News-Sentinel.com

Thursday, 03/18/1999

Mexico more accepting of foreign commerce

By LYNNE McKENNA FRAZIER of The News-Sentinel

Mexico began this century by booting out foreign investment. It ends the century welcoming the money of outsiders.

The path was not easy and is still not universally applauded.

At the beginning of the 1900s, a corrupt national government was more than willing to accept bribes and hand out favors to foreign-owned companies, as well as favorites within Mexico. The situation led to a series of revolutions and counterrevolutions which ended with the consolidation of power in the 1920s of the Partido Revolucionario Institucional or the Party of Institutional Revolution, usually called the PRI.

PRI governments severely limited foreign ownership of natural resources, land and manufacturing assets. Mexico's growing oil industry, from production through retailing, became a state-owned company, Pemex. Foreign-based companies were limited in how and where they could invest. Such consumer brands as Coca-Cola were successful in Mexican markets. But the nation never did develop some industries, such as auto making and electronics, and had to rely on imports and foreign-owned companies for those products.

But many imports were heavily taxed, putting those goods out of reach for most Mexican citizens, for the PRI failed to bring about widespread economic growth. Mexico remained largely a two-tier society, rich and poor.

In the 1960s, the maquiladora program ushered in a different sort of industrial program. In designated areas along the U.S.-Mexico border, non-Mexican companies were allowed to build factories whose production would not be subject to regular tariffs. The system allowed companies, primarily from the United States, to ship components in, have them assembled by much lower-cost labor into completed goods, and ship the products out without paying those tariffs.

Today, Asian and European companies also are represented in the maquiladora parks, which employ more than 1 million Mexican workers.

Mexico's next significant step toward opening its doors was its entry into GATT, the General Agreement on Tarriffs and Trade in 1986. GATT members are bound by agreed limitations on trade restrictions. And GATT has been regularly modified to push its members toward freer trade and investment.

Those decisions led the way to the North American Free Trade Agreement or NAFTA, which took effect at the beginning of 1994. For the United States, Canada and Mexico, NAFTA formed a free-trade area similar in size and scope to that formed by western European nations in the European union.

Today, Mexico, with a land area of more than 1.9 million kilometers, has an estimated population of 95.7 million.

Head of state is President Ernesto Zedillo, who was elected in August 1994 and represents the PRI, which has run Mexico since 1929.

Mexico's main exports are crude oil, machinery, transport equipment, engines, coffee, shrimp, cotton, fruits and vegetables. The United States is its major export destination, followed by Canada, Japan, Spain, France and Germany. Its major sources of imports were the United States, Japan, Germany, France, Brazil and Canada.