MEXICO
P.E.L.T. ENVIRONMENT
 
 
 
 
 

POLITICAL ENVIRONMENT

FORM OF GOVERNMENT
 Federal Republic
POLITICAL STABILITY
There is a large degree of instability in Mexico in the political structure.  The dominant party of the 20th century is the PRI party.  Because the cabinet members and congress are appointed by the president, they share the same party affiliation.  This has created a tenuous situation with opposition parties being created, namely PAN and PRD.  There have been assassinations of PRI party members, by gang style hits.  With the low level of education and the high degree of poverty, the instability in the region will continue. 
FOREIGN POLICY
Mexico is encouraging more foreign investment as of late.  In 1993 Mexico enacted a new act which opened foreign investment into more industries, which was in compliance with NAFTA. 
STATE COMPANIES
 Mexico has undergone an extensive privatization in most industries, including railroads, telecommunications and airports.  The number of state owned enterprises has decreased from 1,000 in 1982 to 200 in 2000.
ROLE OF THE MILITARY
The military consists of  Army, Air Force and Navy branches.  There role is of a protector and enforcer of laws. 
LEVEL OF TERRORISM
Although actual terrorists acts in Mexico are minimal, they have drug cartels and revolutionaries to be concerned with. 
IMPORT/EXPORT RESTRICTIONS
Because Mexico is a member of NAFTA, there restrictions are minimal for the member countries 

 

ECONOMIC ENVIRONMENT

ECONOMIC SYSTEM
 Mexico is considered a free market economy, with heavy emphasis in the service industry.
STAGE OF DEVELOPMENT
 It is a developing nation.
ECONOMIC STABILITY
 In 1994 and 1995 was characterized with a negative growth rate and high inflation.  The devaluation of the Peso exacerbated Mexico's problems in those years.  However, 1996 through the current year has seen significant growth in GDP and a more manageable rate of inflation.  Mexico still has to deal with the disparate income between the upper class and the lower class.
GROSS NATIONAL PRODUCT
 Gross domestic product is projected to be in the 8.7% range for the year ending 2000.  The GDP- per capita is approximately $9,100's.
INTERNATIONAL FINANCIAL STANDING
In the early 1900's Mexico had to borrow a significant amount of money at high interest rates to survive.  Mexico inevitably had to renegotiate the credit lines to make them more affordable or face default.  However, in the past 5 years Mexico has increased its creditworthiness by having a more favorable balance of trade.  Exports have grown inexorably in the past years which has given them the more liquidity, which has improved their credit standing.
MONETARY/FISCAL POLICY
Monetary and fiscal policies in the early 1990's were woefully inadequate, with significant debt and high inflation.  However, the new regime through the aid of monetary policy and fiscal policy, have since tamed inflation and increased domestic savings.  Mexico has become very proactive in managing its economy. 
FOREIGN INVESTMENT
With the NAFTA agreement, Mexico has become very receptive to foreign investments, as prescribed by the agreement. 

 

LEGAL ENVIRONMENT

LEGAL SYSTEMS
Follows the Civil law code, involving statues as a resource.
PREVAILING INTERNATIONAL LAWS
Several of the international laws are guided by the NAFTA agreement.
PROJECTIONIST LAWS
There are a couple of industries where projectionist laws exist, but because of the NAFTA agreement they are minimal. 
TAX LAWS
Mexico has a corporate tax rate of 34%.  Mexico offers both standard incorporation's and limited liability corporations 
ROLE OF CONTRACTS
US contract law and Mexican contract are very similar with the same components of initial offer, negotiation of the terms, acceptances and formalization of the contract.
PROPRIETARY PROPERTY INFORMATION
This is an area where Mexico law has been extremely inefficient.  However, with the NAFTA and WTO agreements Mexico has formalized its intellectual property laws.  Mexico has just recently passed a new copyright law, which was much needed given the high degree of piracy that exists in Mexico. 

 

TECHNOLOGICAL ENVIRONMENT

LEVEL OF TECHNOLOGY
Mexico has minimal technological capabilities.  The  NAFTA agreement has injected more capital into the country which has increased its technological capabilities.  However, given the poorly skilled labor pool, Mexico is at a competitive disadvantage.  The number of patents approved each year is increasing, but Mexico's infrastructure is woefully inadequate to support inventions.  This can be seen in the lack of Internet subscribers, which is less than 2% of the population
AVAILABILITY OF LOCAL TECHNICAL SKILLS
Mexico has a relatively large population of illiterate people.  There education level is extremely low, with a large percentage of high school drop outs.  Although, Mexico has a large number of engineers, most of them aren't practicing in their respective profession. 
NATIONAL TECHNICAL REQUIREMENTS
Governed by the rules of NAFTA 
APPROPRIABILITY
Given the lack of technical expertise, this risk is negligible. 
TRANSFER OF TECHNOLOGY
This is extremely high in Mexico, given the lack of innovation.  Most of Mexico's technologies were transferred from other countries. 
INFRASTRUCTURE
Poor telecommunications in the early 1990's but since privatization has occurred, it is improving. 
ENVIRONMENTAL PROTECTION
Enviromental laws are inadequate, but improvments are being made. 

 

Sources:  Central Intelligence Agency, “The World Factbook – Mexico” http://www.odci.gov/cia/publications/factbook/geos/mx.html (21 Jan. 2002)
Deresky, Helen, International Management (Prentice Hall 2000) p39.