...Group on Development and Environment in the Americas Discussion Paper Number 11 The Impact of Foreign Direct Investment in Mexico Enrique Dussel Peters i April 2008 The Working Group on Development and Environment in the Americas, founded in 2004, brings together researchers from several countries in the Americas who have carried out empirical studies of the social and environmental impacts of economic liberalization. The goal of the Working Group Project is to contribute empirical research and policy analysis to the ongoing policy debates on national economic development strategies and international trade. The project also brings more prominently into U.S. policy debates the rich body of research carried out by Latin American experts, as well as their informed perspectives on trade and development policies. Hosted by Tufts' Global Development and Environment Institute, the Working Group Project has four initiatives. The Working Group’s web page is http://ase.tufts.edu/gdae/WGOverview.htm Enrique Dussel Peters did his BA and MA studies in Political Science at the Free University of Berlin (1989) and PhD in Economics at the University of Notre Dame (1996). Since 1993 he has worked as a full time professor at the Graduate School of Economics at Universidad Autónoma Nacional de México (UNAM). He has taught more than 90 courses at the BA, MA and PhD level in Mexico and internationally, and participated in more than 260 national and international seminars and conferences. His...
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...Rotman commerce Political Risk Assessment of Foreign Investment in Mexico Siyu Li 997707209 RSM491 Mexico is a democratic country in Central America that has a reputation for being a poor and dependent country. However, its democratic title and recent political movement has inched it toward stability politically. The country is comprised primarily of two parties with several smaller ones, much like the US and other countries, including the National Action Party (NAP), a conservative group, and more moderate Institutional Revolution Party (PRI). These two powers have experienced much deadlock and turmoil in the past few presidential elections to the dismay of Mexicans, who appear to simply be interested in the progress of the country and not necessarily just one political group. This paper’s intention is to outline the political ecology of Mexican government and offer a look into the risks and rewards possible from an economic standpoint as the result. Political movement of late has primarily involved the election of President Enrique Pena Nieto, a very young and idealistic leader who has nevertheless brought the country together politically by working both sides of the aisle and offering a moderate rather than liberal viewpoint. John-Paul Rathbone writes that “What made this display of Latin cordiality so notable, though, was that it took place on the second day of President Enrique...
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...Analysis of Foreign Direct Investments of North America Kristin Daughdril & William Cassidy Business Administration 418 Abstract Foreign Direct Investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest in and control by a resident entity in one economy of an enterprise resident in a different economy (UNCTAD). There are two types of FDI, inflows and outflows, which can be used to help determine the investment strategies and economies of countries engaged in FDI. North America has been the source of nearly one-half of all investment and almost three-quarters of the jobs created throughout the globe (Huggins, 442). North America is probably the most important continent when it comes to dealing with FDI. The three main countries of North America, the United States, Canada, and Mexico, all rank in the top 15 of world economies, proving them to be desirable partners in FDI transactions. The trends of FDI discussed in this report will be unparalleled to this information and can lead to some predictions on how future trends of the countries of North America will continue to be superior to that of the other continents of the world. Keywords: Foreign Direct Investment, FDI Inflow, FDI Outflow Foreign Direct Investment is investment of a company located in a different country either by buying a company in the country or expanding its business into the country. FDI can be done for many purposes. Companies may have tax incentives abroad...
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...1994, the United States, Mexico, and Canada implemented the North American Free Trade Agreement (NAFTA), forming the largest free trade zone in the world. The goal of NAFTA is to create better trading conditions through tariff reduction, removal of investment barriers, and improvement of intellectual property protection. NAFTA continues to gradually reduce tariffs on set dates and aims to eliminate all tariffs by the year 2004. Before NAFTA was established, investing in Mexico was a difficult process. Investors needed the Mexican Government's approval and were also required to meet specific investment guidelines. These requirements necessitated investors to export a set level of goods and services, utilize domestic goods and services, and transfer technology to competitors. Under NAFTA, investors no longer need government approval to invest and are treated as domestic investors. NAFTA has also increased intellectual property rights and allowed companies to obtain patents in Mexico and Canada. In the past, companies were hesitant to export research and development intensive goods; with increased intellectual property protection, however, exports of these goods have shown a definite increase. As a result of better trading conditions, exports and imports of most other goods have increased along with the research and development intensive goods. In Mexico, the elimination of investment barriers has allowed investment to expand. Increased trading and investment has then created many...
