International business project: A case of Mexico Essay

Mexico is the close(prenominal) populated Spanish speaking nation in the domain of a function and comes third in population in the Western hemisphere. Mexico holds to a greater extent than than 100 gazillion inhabitants. In the untimely stratums of its history the establishment had embraced the protectionists policies of mountain in order to motivate industrial growth and indeed plug growth in the domestic miserliness. Unfortunately under these policies the unpolished underwent a decline in animate standards and inflation.The debt crisis in the socio- sparing class of 1982 that precept the state of matter fail to meet its debt obligations primarily aggravated the ch allenges in the sparing especially half panache into the mid 1980s (Pasco 72-73). The Mexi give the sack presidential term therefore in the late years of 1980 adopted measures that were aimed at restructuring the aras economy. The agriculturals efforts consequently shifted to softwood liberalizati on and privatization of industries that were antecedently state owned. Privatization of infrastructures such(prenominal)(prenominal) as rail roads, natural gas distribution, telecommunications, electricity and the airports among others took place extensively.The country proceeded to make economic policy reforms in the early 1990s consequently attracting large amounts of contrary investment funds funds funds cash. However in 1993 the f outset of capital from alien countries started to decline majorly as a result of political uncertainty and an exchange rate that was overvalued. The declined levels of world(prenominal) levels subsequently conduct to peso devaluation. By the last months of 1994 the country was experiencing a currency crisis forcing the disposal to take on the floating exchange rate system. The result was a deep recession of the economy six months later.The aftermath of the recession saw the government restructure the system again to create conditions that would hasten the recovery of the economy. An emergency package was received form the World Bank and a plan that incrementd value added tax, fostered budget cuts and even tighter m angiotensin converting enzymetary policies was implemented. consequent years saw the country increase its exports and softened the impact of the recession. The countrys Gross Domestic Product (GDP) growth in 2006 was 4. 8 percent but decreased to 3. 3 percent in the year 2007 and further down by approximately 1% in the year 2008.Mexico has non been left out and the country is significantly feeling the make of the worldwide economic downturn. Economists forecast the contraction of its GDP this year by 2. 6 percent the sharpest ever contraction since the 95 crisis. The country is soon experiencing stemma losses, cut production capacities in plants and poverty levels allow as well short up with more than 5 million people living in impoverished conditions (Field 32-41). Mexicos stack position with Canada The trade traffic between Canada and Mexico shed strengthened because of the North the Statesn cease billet deal proportionateness (NAFTA).The trade flows between the two countries has shown an impressive gradual increase in the non little than nine years existence of the concordance. The results possess now made Mexico, to become Canadas major trading render within the Latin America region. The country in addition ranks fourth as Canadas trading partner in the globe after coupled States (US), China and Japan. For Canada, Mexico has become a very essential destination and is positioned as Canadas third biggest mart for its exports. On the same note Canada in 2002 appeargond on Mexicos lists as the tally five largest foreign provider.The countries sire continued over the years to strengthen their trade ties and now Canada is the first supplier of Mexican agricultural, mineral and metal products. On the other pass richly production standards of Mexico have made it C anadas top supplier in vehicles, agricultural totals and electronic equipment. Consumers in the two countries have taken receipts of the relations to entree a wide range of cheap well-behaveds. On the other hand Mexico also has good trade relations with other countries such as the coupled States. America is basically the lead-in creditor and trade partner for most counties in the Latin region.The two countries are closely linked such that Mexico as a country is the most exposed to the U. S economy and both changes in it would largely allude the Mexicans. More so 80% of the Mexican exports find there way to America. Additionally the Mexican economy is greatly supported by the remission from its working citizens who are in the United States, (Field 32-41). The remittances actually account for not less than 3 percent of its GDP and they form the second largest blood line of income to the nation after oil exports. The country has also taken advantage of its skilled labor fo rce to attract high engine room investors from the United States.The sectors in which America has invested in Mexico include the telecommunications, transport and agricultural industries to remark just a few. Membership in trade blocks. Trade blocks bit a very critical role especially when it comes to outside(a) trade negotiations. Mexico for example is a member of the G20 trade block which constitutes of other members such as Argentina, India, Brazil, Pakistan, China, South Africa. , Philippines, Bolivia, Thailand, Venezuela, Chile, Zimbabwe, Paraguay, among others. The G20 is developing countries grouping that resulted from the world trade dialog in Cancun in the year 2003.The group is led by major exporters and countries that are rapidly growing such as India, China, Brazil, and South Africa reservation it strong and with the capacity to compete with the US and EU in trade negotiations. G20 has been noted for its emphatic rejection of the proposal by the EU to include con test and investment as critical elements in trade talks. The group has also been emphasizing that before they make any agreements on reduced tariffs for manu itemure goods or services the rich nations must first put concessions on agriculture.Additionally Mexico together with the United States and Canada form the North American Free Trade Agreement (NAFTA). The Agreement addresses the issues of labor, surroundings, trade and investment. Even then the Agreement has been criticized by some US environmental groups and unions who claim that its safeguards are weak. It was amalgamate in the year 1992. The aim of the agreement was to remove trade tariffs on products for a period of not less than 15 years and at the same time limit trade contacts with outsider countries in the globe.The agreement was also expected to increase and enlarge their farmers markets and stimulate economic growth. belatedly there have been calls to renegotiate or su cut down the Agreement after fourteen years i n operations. Clearly though Mexico has benefited from its membership in the block, which is said to be the among the worlds richest blocs. It has for example acted to increase Mexicos amounts of exports, and also increase the amount the country receives from the United States in terms of foreign direct investments (Pasco 72-73).The agreement has also led to an increase of job opportunities for Mexicans also accompanied with an increase in wages especially in the areas with most foreign investors. 