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Mexico Risk Analysis on Microchip Identification The decision of Microchip Identification to base its business operations in Mexico can be justified from many sides. The costs of running an enterprise on the territory of this country are relatively low, and the possibilities of development are rather broad due to beneficial social and political conditions within the state. When approaching Mexico as an alternative for placing the business activity we should note that the country is a member of North Atlantic Free Trade Association (NAFTA), and has very similar to Canadian or the American legal basement for business. The Mexican legislature ratified NAFTA in 1993 and the treaty went into effect on January 1, 1994, creating the largest free-trade zone in the world. NAFTA has provided for several of the benefits to its participants, and eventually businessmen of the member-countries. First of all, the flow of capital between the United States and Mexico is regulated by NAFTA treaties, which protect the inviolability of the monetary resources.
Second, the introduction of the asset capital to the Mexico-based business from the territory of the United States is performed on the preferential basis. It means that any investment, which can be classified as an investment into the statutory fund of the enterprise, is protect by the law of Mexican republic and is freed from any customs taxes. In this case the potential shareholders can be calm about their investments, there will be no cases of nationalization and the repatriation can be done at any point of time and upon the first request. In 1989, the Salinas government f Mexico sped up the privatization f state-controlled crpratins and modified restrictive trade and investment regulations t encourage foreign investment by permitting full cntrl f crpratins by foreign investors. Until today the globalization of the national economy remains the priority task of the administration. After February 1999 visit to Mexico, Moody's Investors Service team changed its stable outlook to a positive one with regards to Mexico's investment grade.
What is very important about that decision, is that Moody's has decided to change its investment assumptions prior to the elections in Mexico, which were to determine the fate of the Partido Revolucionario Institutional (P. R. I. ) -Mexico's ruling party for 71 years. Usually such a decision would be considered very doubtful but in case of Mexico it proves that the country has managed to assure the rest of the world in the stability of its governmental policy towards international business in the country. Even though the ruling power could be shifted, the business would not be suffering, for the political instability of Mexico is set apart from its attitudes towards doing business. The upgrade reflected its [Moody's] belief that, whichever of the two leading candidates won the July 2 presidential election, they would maintain prudent macroeconomic policies.
These included cautious fiscal and monetary policies, a manageable current account deficit financed mostly by foreign direct investment, and a falling foreign debt burden (Tricks). My me Mexico int the league f countries that present a very lw risk f failing t pay their debts. Therefore the investments into the economy of the country are considered to be secure. Another proof for the above words is the statistical data: according t the Economic Development Secretary frm the Mexican state f Baja California, the state hst's 90 companies frm Japan, 25 Taiwanese companies, five frm Has King, fur frm Singapore, and three frm Malaysia. ther Mexican states bast similar numbers t Baja California in terms f foreign company presence.
The expansion of the high-technology companies into the Mexican market is the next argument, which supports the decision of Microchip Identification to place its main production and administrative resources on the territory of the country. Besides positive political and economic factors, foreign countries can also count on the support of international organizations when resolving business disputes involving Mexican government whatsoever. The former World Bank President for Mexico Mr. Fox, widely seen as pro-United States and pro-NAFTA has set the new type of international business understanding for Mexican officials, and provided for a continuous improvement and support of the international companies entering Mexico.
In the conclusion I would like to note that the decision of Microchip Identification to begin its operations in Mexico is rather wise. The costs of doing business will be lower than on the territory of the United States, and the security of the investment will be on the reasonable and controllable level. Reference: Tricks, Henry. Moody's Report on Mexico. The Economist. March 2000.
Judas, Joseph. Business in Central America: Millennium Perspectives. Dublin: Dublin Publishers, 2002.
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Research essay sample on Mexico Risk Analysis On Microchip Identification