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...barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to export their products and services to trading partner markets. Agreement | Countries | Enters into force | Advantages | Disadvantages | NAFTA | Mexico, Canada and United States of America | January 1st of 1989 | Market Access for Goods, Protection for Foreign Investment, Protection for Intellectual Property, Easier Access for Business Travelers, Access to Government Procurement. | U.S. Jobs Were Lost,U.S. Wages Were Suppressed,Mexico's Farmers Were Put Out of Business,Maquiladora Workers Were Exploited,Mexico's Environment Deteriorated | FTA Nicaragua | Mexico and Nicaragua | July 1st of 1998 | Provisions on national treatment and market access for goods andservices; rules of origin; agriculture; sanitary and phytosanitary measures; telecommunications;financial services; | The FTA does not include a chapter on competition policy, energy, environment, labor, or transportation. | FTA Costa Rica | Mexico and Costa Rica | January 1st of 1995 | Provisions on national treatment and market access for goods, the agreementcontains provisions on agriculture, sanitary and phytosanitary measures, rules of origin, customsprocedures, safeguards, | The FTA does not include energy and basic petrochemicals, telecommunications andfinancial services. | FTA Colombia | Mexico and Colombia | January 1st of 1995 | Measures related to market access...
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...Introduction Mexico maintained a fixed exchange system of Peso to Dollar, since 1954. Mexico continued the use of such system even after collapse of Bretton Woods system in 1971 and world price shock in 1973. But due to escalating accumulated foreign debt, high inflation, large capital flight, and consequences of import substitution policy, the Peso has lost its value in 1976. After exploring with two rates – preferential rate and free market rate, Mexico established a floating rate policy in 1994. (Source: cuhk.edu.hk, 2013) In this new system, exchange rate is dictated by forces of demand and supply. The New system allows for little or no government involvement in fixing exchange rate. The exchange rate is impacted by macroeconomic aspects such as inflation, interest rate, GDP growth rate, budget deficit, general business environment, political stability etc. Mexico is one of the rapidly developing economies who has been able to keep inflation rates low. In 2012, average rate of inflation was just 3.6%, which is low as compared to other emerging markets. Real GDP growth in 2012 was 4%. Towards the end of 2012, Mexico had foreign currency and hold reserve of $163.6 billion, which was 18th highest in world. (CIA World Factbook, 2013). Foreign investment has played an important part on Mexico’s growing economy. The study of MXN against USD for a period of 5 years (year 2006 to year 2010) reveals that foreign investors are ready to back out from their investment in international...
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...Mexico Needed Strategies to Retain & Attract Maquiladoras In the past, challenges on the Mexican side for competitiveness in retaining the maquiladoras in the country have included high business taxes, pricey highway tolls and the need for energy reforms (Canas, Coronado & Gilmer, 2004). Also, the cost of labor and services and international competition have thwarted the ability of Mexico to retain maquilas. In this paper we see how Mexico’s ways of doing business, how the government and other factors influence the retention or attractiveness of maquilas and what Mexico, as a country, could do/continue to do in order to place itself in a more competitive place. In the early 2000s, the Mexican maquiladora industry slowed, losing in about sixteen months almost 278,000 jobs. Being that maquilas make up a major part of trade between Mexico and the United States, this was a huge hinder for the Mexican economy. According to a speaker at a 2003 conference pertaining to the downturn of maquilas in Mexico, there ae about 26,000 United States companies that “supply maquiladoras with machinery, raw materials and components” (Canas, Coronado & Gilmer, 2004). The effect that maquiladoras have had on areas such as the border have been positive, as laborers from the interior of Mexico migrate to areas in search of these job opportunities (Beck, 2012). However, as I mention below, violence in the northern area of Mexico has also hurt the availability of skilled workers, as they seek safety...
