U.s Investment In Mexico :: essays research papers

U.S Investment in MexicoEconomics 580Dr. LeonHaitham BoukhadourFall 96Mexico has established itself as one of the biggest uphill markets inthe world today. It has exhibited many of the signs of a high growth economy,offering several advantages to prospective investors. Some highlights of theMexican economy include " single-digit inflation, a balance public budget, realeconomic growth (presently at a rate of 12 percent), a deregulated economy and afavorable investment climate" (Risk concern/ June 94, P.32). Mexico alsopossesses a strategic geographic location as a gate way to Latin Americanmarkets.     Mexico is among the fastest- growing export markets for the joinedStates. In 1985, Mexico became the third largest market for quantity U.S. exports,behind Canada and Japan. In 1992, Mexico surpassed Japan as the second largestexport market for U.S. manufactured goods. Mexico now accounts for $1 out of all $10 of total U.S. exports.      After the passing of NAFTA, bilateral trade was quite balanced in 1994,with the U.S. registering a surplus of $1.3 billion, virtually unchanged from1993. However, there was a sharp increase in trade opportunities, as both importand export growth exceeded 20 percent. One-fifth of the total trade that occursbetween the United States and Mexico was created in 1994.One of the major sectors that holds a large promise for the U.S.manufacturers is that of the automobile industry. The Mexican market for autoparts is expected to grow by 24 percent from 1994 levels to $16.9 billion in theyear 2000. It is also expected that NAFTA will help increase the U.S. exportshare of the Mexican market to around 70 percent by the year 2000. In the longrun, Mexicos location could profit the U.S. industries that establishthemselves there, through an expanded free trade area in Latin America, whichcould include Argentina, Brazil, Venezuela, and Chile. Such expansion couldprove crucial to the U.S. industry, a s a strong export orientation helpedsustain industry growth. Exports increased from 18.5 percent of total output in1989 to 27.2 percent in 1991. And the level of employment which could beattributed to exports increased from 116,500 in 1989 to 154,200 in 1991.     Mexico also offers some intriguing possibilities in price of productionfacilities for U.S. based firms. In 1994 alone Mexican car and truck productiontotaled 1.173 million units, up 8.6 percent from 1993. The Mexican governmenthad along term plan in terms of automobile production in Mexico, and it is in aphase now that favors foreign investors and exportation out of the Mexicanmarket. Check the figure bellow to see how the plan has progressed so far.