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New Government in Mexico Opens Up Investment Opportunities
Export Quarterly / Summer 2001

By Larry Luxner

WASHINGTON -- The inauguration of Vicente Fox as the first Mexican president in 71 years who isn't connected with the Institutional Revolutionary Party (PRI) is a landmark event that can only be good for U.S. exporters, says Al Zapanta, president and CEO of the United States-Mexico Chamber of Commerce.

"It signifies a departure from the past, a coming of age," Zapanta told Export Quarterly in a recent lengthy interview in Washington. "The people of Mexico elected Fox with an aspiration to change from the past, to deal with corruption. He's got a clean slate. He can take on issues and problems that the PRI could not."

Those problems include poverty, corruption, drugs and immigration -- issues that have a direct bearing on the United States as well. Zapanta, predicting that Washington "will have a better working relationship" than it had with Fox's predecessor, Ernesto Zedillo, says the relationship between the U.S. and Mexico "is the most important and complex bilateral relationship we have with any country in the world. The numbers speak for themselves."

In 1994, trade between the two nations came to $60 billion. In 2000, it totaled $135 billion. And commerce among the three members of the North American Free Trade Agreement -- the United States, Canada and Mexico -- came to $225 billion this year, up from $140 billion in 1994. Next year, says Zapanta, that number could reach $300 billion.

Furthermore, Mexico has become one of the most important destinations for U.S. direct and financial investment, with several thousand "maquila" factories along the border area. An estimated one million people cross the 2,000-mile-long border itself every day.

In addition, Mexico hosts the largest number of Americans permanently living outside the United States, and boasts more consulates in this country (42) than any other.

Finally, the Mexican-American community numbers close to 20 million, and according to most demographic studies, the Hispanic community is going to become the nation's largest minority group by 2010. This includes thousands of Mexicans such as Zapanta whose families have lived in the United States for many generations.

"The chamber got started in the early 1970s because there was a need for a binational dialogue between the U.S. and Mexican private sectors to discuss issues such as transportation, agriculture, textiles and the beginning of the maquiladora industry," he said. "We currently have 14 offices in the United States and six offices in Mexico, plus two binational offices in Mexico City and here in Washington. We have almost 2,500 corporate members representing about 80% of the trade between the U.S. and Mexico."

That's an impressive accomplishment for Zapanta, a self-described "Chicano kid from East L.A." who attended public schools and colleges, and later became a Green Beret in Vietnam, sloshing through jungles as commander of a Ranger company in the Mekong Delta. He went on to graduate from the Harvard School of Business and earn a doctorate in international political economics from the University of Southern California.

In between his lobbying and academic activities, Zapanta has also held numerous presidential appointments, including a 1976-77 stint as assistant secretary of the interior for management and administration. In the early 90s, Zapanta coordinated the Haiti Crisis Control Center in the Pentagon, and has also participated in U.S. peacekeeping missions from Somalia to Spanish Sahara.

Perhaps it's fitting that, in his current job, Zapanta should occupy a corner office in the Ronald Reagan International Trade Center. An unabashed Republican, the 59-year-old executive spent 18 years as a lobbyist for oil giant Arco. The far wall of his office is crammed with over 50 framed photographs of himself posing with prominent Republicans such as George Bush, Gerald Ford, Henry Kissinger, Lee Atwater, Jim Baker and, of course, Ronald Reagan.

Yet when it comes to U.S.-Mexican relations, Zapanta admits that it doesn't matter much who's in the White House.

"If anything, we've done just as well under a Democratic administration as under a Republican one. If you're doing business and fostering better economic ties, what's the difference?" he said. "What's really critical is that relations are not driven by government regulations but by the private sector."

In that regard, said Zapanta, clearly the most important accomplishment of the past decade has been the implementation of NAFTA.

"Per-capita income in Mexico remains the same as six years ago, due to the 1994 peso devaluation," he said. "But because NAFTA was in place, it stemmed the free fall of the Mexican economy, and within one year they were able to stabilize and pull out of the crisis."

Zapanta added that critics of NAFTA, led by Ross Perot who feared widespread U.S. unemployment and environmental degradation in Mexico, have been proven wrong.

"We now have irrefutable empirical evidence that fears of major U.S. job losses to Mexico due to NAFTA are unfounded," he writes in a position paper. "U.S. employment has risen, and the level of unemployment has decreased during the first three years of NAFTA. The 6.4 million net new jobs created over this three-year period led to a decrease in the number of unemployed from 8.5 million to 7.2 million, which was due only in the most marginal way to NAFTA. Over this period, it is estimated that 31,000 new jobs were created and 28,000 jobs were lost due to NAFTA."

He continues: "Yes, there have been dislocations and plant closings, but 70% of all the textile manufacturing that went to Asia -- mainly India and Pakistan -- has returned to Mexico. And because of NAFTA, we were able to start the first bilingual, bilateral database of Mexican environmental laws. We're doing this because we can help U.S. companies know what they've got to do from a legal standpoint to put a plant in Mexico. They used to have to hire lawyers and translate documents, and none of that would stand up in a court of law."

Despite the success of NAFTA, three big issues remain of concern to Zapanta: open borders for truckers, a freer telecommunications market and unresolved immigration issues.

On Dec. 18, 1995, the U.S.-Mexican border was to have opened up for international delivery by truck into border states. On the same day, the United States was to let Mexican owners purchase interests in U.S. trucking companies. Neither provision has been implemented.

"With transportation, the big problem is one of disparity in the wages of truck drivers on either side of the border. A trucker in Mexico makes $10 a day, while a trucker in the US makes twice that in an hour," he said. "Once that can be resolved to a satisfactory level, it'll move forward."

With regard to telecommunications, Zapanta urges deregulation of the Mexican basic phone network, which is currently dominated by Telmex. This would boost possibilities for U.S. companies hoping to establish a market presence there.

Immigration is always a sticky issue, though an improved Mexican economy will mean fewer people crossing the Rio Grande in search of a better life in the United States. What Zapanta wants to see, he says, is "a border program, with U.S. and Mexican workers moving freely across the international boundary with a 50 to 100-mile zone, in order to develop the maquila industry."

To that effect, Zapanta's organization is in the forefront of a $5 million effort known as "Wiring the Border." The ambitious project would create a virtual network of small-to-medium-sized businesses in four U.S. and seven Mexican border states. The objective is to identify 200 such enterprises along the Southwestern border "which have the greatest likelihood of increasing sales, profits and employment in the private sector, if 'web-enabled' by having the basic hardware, software, telephony, connectivity and access to online procurements, online credit, online capital, online business and environmental research." Companies involved in the effort include IBM, Soza, Telmex and Roadway Express.

Asked if Mexico was becoming too reliant on the U.S. economy, Zapanta said that's hardly one of his concerns.

"Mexico is very much part of the U.S. market and economy, but not totally reliant as it was in the past. Before, it was very much like Venezuela, with 70% of foreign-exchange earnings coming from oil. Now it's down to 30%. But things are not all rosy. Mexico still does not have a very strong small and medium-size business sector. That's why our Wiring the Border project is so important, because it empowers small and medium-sized enterprises and gets them into the supply and procurement chains of major U.S. and Mexican corporations. The Internet can be a great leveler in this regard."

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