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...to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. . In this mini-case we will look into 4 key aspects such as Mexico’s key economic indicators, the causes of the country’s balance of payment problems, policies in which Mexico could have implemented in order to avoid the problems and the lessons in which developing countries can learn from this incident. Through these 4 key aspects, the reader would be able to gain a better understanding about Balance of Payments concepts. Trend in Mexico’s key economic indicators: balance of payments, exchange rate, and foreign reserve holdings. Yr | Balance of Trade | Current Account | Direct Foreign Investment | Portfolio Investment | Gross International Reserves | Total External Debt | Public Sector External Debt | Interest Payments | 1994 | -18.5 | -29.7 | 6.1 | 8.2 | 6.1 | 142.2 | 85.4 | 11.8 | 1995 | 7.1 | -1.6 | 15.7 | -9.7 | 15.7 | 169.9 | 100.9 | 13.6 | Mexico’s current account deficit was continuously increased from $5 billion to $25 billion during the period 1988 through mid-1994. In late 1994, it became $30 billion. Prior to 1994, Mexico experienced sharp rising trade deficits starting from 1989 and caused the current account to sink into deficit, ballooning from a deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November...
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...Factory Darlene Richardson Global Business Management Jason Britt South University Online October 6, 2015 Opening a New Factory Differences in the Political Economies During the cold war the United States had several rivals which included Chile. Whereas, in Honduras the United States bases were provided so that Nicaraguan rebels could be funded and trained by the U.S. Mexico has never been a major confliction but there have never tried to be a key player when it comes to be a go between with the other nations of Latin America. Recently, the countries of Honduras, Mexico and Chile have become encouraging for the business industry from the U.S. because the political environment has changed. Authorities from the rightwing have lobbied for closer relations with the U.S. Because of such relations it has caused Mexico to become the third largest trading associate of the U. S. However, Mexico and Honduras are dealing with a high crime rate when compared to Chile and Honduras and Mexico have had cases of political intimidation (Kingstone, 2013). The Cultural Barriers Tradition and family values are highly regarded in the Mexican culture. For example, working outside the home in a commercial organization is not as important to women then working in their homes. The children remain at home longer then in the U.S particularly the families that have middle and high incomes. The culture in Honduras has been integrated...
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...Country Analysis MEXICO Aga Wyporska 100853121 Executive Summary: Mexico is located in North America with a population total of 113,423,000 people (University Michigan State 1994 - 2012). It borders 3 countries: Guatemala, Belize and the world economic super power, the United States of America. It has the second greatest economy in Latin America and is a major exporter and refiner of oil. Mexico is currently experiencing growth in its economic factors such as GDP, labor productivity and its exports of goods and services; however, due to the current political instability and the extremely high amount of drug trafficking and the associated violence, it is not recommended to proceed. A lack of an ability to implement laws leads to a lack of solid property rights and enforcement of contracts, which ultimately leads to a loss of business. Country’s Macro Environment: Some of Mexico’s most critical industries include agriculture, which is in the decline (3.9% of GDP in 2006 down from 7% in 1980) and electronics, which is experiencing an upsurge (Central Intelligence Agency 2012). Furthermore Mexico is the 6th largest oil producer in the world and so has a strong performance in the energy and mineral resource industry. Lastly Mexico is involved heavily in services such as tourism (it is the 8th most visited country in the world) and finance (World Tourism Organization 2012). Mexico is the second largest supplier of electronic parts to the US market (exported $71.4 billion...
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...agreements have become a major area of research in recent years. Much of this has to do with regional economic integration, where countries in a geographic region, reduce and remove tariff and non-tariff barriers to the free flow of goods, services and production between each other (Hill, 2005). On the 1 January, 1994, such a trade agreement came into affect between America, Mexico and Canada. This was known as the North American Free Trade Agreement (NAFTA). This removed all barriers to the trade of goods and services within the member countries, the protection of intellectual property rights, application of national environmental standards and the establishment of two commissions with power to impose fines and remove trade privileges when such standards are ignored involving the environment, health and safety, wages and child labour (Hill, 2005). There is a belief that agreements designed to promote free trade within regions will benefit trade for all the countries involved, and also the rest of the world (Abbott and Moran, 2002). While regional economic integration, or foreign direct investment, is seen as a good thing, some observers worry that it could lead to a world in which regional trade blocs compete against each other. We are seeing the formation of many trading blocs continuing today as the need for it has become essential for countries and their firms to compete in the global market place (Seid, 2002). Although this is the case, each bloc will also protect...
