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Commercial study of Mexico

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Mexico is the third largest country in Latin America after Brazil and Argentina. Located between the Pacific and Atlantic Ocean, Mexico has 10,000 kilometers of coastline and its border with the United States extends over approximately 3300 km. The climate is very varied: the north has arid desert sort of climes, while the south primarily has a hot and humid tropical climate. There are both coastal and mountainous areas.

The Mexican Republic is composed of 31 states and one federal district. These 31 states are divided into 2,394 municipalities. The legislature consists of two chambers: the Senate (Camara de Senadores) with 128 members,and a House of Deputies (Camara de Diputados) with 500 members, in charge of drafting laws. The President is directly elected, and promulgates laws. The governors and the legislatures of various states of Mexico are elected by citizens, and not necessarily the same party as the federal government. The same goes for municipal councils (?ayuntamientos') and their chairmen. On July 2, 2000, Vicente Fox Quesada of the PAN won the presidential elections against the official candidate of the PRI. Fox was governor of the state of Guanajuato, and is a former executive of Coca Cola Mexico - Central America.

In 2002, for the first time in 5 years, growth was negative. Following the peso crisis in 2000, Mexico recorded five years of successive growth, mainly driven by exports. The crises in Asia, Russia and Brazil have merely slowed the pace of growth. The rate of growth even accelerated in 2000 (+6.9%). The intervention of international financial institutions in Canada and the U.S. (the economies of these two countries are linked to that of Mexico since it joined NAFTA in 1993), the fiscal austerity measures taken by the Mexican government and Mexican exports stimulated by NAFTA allowed Mexico to emerge from recession in 1996.

But this was done at the cost of increased social and regional inequalities and a decline in the purchasing power of the Mexican population. Poverty and crime have increased. The minimum wage is $90 per month.

Financial Position: The external financing requirement remains high (40 billion U.S. dollars per year, or 8% of GDP). Foreign direct investment, though important, is insufficient (over 20 billion U.S. dollars in 2001, given the acquisition of Banamex by Citigroup). Government revenues depend to a third on oil revenues. Tax collection implementation is one of the lowest in Latin America (11% of GDP). The government had to abandon the proposed generalization of the VAT in face of opposition in Parliament. Instead, a series of tax measures that are complex and heterogeneous in nature have come into force.

Bank credit: Bank credit remains very difficult to access. The limitation of bank credit is due to economic and legal factors. Banks face many bad debts, and have few legal remedies for missing payments. They therefore operate a rigorous selection procedure, so that much of the companies are excluded from bank credit.

Tags: Mexican Republic, bank credit, NAFTA, Mexican legislature, American investment, external financing requirement

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