Success Finds Its Way South of the Border
BY Marc Ballon
What lurks beyond Rio Grande A leading expert on the opportunities and risks for U.S. companies in Mexico is Stephen Blank, a professor of international business and management at Pace University's Lubin School of Business, in New York City, and the director of its Center for International Business Development. He spoke recently with Inc. staff writer Marc Ballon.
Q: How has NAFTA changed the business environment in Mexico since the treaty took effect, in 1994?
A: NAFTA represents the culmination, not the beginning, of a period of trade liberalization between Mexico and the United States that began in the early 1980s. NAFTA, in effect, told investors that they could have confidence that there would be no backsliding in Mexico.
Q: Did the large devaluation of the peso in 1994 and 1995 shake investors' confidence in the Mexican economy?
A: Many businesses were decimated, especially those selling to the Mexican market. But some big companies changed their strategies. Automotive-industry executives, for instance, no longer thought so much about the Mexican market but instead focused on exporting to the United States. Mexico became a place where U.S. companies went to take advantage of cheap labor and the low cost of assets, such as factories and land. Mexico has become, in a sense, an export platform within North America.
Q: Is there a danger of another major devaluation?
A: If the Brazilian economy collapses, the effect on Mexico could be devastating. However, one hopes there won't be another massive devaluation.
Q: How politically stable is Mexico?
A: The Mexican Congress is now dominated by opposition parties. This has never happened before. Many of the new members of Congress are economic nationalists. As the system becomes more democratic, the danger is that there will be policy instability and chaos.
GOING MEXICAN A sampler of companies started by U.S. citizens south of the border