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...Switzerland vs. Mexico Switzerland My research paper will individually concentrate on Switzerland and Mexico in its history, competitive advantage, export, trading, and globalization. I will then compare and contrast both countries by their competitive advantage in the market, government intervention, trading, export, and globalization. The Switzerland economy is founded on an exceedingly competent labor force and skilled work. The principal areas consist of micro technology, hi-tech, biotechnology, and pharmaceuticals, also, includes banking and insurance knowledge. Switzerland was not the success story that it is today; in the late nineteenth century Switzerland was a poor nation and its major exports were mercenaries and emigrating citizens. By the early period of the twentieth century, Switzerland had emerged as an industrial nation of importance despite its small size. Switzerland was one of the richest nations in the postwar period and by the 1960 using some measures, Swiss per capita income was the highest in the world. The wealth of Switzerland is the outcome of national competitive advantage where there are shockingly numerous competitors in a wide range of advanced manufacturing and service industries and Switzerland a small nation was able to establish their competitive advantage over large nations and their competitors. The industrial success has allowed Swiss citizens to be employed at high wages and for many years the unemployment has affected...
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...Mexico: An Emerging Market Country Mexico has one of those economies that many people tend to overlook and undervalue. I am unsure as to why many take Mexico out of the equation when looking at the world market investment and business options, however, in my opinion, Mexico is a strong emerging market country. Perhaps many Americans are frightened of sending their investment money into the Mexican economy because of the negative press Mexico is always getting. Not more than a month or two seems to go by without some mention of a drug cartel, violence, border enforcement, or poverty. The purpose of this paper is to discuss the positive and negative aspects of an American company doing business in Mexico, to discuss Mexico’s laws and government stability, and finally to discuss Mexico’s gross domestic product (GDP) and other elements that involve Mexico’s market economy. Rowland, 2012, lists some of the concerns most business owners would have when doing business in Mexico. Fear of corruption and violence likely top the list, both of which seem to be problematic in the country. Some American businesses may also dislike the idea of bringing jobs from the United States into Mexico. However, looking past these top concerns gives one a huge glimpse into the possibility of growth and investment to be had within the Mexican economy. Cost alone is a huge motivating factor when deciding on whether or not to do business in Mexico. Kohli, 2014, states “Mexico’s manufacturing cost is...
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...Canada and Mexico. NAFTA also beget one of the world’s biggest free trade areas by bringing together two of the world’s richest countries; United States and Canada and Mexico which is a less developed country. Its main aim was to lower the costs which are incurred during trading, also to make an increase of investments in the business and to assist the North America to be very competitive in market. NAFTA was also made to eliminate some of the barriers that are put in place to the manufacturing, to the agricultural and to the services (Buono, 2013). Also, was to remove various restrictions that are put in place in investment and...
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...and Its Advantages in Mexico Regional Integration is described as a process in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules. North American Free Trade Agreement was the removal of barriers between Mexico and the United States. It was the phasing out of virtually all restrictions on trade and investment flows. “The expanded trade resulting from NAFTA has raised the United States' gross domestic product very slightly. (The effect on Mexican GDP has also been positive and probably similar in magnitude. Because the Mexican economy is much smaller than the U.S. economy, however, that effect represents a much larger percentage increase for the Mexican economy.)” (The Effects of NAFTA on U.S. –Mexican Trade and GDP, May 2003). Over the years NAFTA has helped Mexico to improve on their exports and imports trading with the United States. NAFTA has had a positive effect dealing with the international investments. This is because some of the restrictions Mexico had on their foreign investment dealing with the ownership of capital. NAFTA also allowed Mexico to do away with tariffs and quotas. This allowed Mexico to become a profitable place to invest, in plants and assembling of products in the United States. NAFTA eliminating the tariffs in Mexico helped to reduce the different license requirements and restrictions on foreign investment. This meant that it would open the doors for Mexico to invest in private...
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