From bankruptcy to recovery
did you know?
It was just five years ago that the
Mexican economy suffered its worst
setback since the days of the Mexican
Revolution. Since then, there's been a
series of positive economie reversals
that have set Mexico on the path to
economie stability. With a strong fiscal
discipline, several profitable trade
arrangements, growth in F&A and
increasing foreign
investments, there's bright
prospects for the current
year - helping Mexico
secure its position in the
market.
Mexic
Successful transformation
Trading hub
Attractive investment
6 Whafs NewS Issue 4 June/July 2000 (QIJflffy pfQ fjjg
In 1995, the economy had
plummeted hy 6.2% while GM Maurits Barendrecht
inflation soared to 52%. Un-
employment more than doubled, reaching
levels over 6%. But the situation in Mex
ico today is radically different. Our people
in Mexico City teil us that GDP is
projected to
grow hy at
least 5.2%,
inflation is esti-
mated to fall to
10%, and unem-
ployment will decline to
2.4% - the lowest level in
more than a decade. The bud
get has been brought under control - now
representing less than 15% of GDP, it's at
the lowest level in more than a decade.
And interest rates, while they're still rela-
tively high, are on a downward
trend.
So what explains
this rapid turn-
around? 'One of the
key factors in dri-
ving recovery is the
commitment to
structural change,'
explains Maurits
Barendrecht, gen-
eral manager in
Mexico City. 'In the
1980s, Mexico's structural
change process has trans-
formed the country from a
closed, heavily state-directed
and intervened economy to one of the
more open economies, with free market
policies becoming ever more important.
Part of the structural adjustment implied
FAR's Ken Shwedel
the reduction and elimina-
tion of a number of subsidies
and market distorting poli
cies, as well as the sale to
private industry.'
As a result of these mar
ket oriented policies,
Mexico is well on its
way to becoming a
trading nation. In
fact, the value of Mexico's
foreign trade is well above
that of any other nation in
Latin America. Since the
opening of the economy in
the late 1980s, Mexico's
foreign trade has grown
radically. Expansion of
both imports and exports
has fuelled this growth.
While trade has interna-
tionalized the economy, it
has not isolated Mexico
from internal shocks, such
as the December 1994 de-
valuation. But, interna-
tionalization has been a decisive factor in
the country's rapid recovery. NAFTA has
played a key role in this recovery. With
assured access to the US and Canadian
markets - particularly given the current
strength of the US economy - Mexico has
expanded its economy through exporting.
This revitalized market has also generated
new jobs and improved salaries, leading
to greater economie stability. (See Nafta
Numbers.)
Next time you pack for a business trip to the US rnake sure you leave your
three-piece suits behind. The days of compulsory and conservative Brooks
Brothers attire are long gone, but until very recently they had only been replaced
by Armani and Boss. Now the wind of change has blown right through Wall
Street and casual has become the dress code, not only for Friday, but for every
day of the still lengthy working week. And it is not only for those days when
you're not meeting a cliënt - even the clients have left their neckties at home. The
idea has crept in from the west coast. This change is, apparently, another spin off
from the 'dot.com' revolution. So when you're heading Statesidc, check out what
to wear so you're not the only 'suit' in the room.
The opening to and promotion of foreign
investment has become another major dri-
ver in Mexico's economie recovery. Due to
the size of its domestic market, the coun
try has always been attractive for foreign
investment. And, with changes in eco
nomie policies and preferential access to
the US and Canadian markets through
NAFTA, Mexico has become even more
interesting for direct foreign investment.
'The opening of the economy has enabled
companies operating in Mexico to souree
worldwide,' explains Ken Shwedel, head
of FAR in Mexico. 'Investors are more
attracted to the Mexican market than they
