A Company (Acme Automotive) Doing Business in Mexico

Abstract

This guide will help employees understand the economic experiences of Mexico since NAFTA. Issues that will be covered are trade liberalization, national sovereignty, worker rights, World Trade Organization and committees, relationship with World Bank and IMF, and types of economic development.

ACME Automotive

Pre-Orientation for Future Deployed Employees

BACKGROUND

Mexico since NAFTA

Since NAFTA was adapted in 1994, we have seen a shift from producing simple consumer products to being a subcontractor for more upstream industries in the North American economy. (Nesvisky, 2005) “In Mexico, NAFTA evidently strengthened incentives for foreign direct investment. ” (Nesvisky, 2005) However, research by Hanson (Nesvisky, 2005) indicates that the skilled workers along the borders of the United States increased wages while and least in southern Mexico for unskilled workers.

Farmers in the United States, Canada, and Mexico all benefit from NAFTA. “The continued strength of North American Free Trade Agreement (NAFTA) markets has been one of the brightest spots for U.S. farmers, agricultural exporters, and the industries that support them. Together, our NAFTA partners, Canada and Mexico, purchased $18.2 million worth of agricultural products or 29.6 percent of total U.S. agricultural exports in 2004, up from 28.9 percent in 2003 and 20.8 percent in 1993.” (FAS BACKGROUNDER, 2005)

The trade liberation of Mexico has steadily turned a trade deficit into a $37 billion trade surplus. Mexico and the United States grew from $81 billion in calendar 1993 to $231 billion in 2002. (Williams, 2005) The World Trade Organization reported in 2002 that “Trade and investment liberalization has served as catalyst for Mexico’s development but further reforms are essential.” (WTO, 2002, TRADE POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT AND GOVERNMENT SUMMARIES).

A seven year study was done by the World Bank and although they have had an increase in the jobs available and foreign investments in Mexico, there has been an increase of poverty since NAFTA. (Anderson, 2001)

National Sovereignty

You can except to see widespread poverty throughout Mexico. While there are different estimates of poverty in Mexico, there is a general agreement that poverty exists throughout Mexico. (World Bank 5 point, 2005, chapter 3)

Investing in the poor allows food subsidies and other programs, compensatory education programs, and basic healthcare programs. (World Bank 5 Point, 2005, Chapter 3) One such program is PROGRESA which began in 1997.

ORGANIZATIONS

World Trade Organization

The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. (WTO, 2005) The World Trade Organization Goal is to improve the Welfare of the peoples, of the members countries. The committees Work specifically on developing countries within the WTO itself can be divided into two broad areas: (i) work of the WTO committees, and (ii) training for government officials (and others) by the WTO Secretariat as mandated by the committee. (WTO 2005, Committees)

Although there has been many complaints about workers rights in Mexico, and NAFTA still needs more reform on this subject matter. Labor standards are currently not subject to World Trade Organization rules and disciplines. (WTO, 2005, Press Brief Labor Standards)

IMF

“The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.” (IMF, 2005) The purpose of IMF is to promote global growth and economic stability.

World Bank

“The World Bank is a vital source of financial and technical assistance to developing countries around the world.” They are not a bank as you or I would think of. “We are made up of two unique development institutions owned by 184 member countries-the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but supportive role in our mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes.” (World Bank, 2005)

As an Executive of ACME…

Changes in management and what you should expect

Mexico – Business Hours

Mexican business hours are from 9:00 a.m. till around 6:00 p.m. in the evening. You can expect government offices to be open till 9:00 p.m. Lunch is typically from 1:30 p.m. till 3:00 p.m. and some government offices has been know to serve lunch as late as 4:30 p.m. (Executive Planet, 2005) Mexicans seldom work on Saturdays or Sundays. It would be appropriate to arrive to a dinner party at least thirty minutes late.

Mexico – Dress

Business men wear dark colored suits and ties. Standard office attire for women dresses, skirted suits or a skirt and blouse. “In Mexico, femininity is strongly encouraged in women’s dress.” (Executive Planet, 2005).

The rainy season is from May to November, men favor to wear raincoats and umbrellas are popular. Shorts are never acceptable in Mexico City except on children. (Executive Planet, 2005) Tennis shoes are never appropriate at business meetings.

Conversations

Remember we are visitors in their country. Avoid topics such as religion, Mexican politics, the Mexican American War, and illegal aliens. Try to say something positive about their culture or experience you have had while traveling there.

Don’t be surprised if they ask you about prices of a particular good, Mexicans are often curious of what an item might cost in another country. (Executive Planet, 2005)

Wait until asked to call someone by their first name. In Mexico, your first name is reserved for family members and close friends. Professional titles are always used when addressing someone. If you are doing business with someone with a professional title be sure to use it when speaking with them.

Managing Workers

It is important that all managers overseeing productions in Mexico develop the capacity for personal attention. (Alder, 2005) “According to Sánchez, for leaders to be effective in Mexico they must be people-oriented. If directors think of their personnel as a group of individuals, give them respect and care about what happens in their lives, they will, in turn, develop a trust in their leaders and work ethically and professionally.” (Alder, 2005)

Reference List

Anderson, Sarah, August 2001, “Seven Years after NAFTA”, [Electronic Version], Institute for Policy Studies 2001. Retrieved on October 10, 2005, from http://www.ips-dc.org/downloads/NAFTA%20at%207.pdf

FAS BACKGROUNDER, “Benefits of NAFTA”, May 2005, [Electronic Version], retrieved on October 10, 2005 from http://www.fas.usda.gov/itp/Policy/NAFTA/nafta_backgrounder.htm

Commentary by Ilya Adler, “Power Play“, This article originally appeared in Business Mexico magazine, [Electronic Version] retrieved from Mexico Connect on October 10, 2005 from http://www.mexconnect.com/mex_/travel/bzm/bzmadler11.html

IMF, 2005, retrieved on October 10, 2005 from http://www.imf.org

Nesvisky, Matt, “What happened to wages in Mexico since NAFTA”, a review of research paper written by Gordon Hanson, [Electronic Version] retrieved on October 10, 2005 from http://www.nber.org/digest/sep03/w9563.htmlNBER Working Paper No. 9563, Issued in March 2003, NBER Program(s).

Williams, David, Mexico’s NAFTA Experience, [Electronic Version] retrieved on October 10, 2005 from http://www.fas.usda.gov/info/agexporter/2004/January/pgs%2014-15.pdf

World Bank, 2005, retrieved on October 10, 2005 from http://www.web.worldbank.org/

World Bank Presents Five-Point Development Agenda. Mexico – A Comprehensive Development Agenda for the New Era. MEXICO CITY, May 22, 2001, retrieved on October 10, 2005 from http://wbln0018.worldbank.org/LAC/lacinfoclient.nsf/8d6661f6799ea8a48525673900537f95/6389d4c432fc1df985256a50004dcfeb/$FILE/14914%20ch%2003.pdf Chapter 3

World Trade Organization (WTO), 2005, “About the World Trade Organization” retrieved on October 10, 2005 from http://www.wto.org Press Brief on labor standards retrieved from http://www.wto.org/english/thewto_e/minist_e/min96_e/labstand.htm

Executive Planet, Mexico Business Culture Guide, retrieved on October 10, 2005 from http://www.executiveplanet.com/business-etiquette/Mexico.html

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