country pro file
NAFTA Numbers
Strategie links
Market position
Optimistic outlook
Team work
have heen in the past. This is strengthen-
ing the industrial economy - and position-
ing Mexico in international trade.'
Trade policy has focused on hilateral
trade agreements, turning Mexico into a
kind of springboard to the US market.
While the US is the leading foreign in-
vestor in Mexico, there are a number of
other countries whose investment ratio far
exceeds its trade with Mexico. Looking to
take advantage of NAFTA, Mexico has
entered trade agreements with Chile, the
European LInion, Israël and the northern
tier countries of Central America. And
currently, it's negotiating with Brazil and
Singapore. 'These agreements are giving
Mexico a strategie trade position,' says
Shwedel. it's taking on the role as the
bridge between the Old World and the
North American market and the rest of
the world.'
The food industry is expected to further
fuel economie growth, driven by the re
bound in consumer spending and contin-
ued export growth. 'The industry has un-
dergone a process of consolidation,'
explains Shwedel. 'We expect this to con
tinue as companies reposition themselves
in the domestic market and develop multi-
market strategies. While growth in the
food industry is promising, the market
also suffers from poor agricultural perfor
mance. Of the last 20 years, agricultural
output lias lagged behiud population
growth for 10 of those years,' Shwedel
adds. 'But, commodity imports continue
to grow, and Mexico is now a major
importer of powered milk, grains and
oilseeds. On average, imports are equal to
about 15% of production.'
In a market that is historically susceptible
to changes in political administration,
there's some cause for concern as Presi
dent Zedillo and his administration step
down. And, there is some potential risk
coming from outside factors - a sudden
drop in the US economy or a sharp fall in
oil prices could dim Mexico's economie
outlook. 'But,' says Barendrecht, 'the
government's strong macroeconontic man
agement, commitment to implementing
structural changes and maintenance of a
floating exchange rate has created confi-
dence in Mexico. Right now, we are fo
cusing on our core business in the food
and agribusiness - there are ample oppor-
tunities to move from a lending bank to a
bank with a wider product range. Our
F&A knowledge differentiates us from
other banks in Mexico - and this is dri-
ving opportunities in M&A and advisory.
In general, things have really turned
around - and we expect that they'll only
get better.'
From 1 January, 1994 Mexico, Canada and the US began implementing the
North American Free Trade Agreement (NAFTA). Removing most barriers to
trade and investment between the members states, it has helped position Mexico
as the second largest trading partner to the US, and the fourrh largest to Canada.
Between 1993 and 1999, US-Mexico trade skyrocketed by 150%, reaching over
USD 200 billion at the end of last year. In the same period, Canada-Mexico trade
doubled, amounting to USD 8.5 billion. Statistics released by the US Department
of Commerce in January 2000 suggest even stronger rates of growth - in the first
month of the year, US-Mexico trade totalled USD 17.4 billion, a 30% increase
from January 1999, and almost 190% higher than in I 993. Of this amount, Mex
ico bought almost 14% of US exports and Mexican products accounted for 1 1%
of US imports. The picture of the food and agri sector tells a similar story: in
1993, the year before NAFTA went into effect, Mexico's F&A exports into the US
were USD 2.7 billion. In 1999, exports had climbed to USD 4.8 billion, an in
crease of 78.3%. During the same period, Mexico's F&A imports grew by 55% -
climbing from USD 3.6 billion to USD 5.6 billion. Under NAFTA, all non-tariff
barriers to agricultural trade between the US and Mexico were eliminated. Many
tariffs were eliminated immediately, while others are gradually being phased out
between 2000 and 2010. It's expected that all agricultural provisions will be im-
plemented by 2008.
-■*- Continued from page 5
It's clear that our team in Argentina has
lots of work to do. While cautioned,
they're optimistic about the improvements
expected in the next 12 months. The
volatility of the market has taught us to
work flexibly and proactively,' says
Abbenh uis. 'L.everaging our deep knowl
edge in F&A and strong relationships
with clients gives the bank a solid position
in Argentina. In fact, no F&A transaction
occurs in the market that we're not a part
of.' The team is busy advising clients on
strategy and M&A issues, and they're in-
volved in a number of structured transac-
tions with mitigation of country risk.
Throughout the year, the office in Buenos
Aires has put forth serious efforts and at-
tention on monitoring credit risk - a cru-
cial factor in the coming months.
'The dedicated and professional team in
Buenos Aires brings together a blend of
experience and knowledge,' says Abben-
huis. 'We've worked together to overcome
the obstacles of this volatile market - and
we're ready and well-positioned to face
the ehallenges of the future.'
