Mexico Is a `Must See' For American Business

Mexico is one model for Latin America of how to secure access to the US market and attract foreign investment. Argentina exemplifies the region's battle with corruption

SCIENCE Applications International Inc., a successful United States-Canada-based company specializing in high-tech applications to industry and infrastructure, was looking for opportunities to further its presence in the international marketplace.

Passage of the North American Free Trade Agreement was all it took to convince SAIC that Mexico was a ``must'' site for expansion.

``NAFTA was clearly influential in our decision to do business here,'' says John Glancy, president of SAIC Canada and Mexico, which last month announced plans to set up shop in Mexico.

``We saw NAFTA as a signal that Mexico was serious about becoming a lot more involved in high-tech development and the kinds of skills our company offers,'' he adds. SAIC will hire ``the best Mexican scientists and technologists we can find'' to focus on three areas in which Mr. Glancy says he sees NAFTA promoting technological advancement: transportation, the environment, and telecommunications.

The link between free-trade agreements and increased foreign investment and job growth - especially the kind of good-paying, highly skilled jobs SAIC will create in Mexico - is the reason why Latin American countries attending this weekend's Summit of the Americas in Miami will be looking for concrete steps toward a hemispheric free-trade zone. That link, which appears to be operating in Mexico with the arrival of companies like SAIC, explains why Latin countries are keeping an eye on NAFTA-member Mexico as it adjusts to a closer relationship with its economically powerful neighbors, the US and Canada.

``The most important thing all these [Latin] countries want is secure access to the US market and strong foreign investment,'' says Sidney Weintraub, a Latin specialist with the Center for Strategic and International Studies in Washington. ``Mexico has secured this with NAFTA, so they look to Mexico as the way to go.''

Not that all of Latin America is ready to join NAFTA, Mr. Weintraub notes. ``Mexico took important internal steps to prepare for free trade,'' including tough decisions to control debt and inflation and to privatize industry, preparing it for foreign involvement, ``but that's not true yet everywhere else.''

Now, Mexico is enjoying the fruits of its preparation for NAFTA. Exports to a more-accessible US market have boomed this year, while foreign investment has shot skyward in anticipation of the country's integration into the North American market. Last month alone, foreign investments totaled nearly $2 billion. That is less than the same month in 1993, but more than was typically registered in a full year a decade ago.

The picture isn't uniformly bright, however. Hundreds of small Mexican businesses have closed, unable to compete in a more open market. And overall job growth has been slow, as companies focus on boosting productivity.

Such problems are just as much a result of Mexican economic policy as of the country's entry into NAFTA, some economists claim. Mexico could have done more to take advantage of NAFTA with measures to boost growth and encourage investment in job creation, they say.

Black marks are one reason why Latin countries will take their eyes off Mexico long enough to study the case of Chile - which earns higher praise for its economic transition. ``We expect something concrete in response to our country's successful and widely recognized economic and political reforms,'' says Felipe Lorrain, an economist at Santiago's Catholic University of Chile. He notes that a recent study by prominent US economists graded Chile's transition ``a 4.4 over 5, above the 3.9 Mexico earned.''

Despite generally backing a hemispheric free-trade accord, Mexico has remained silent on prospects for Chile's imminent membership in the NAFTA club - leading to speculation that Mexico would prefer to have more time to adjust before it faced new competition from within.

``That would be not just selfish but a very short-sighted position for Mexico to take,'' Mr. Lorrain says. ``The new thinking in Latin America has been that, the more we all grow and trade, the better off we will all be.''

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