From
[email protected] Jan 26 15:42:28 1995
Date: 20 Nov 94 20:46 PST
From: IATP <
[email protected]>
To: "Recipients of conference trade.news" <
[email protected]>
Newsgroups: trade.news
Subject: NAFTA & Inter-Am Monitor 11/21/94
Produced by the Institute for Agriculture and Trade Policy
- - - - - - - - - - - - - - - - - -
NAFTA and Inter-American Trade Monitor, vol. 1, #26
November 21, 1994
- - - - - - - - - - - - - - - - - -
HEADLINES
PROPOSITION 187 ANGERS MEXICO
PRIVATIZATION AFFECTS MEXICAN BANKING
TELMEX STOCK FALLS
MEXICAN EXPORTS TO U.S. INCREASE
GM ANNOUNCES TRUCK EXPORTS
POULTRY INDUSTRY SUFFERS UNDER NAFTA
TIMBER DISPUTE SHIFTS
COSTA RICA FOCUSES ON TRADE
CHILE MOVES ON WORLD STAGE
RESOURCES/EVENTS
- - - - - - - - - - - - - - - - - -
PROPOSITION 187 ANGERS MEXICO
California's newly-passed Proposition 187 "creates the wrong
spirit," according to U.S. Trade Representative Mickey Kantor.
Mexicans agree. Delegations of California business leaders
visiting Mexico in October were snubbed, with the Mexican
commerce secretary and his undersecretary failing to show up
at a trade show. Prominent Mexican guests were no-shows at a
reception given by the U.S. ambassador. The American
Chamber of Commerce of Mexico denounced Proposition 187,
warning that it "potentially damages U.S.-Mexican relations and
trade ... breeds distrust and damages years of collaboration ...
[and] threatens to damage the promising future on both sides of
the border."
Proposition 187, which denies most public benefits to illegal
immigrants and their families, was also the target of an
election-day action at a McDonald's restaurant in Mexico City.
Dozens of masked protesters invaded the McDonald's, throwing
cash registers to the floor, overturning tables, and smashing
windows. About 150 peaceful protesters gathered outside the
U.S. embassy.
Mexican Deputy Foreign Minister Andres Rosenthal recently
pointed out that Mexico does $16 billion in trade with California
yearly. California ships 10 percent of its exports to Mexico,
making it second only to Texas among U.S. states trading with
Mexico. Mexican President Carlos Salinas de Gortari suggested
that the U.S. and Mexico need to enter into negotiations on a
more free flow of Mexican migrant workers, just as they have
agreed on free trade. Salinas noted that he had first proposed
such an agreement when free trade negotiations began, but that
the Bush administration had said that an immigration side
accord was politically impossible.
Source: "Measures Against Immigrants and Incumbents Pass,"
IPS, 11/9/94; "Ballot Issue May Hurt U.S.-Mexican Trade," EL
FINANCIERO, 10/31-11/6/94; John M. Nagel, "US Executives in
Mexico Denounce Calif. Proposition," JOURNAL OF COMMERCE,
11/7/94; Paul B. Carroll, "A McDonald's in Mexico City Is
Trashed in Protest Against California Proposition," WALL
STREET JOURNAL, 11/9/94; Ernest Sander, "Prop. 187 - Trade
Fallout," ASSOCIATED PRESS, 11//7/94; Tim Golden, "Salinas
Urges Talks on Free Migrant Flow," NEW YORK TIMES,
11/14/94.
- - - - - - - - - - - - - - - - - -
PRIVATIZATION AFFECTS MEXICAN BANKING
Mexico's privatized banks have seen their return on equity fall
from 40.59 percent in 1992 to 27.39 percent by June of this
year. The number of domestic banks has risen from 18 to 37,
and in October the Finance Secretariat authorized 18 foreign
banking subsidiaries to begin operations. Mexico's private
banks are handicapped by undercapitalization and past-due
loan portfolios, as well as volatile interest rates and a sluggish
economy. Bad loans have risen to a total of $12.02 billion in
June 1994, up from $3.48 billion in June 1992. Problem loans
include a large load of credit card debt, incurred when newly-
privatized banks rushed to issue credit cards despite lack of
credit bureau information.
