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QUESTION
Scenario: Select a foreign country that interests you either for investment purposes or just to visit. Go to the CIA Factbook website, MarketWatch http://www.country
Directions:
- Acquire information about this country–its culture, geography, economy, government, and other indicators—and use this information to make an assessment on how favorable and how risky this country is for foreign investments. Support your recommendation with some of the indicators discussed in the module, the textbook, and in your research.
- Your assignment should be a paper two to three pages long, not including the required title and reference pages.
- Adhere to the CSU-Global Guide to Writing and APA.
- Include at least three scholarly sources (you may use the recommended readings) to support your answers. The CSU-Global Library is a good place to find these sources. Remember to use in-text citations as appropriate and to include your sources in your reference page
ANSWER
A Study on Mexico’s Viability for Investment
Mexico Statistics
Mexico, a vast country found in Northern America, borders the Northern part of the Pacific Ocean. Its climate ranges from tropical climate to desert climate, and the country has high, stretched mountains and very low-altitude coastal plains. Mexico has a wide range of natural resources such as wood, and minerals such as petroleum, silver, lead, copper, zinc, natural gas, and gold. Most of Mexico’s population is located in and around Mexico City. Natural hazards such as volcanoes in the middle southern part of the nation and tsunamis along its Pacific coast are present.
The products from agriculture that Mexico produces include maize, wheat, cotton, rice, beans, coffee, tropical fruits, and tomatoes. It also produces livestock products including beef, dairy products, and poultry. Mexico is highly industrialized, with the food and beverage industry, tobacco industry, chemical manufacturing firms, metals such as steel and iron industry, petroleum industry, textiles and clothing industry, motor vehicle industry, and tourism being the most developed. Mexico majorly exports finished goods, petroleum products, cotton, canned fruits, packed vegetables, processed coffee, and silver products. However, the country mainly imports metals, products made from steel, machinery used in agriculture, electronics, motor vehicle parts, aircraft, and aircraft parts for assembly. 99% of the country has access to electricity, primarily generated from fossil fuels.
Mexico enjoys adequate mobile phone service for public communication, and a proper, well-spread telephone connectivity for business and government services. Fibre-optic and coaxial cable communication is also well-spread throughout the country. There are also more than 1400 radio stations and many television stations. The country also enjoys a well-developed transport network, with about 21 air carriers and 243 airports with proper runways. There are also railways and roads all over the country, with gas, petroleum, and refined products’ pipelines in place (Looney, Frederiksen, 1981).
Viability for Investment
Mexico has a fast-growing economy. The country’s economy grew at a rate of 5.1% per year between the year 1995 and 2002, a growth stronger than that of many developed nations, the US included. The economy seems to remain stable and keep growing, even with economic crisis and disasters rocking the country once in a while. A consistently low exchange rate between the USD and the Mexican peso ensures that Mexicans can afford American products and services. Due to the proximity of Mexico to the US, American companies can start firms and branches in Mexico, yet remain managed by the investors in the U.S. Investing in faraway countries can be quite expensive as one has to hire a local employee to manage the business.
Mexico’s economy is mainly export-driven, enjoying international recognition and global demand. For instance, three of the most massive automotive manufacturers are found in Mexico. The workforce in Mexico is extremely hardworking, with wages quite low as a result of the high population in its cities (Pacheco‐López, 2005). The country also has enormous growth potential, as most of its resources are untapped, and industries are not set up everywhere. Only the developed region in the middle of the nation and around Mexico City is largely industrialized.
Mexico also has the advantage of high private ownership of firms and extremely encouraging business regulations. An example of the prevailing business regulations is, after president Nieto was elected in 2012, he reduced corporate taxes, liberalized industries such as the energy and power industry, and disbanded monopolies in the country. The government has also done a lot to ease the process of registering corporations and firms. Presently, registration can be done online, reducing the time taken to establish a business and the cost of registration.
Challenges Affecting Investment in Mexico
Besides the Mexican economy is very favorable for investors, the labor laws are not friendly to businesspeople. The government has established laws to protect the local employees against foreign companies. Any employer has to pay three months’ salary plus a premium based on the years the employee has worked, unless an apparent reason that the employee has done an illegality exists (Sassen, 1990). However, an investor may use independent contractors to avoid these problems. Mexico also suffers from rampant crime, mostly drug wars and gang-related crimes (Shelley, 2001). These can be frustrating for any investment, with corruption and bribery amongst businesses and the government also present. Petty fraud is estimated to contribute to up to 10% of the total cost of consumer goods. Businesspeople are said to bribe the government authorities to obtain permits.
There also exists a scarcity of waste disposal facilities for hazardous wastes and industrial effluent. Raw sewage and industrial effluent are seen all around Mexican streets, polluting the rivers in urban areas. Deforestation, excessive erosion, and desertification are also significant problems affecting the landscape of Mexico. The country also suffers from thousands of poor immigrants from Guatemala and America, who cross the Mexican border in pursuit of employment.
Conclusion
Mexico is a good country for investment. However, there exist challenges that need to be properly looked into, with ways to counter them factored in the establishment cost of the business venture.
References
The CIA World Factbook-Mexico.
Pacheco‐López, P. (2005). Foreign direct investment, exports and imports in Mexico. The World Economy, 28(8), 1157-1172.
Sassen, S. (1990). The mobility of labor and capital: A study in international investment and labor flow. Cambridge University Press.
Looney, R., & Frederiksen, P. (1981). The regional impact of infrastructure investment in Mexico. Regional Studies, 15(4), 285-296.
Shelley, L. (2001). Corruption and organized crime in Mexico in the post-PRI transition. Journal of Contemporary Criminal Justice, 17(3), 213-231.