4 Governments position on trade and foreign investment In the past few decades Mexico has transitioned from a closed economy to an open economy. The policy of open trade has enabled the country to face the challenges brought by the economic slow down and financial markets that are not stable. In early years of the 80s the country took a step towards unilaterally liberalizing its economy.The country then took domestic measures with the aim of encouraging foreign investment and deregulatin g business activities. In the early 90s the country embraced the country took the initiative of opening its markets by undertaking international trade negotiations with the principles of reciprocity and balance in mind. The country has currently write various bilateral investment agreements and not less than nine international free trade. The result has been export oriented growth and industrial competitiveness.The policies have also led to preferential market access of their exports to more than 800 million consumers that benefit from their exports and have additionally opened up new investment opportunities. Generally the Mexican strategy of free trade agreements has been critical in improving its competitiveness on a global scale, increased trade and long term growth. Its current network of trade agreements can be said to be the major cause of the impressive trade flows in the country. Mexico appears among the ten largest trading countries in the world.In 2003 for example the co untry had exports be not less than $165 million. Basically its quantity of exports has tripled since 1993. Mexico has also been modify to become a manu particularuring export center courtesy of trade liberalization. currently most of the countrys exports are largely manufactured goods a change from the early 80s when the greater percentage of exports was oil. Their youthful productive labor together with the measures of investment protections and tariff elimination are among the factors that have encouraged foreign investments making it a manufacturing hub.Their auto, electronics and textile and invest industries have industries have been the most beneficiaries of trade liberalization (Pasco 72-73). . Reasons why Canadian companies should trade/invest there and reasons why they should not. Mexico comes across as a very viable country for Canada to invest in. Among the reasons are its strategic position, economic indicators, policies that aim at encouraging foreign investors an d a conducive environment for investment among umteen others. The country is made up of 32 federal official States of which each is free and sovereign and its territory extends to not less than one million square kilometers.The country borders Guatemala, Belize and the United States. The country additionally hosts more than one hundred million inhabitants of all religious affiliations meaning that all beliefs are represented without bias though the majority of the population is Christian. Spanish is the official language of Mexico although it has more than 66 kinds of languages. The country currency is called Peso. The countrys place of location allows it to supply the markets in North America and also to have access to potential world inputs and modern technologies.The Jalisco, Quintana Roo, Colimo are among the federative entities whose populations greatly participate in economic enhancement. Its population consists of not less than 1 million unemployed citizens. The country is e ndowed with an attractive investment environment even as demonstrated by the following statistics in 2007 the country was ranked as the 12th largest economy in the world by the virtue of its GDP with regards to its oil reserves it appears as number 17 globally additionally the country is a very important tourist destination ranking eight globally in this regard. save the country is among the top ten countries in the world that benefit most from foreign direct investment. Additionally their fiscal and financial policies have served to match that the country enjoys periods of macroeconomic stability with reference to the recent years. In fact it was named the best Latin American country in terms of indulgent business conditions and placement of foreigners capitals. The stable economy that it has enjoyed has led to it accommodating not less 30,000 foreign companies. The economic stability therefore makes it a good destination for conducting profitable business.In order to attract mo re investment the country has a consolidation of several sectors of production which include of industries such as the automobiles industry which was ranked 7th globally, electronic industry, telecommunications industry, the information technology and software industry. These sectors provide different kinds of opportunities for Canadian investors. The country additionally has good relationships business wise with other countries in the global scenario. This has allowed it to have preferential access to the markets in Israel, North America, and the European Union just to insinuate a few.The preferential access it enjoys combined with its cheap yet early and qualified labor force make the country a lucrative destination for investment by Canadians. The Bilateral Investment Treaties that the country has gestural should be an attraction enough for Canadian investors. Through these treaties the country offers legitimate protection and protection to it foreign investors. Moreover the country offers a low risk return combination that guarantees the investors markets access prevailing conditions of macroeconomic stability, foil and political stability.Additionally investors have the opportunity of benefiting from the high quality inputs offered at affordable prices, growing domestic markets, and wide array of trade agreements. In spite of this Canada may not need to invest in Mexico because of the fact that Mexico is among the top countries with high levels of corruption in the region. Any country with high levels of corruption is should be scary to investors because it simply implies that investors will have to spend more than is necessary in order to get value for their money.The make of corruption in fact go way past the monetary costs. The country also suffers from poor infrastructural networks although the government is taking steps to ensure that infrastructure is improved to allow investors to have access to any market and on time. The country is also co nsumed by the culture of drug call out among its especially productive population. This means that in a way the investor security can not be guaranteed. The country also has strict sound and regulatory frameworks that may serve to impede the speed by which an investor can establish his business.The effects of agglomeration also may work to hinder any Canadians that would want to invest in Mexico. In conclusion Mexico would be a wise choice for any investor, this is because the country has done everything to ensure that its business people will not only be able to access the internal but also the external markets especially through the many trade agreements it has signed. This means that all the established businesses in the country have the potential to operate profitably.