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Mexico
is growing increasingly concerned about its ability to compete
with
China
in
North America
. The stakes, admittedly, could hardly be higher. The
United States
accounts for nearly 90 percent of
Mexico
’s exports.
On several occasions, the Fox administration has accused
China
of luring investors away from
Mexico
with practices that violate
international trade agreements. Along the U.S.–Mexico border,
anecdotes abound of trade officials offering investors financial
incentives to move their operations to
China
. Mexican manufacturers also
complain that their labor costs are rising faster than those of
their Chinese counterparts. These concerns were compounded two
years ago, when the six-year expansion of
Mexico
’s exports came to a
screeching halt. Since then, half a million manufacturing jobs
have been lost.
In reality, the current weakness of
Mexico
’s industrial sector has
little to do with
China
. In fact, Chinese exports to
the
United States
have not fared much better than
Mexico
’s in most sectors. Similarly,
although foreign investment has weakened, this is largely due to
the tapering off of
U.S.
investments of all types in
fall 2000. The
United States
accounts for three quarters of
all foreign investment in
Mexico
.
The truth is that
Mexico
remains an attractive place to do business. In spite of the
peso’s supposed overvaluation and the relative rigidity of the
country’s labor markets, there is no evidence that labor costs
have risen faster than labor productivity. By that measure,
Mexican labor is not more expensive today than it was eight
years ago. Additionally, in the past 10 years endemic fiscal and
monetary uncertainty has been replaced by a remarkable
commitment to policy discipline, in jarring contrast to other
Latin American nations. Inflation is near historical lows, and
recent Mexican administrations have spared no effort to bring
fiscal deficits down to less than 1 percent of gross domestic
product. Finally,
Mexico
continues ...
...Continued
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