution of power between the three arms of the government. These are Executive, Legislature and Judiciary. The Constitution defines the powers and roles of each of these arms of the government. The Executive at the federal level is headed by the president who has been more powerful than the other two arms of the government in the past, although parliament is currently becoming very powerful. The incumbent becomes the head of state, and the chief commanding officer of the country’s Armed Forces. The president makes several government appointments including members of the cabinet, attorney general, ambassadors, top military personnel and the judges of the Supreme Court. The country’s legislature consists of the Senate (upper house) and Chamber of Deputies (the lower house). The members of the upper house are elected for a term of six years while those of the lower house are elected for three years and both cannot vie for the term that immediately follows expiry of their current term of office. The same structure of the federal government is applied at the state level, where the Executive is headed by the governor. The Mexican government, beginning in the 1980s, had presidents who were deeply concerned with dwindling economy of the country (Cypher 18). This would result into the signing of various trade agreements such as General Agreement on Tariffs and Trade (GATT) and North American Free Trade Agreement (NAFTA) to promote international trade. The entry into these trade organizations marked the beginning of Mexico’s growth in economy (Selee 116). The presidents also tried to lure their neighbors who had not joined these trade organizations. Currently, the country has a very good network of trade agreements being linked to more than 40 countries (Country Report 4). Mexico is a democratic multiparty state, and the elections at both federal and state levels are conducted via these political parties. The democracy, however, began to flourish just about two decades and the traces of autocratic rule may still exist (Selee 116). The major political parties include National Action Party (PAN), the Party of Democratic Revolution (PRD) and the Institutional Revolution Party (PRI (Country Report 3). Some of the less famous parties are Mexican Ecological Green Party (PVEM) as well as the Democratic Convergence Party (PCD). The country had been ruled by one party, PRI, until 2000 when the elections were won by a candidate from the National Action Party (Country Report 3). Mexico has largely enjoyed peaceful elections in the past, much as what is witnessed in the United States and other development worlds of the west. The country has no history of heated political violence, or military coups plotted to take over the government. However, the country has often witnessed social movements opposing some government actions or pieces of legislation (Country Report 3). Nonetheless, the PRI governments often had strategies to arrest such situations. Just like in other governments, the parliament here is responsible for various legislation and approval of budget bills in the country. Parties play important roles in the passing of bills in each of the houses. The past two governments by PAN Presidents suffered a rather paralyzed parliament where there were constant oppositions against proposed government policies (Country Report 3). The current government came into power with knowledge of the country’s political history and the lesson learned from the past two governments. The leadership of PRI, the current ruling party, understands that they need support from the other major political parties, particularly PAN, in order to enact legislation that embeds reforms in the country. Consequently, the three main political parties signed some agreement termed Pact for Mexico that will see them join hands to support 100 policy measures provided they develop a common perspective about the policies (Country Report 3). When coming into power, the current president had identified some key areas that the government will focus on such as energy sector, education and fiscal policies. The country also still faces the problem of war on drugs characterized by murder and kidnapping. Nonetheless, the political atmosphere in the country remains favorable for a foreign investor. Mexico is a promising economy as reflected in the country’s stock market in the past two decades or so. While the country may not boast of well-programmed institutional reforms, she has enjoyed a political and economic stability, especially beginning with the reign of Salinas and Zedillo (Heyman 31). The same spirit of economic stability has been an important concern for the subsequent presidents from PAN. The country has one of the largest Gross Domestic Products in the world and was in position 12 by 2010 (Vargas-Hernández and Noruzi 7). The stock market has outperformed many emerging markets throughout the past decade (Heyman 31). Salinas was the first president to set the pace of financial reforms by establishing the country’s central bank. Salinas had shown concern for Mexico’s development even before coming into power when, in 1986, he helped push the government sign into GATT (Cypher 20). The humble financial system has allowed for establishment of several local and global banks in the country such as BBVA, Citi, and Scotia among others (Heyman 31). The net effect is a state in which many people have easy access to mortgages that can be channeled to other investments. Consequently, the country has recorded a considerable growth in the proportion of middle class, which was about 60 million out of the 110 million citizens in the country by 2011 (Heyman 31). This reflects positively on the household spending in the country. There is a projection that household spending will remain one of the driving factors for economic growth in the near future (Latin America Monitor 1). The increased proportion of the middle class implies that businesses can thrive well and that foreign investors have potential clients they can target for their products and services. Mexico has served as a host nation for several MNCs for a long time (Vargas-Hernández and Noruzi 7). The country’s stock market indicates that multinational corporations operating within and outside Mexico are performing well. Some of the companies listed high in the stock market include America Movil, Cemex, Televisa, and Coca Cola Femsa (Heyman 31). However, such an environment also comes with associated risks for foreign investors, who are then challenged to have proper risk mitigation strategies. There is fierce competition posed mainly be Asian companies across several sectors and industries (Lassar et al. 126). Chinese companies are of particular threat as competitors given their advanced technological applications that improve operation and production efficiencies (Cypher 20). A company that cannot adopt a competitive strategy will be forced out of the market.