Globalaffairs

Issue 4/August-September 2007
By Naiara Cáliz Fernández

For several years the Mexican market has risen due to an important economic growth, political and economic stability for around 6 years. The controversial arrival of the conservative Felipe Calderon and after controversial elections, trade relations had an inflection point regarding the Vicente Fox Government.

With the continuity of the National Action Party (PAN) in the Government, the main priority is still infrastructures to modernize the country as Fox established. In order to implement such stabilization and modernization plan it is necessary foreign investment for both implementation and financing. In line with this emergent desire, Mexico signed in 2000 a free trade agreement with the EU by means of it 48% of industrial products are duty free and in 2007 it will be a total tax relief except in ceramic products.

The USA are the main investor – 60% of investment in Mexico -, followed by Spain 10.8%, Holland 10.5 % and the UK 3.3%. It is not strange that with these investment indexes Mexico is developing an economy at dizzy pace where everything is allowed. Aztec market is a communication mean between different countries. In a strategic enclave that is a bridge for North-America and a joint link to Centre and South-American countries, many multinationals have the eye on an economically emergent Mexico.

We should not forget that in the current world everything changes continuously and New Technologies play a fundamental role in the economic development in any country. In the present case, New Technologies are a challenge for the Mexican Government that wants to develop infrastructures with future technologies. These new governmental projects are a challenge for companies that are willing to make business with one of the most economically stable countries in Latin America. Thus, studies of the best world consultancies placed Mexico among the most stable markets and less risky.

Apart from the advantages mentioned above, Mexico has other important advantages. Mexican population is ready for developing positions related to New Technologies and labour is relatively low which is an economic advantage at the same time as natural entrance to Latina American market; proximity to North-American market and joint free trade agreements show that Mexico is a modernized country and structurally ready for business culture. These agreements allow the free movement of goods but they are entrance barriers and a copyrights protection in the three geographical areas.

Although we highlight these positive forecasts and its easy implementation, we have to think that despite this economic emergence, Mexico is one of the countries with the lowest index in use of Information and Communication Technologies. Therefore many companies operating in Mexico have some difficulties that could dodge being tenacious as some of them have demonstrated having their own distributor in Mexico and being settled in the country.

The challenge of Spanish companies willing to make business in the other shore of the Atlantic sea is the strong competition due to a devaluated dollar against euro. Similar products with the same composition but less quality regarding contents have a lower price and they are an entrance barrier. Moreover, the reputation of some American multinationals settled has a high local presence and a high prestige very difficult to surpass by new investors. This American settlement is a challenge for our businessmen because they have to compete with companies highly valued by citizens. Accessing Mexican market means accessing North-American market because this last one has important infrastructures in the country; likewise, it is possible to cooperate with Canada market because Mexico is an access channel to the rest of American markets not only in the North but also in the South of the country.

Another competition is the national product against the foreign one. Mexican companies sell products similar to the Spanish ones; due to non existence of tariff barriers business men play an important role; bureaucracy could be very important in this field for a small entrepreneur and it could create a gap feeling but the desire to grow economically makes Mexico a favourable scenario for trade relations. We have to mention again that Mexico is an economically and politically stable country. But we should not forget that past repressions in the system provoke in many cases a high corruption index. This issue could cause an investment recession but fortunately just a few cases show a foreign trade relations recession and it is likely an encouraging future.

State cities such as Distrito Federal, Monterrey and Puebla are the most benefited from this new plan supported by the Calderon Government and it is here where there are true business opportunities concerning New Technologies. We do not take into account Cancun and Acapulco where the most important sector is the services industry shared between North-American and European markets. This new infrastructure plan contains from electric sub-stations to roads construction.

Moreover, Mexican Government has included in its policy the Development National Plan where there are several programs for the development and settlement of Information Technologies and they are looking for promotion and growth of the Mexican industry such as the SME program or the state programs of business parks in Monterrey; this will be one of the infrastructures most relevant and supported by the Government.

According to Spanish Trade Office in Monterrey, services field is the most profitable. Thus, Spanish representation is in Public Administration, infrastructures, network management systems, Information Technologies services for companies, computer security and outsourcing

According to market studies the ICT growth will continue at a pace of 16% until 2010. Thus, it will be above the world average. According to these data, Mexico will become the second Latin American power in Information Technologies market, after Brazil. But the technological gap due to wealth distribution differences will influence the market development and imports.

We have to take into account that the Mexican education modernization is bringing graduated people very useful for implementing modernization plans. A key point and counterpoint for imports is the plagiarism. Copyrights do not have legal coverage in Mexico because there are not clear rules for imported products. Therefore, it is desirable in the case of trade relations to patent products in the origin country and at the same time to patent them in Mexico thus the brand could be reinforced in the country and it will be less vulnerable to indiscriminate copies.

Spanish products in Mexico are well accepted, cultural links to Spain and the tendency to prefer foreign products than national ones re-value our products. Although in the area of Information Technologies the image is blurred due to the little relation in that sector.

Everything points that current gaps in trade relations will disappear and we bid for the Mexican market as door to enter Latin American market. Thanks to governmental investment in the sector and the entrepreneurs’ desire to access this market, it will become one of the main Latin American powers in international technology imports.

Naiara Cáliz Fernández
Journalist specialized in International Relations and Foreign Trade Technician

References:
• Informe Económico y Comercial de México. Oficina Comercial de España en México. 2007
• Nota sectorial: El mercado de las tecnologías de la información en México. Fernández Rodríguez, Rubén. Oficina Económica y Comercial de la Embajada de España en Monterrey. 2007
• World Bank. http://web.worldbank.org
• www.stat-usa.gov
• Standard & Poor’s. http://www2.standardandpoors.com

Global Affairs is not liable for author’s opinion

 Print Economy | Permalink | eva