The three largest financial groups in Mexico, Banamex-Accival,
Bancomer, and Serfin, hold a combined total of 60 percent of the
market. For each of them, non-performing loans make up more
than 10 percent of their debt portfolio, compared to an
international average of about four percent. The nineteen
newer banks, authorized in 1993, have the advantage of
beginning without bad-loan loads, but they also lack existing
client bases. Most of the new banks aim at regional rather than
national coverage.
Most of the private banks are run by non-bankers coming out
of industrial or stock market backgrounds. Some attribute the
banks' loan problems to the less conservative attitudes of
brokerage firm presidents, while others point with concern to
the increasing possibility of conflicts of interest when
industrialists sitting on bank boards of directors approach those
banks for loans.
The financial groups that run banks are also active in other
arenas. Bancomer brokerage, for example, plans to place a
NAFTA Fund on the Mexican Stock Exchange in January. The
fund, which is administered separately in each country, began
operating in Canadian markets last week and will open on the
New York Stock Exchange before the end of 1994.
Meanwhile, the NAFTA opening is bringing foreign banks into
Mexico. Citibank will invest $100 million in new financial
operations in Mexico, and J.P. Morgan and Co. plans an initial
capital base of $100 million, with operations beginning by early
next year.
Source: "Bancomer to Launch NAFTA Fund in January;" "Foreign
Banks Announce Investment Plans;" "Dangerous Liaisons;"
Claudia Fernandez, "The Rookie Season;" Jennifer Tierney,
"Playing With Fire," EL FINANCIERO, 10/31-11/6/94.
- - - - - - - - - - - - - - - - - -
TELMEX STOCK FALLS
Telmex, the Mexican telecommunications giant, suffered two
blows in October, with a lower-than-expected third quarter
earnings report followed by AT&T's announcement that it
would compete against Telmex rather than joining with it to
provide long distance services. Telmex shares fell eight percent,
dragging the Mexican Stock Exchange, the Bolsa, along with
them for a drop of almost five percent in a single day. Telmex
makes up 26 percent of the Bolsa's entire capitalization.
Telmex's American Depository Shares also dropped sharply on
the New York Stock Exchange.
Source: Barry Grant, "Telmex Sends Bolsa Into Tailspin," EL
FINANCIERO, 10/31-11/6/94; Anthony DePalma, "Mexican
Telephone Shares Drop Sharply," NEW YORK TIMES, 11/11/94;
John J. Keller, Craig Torres, "AT&T Corp. and Grupo Alfa Plan
Venture," WALL STREET JOURNAL, 11/10/94.
- - - - - - - - - - - - - - - - - -
MEXICAN EXPORTS TO U.S. INCREASE
Mexican exports to the U.S. rose from $25.26 billion in the first
eight months of 1993 to $31.34 billion for the same period in
1994. The increase is attributed to the healthy U.S. economy
and to NAFTA's trade-enhancing effects.
Source: "Mexican Exports to U.S. Reach $31 Billion," EL
FINANCIERO, 10/31-11/6/94.
- - - - - - - - - - - - - - - - - -
GM ANNOUNCES TRUCK EXPORTS
General Motors announced that its Janesville, Wisconsin plant
has begun building Chevrolet Kodiak medium duty trucks for
export to Mexico. GM plans to export 1,500 annually and will
also begin building the truck in Mexico for sale there and in
Central America.
Source: "GM Exports Kodiak Trucks to Mexico," EL FINANCIERO,
10/31-11/6/94.
- - - - - - - - - - - - - - - - - -
POULTRY INDUSTRY SUFFERS UNDER NAFTA
Five years ago the Mexican poultry industry was made up of a
large number of small to medium size farmers. Today the
industry is dominated by five companies with North American
ties, which control nearly 70 percent of the 650 million broilers
produced annually. The Mexican market, which also includes
nearly 80 million egg-laying hens, is the second-largest in Latin
America. Increasing importation of frozen poultry from North
America has also angered local producers.
Source: Ross Underwood, "Mexico's Poultry Industry Struggling
with NAFTA Effects," FEEDSTUFFS, 10/10/94.
- - - - - - - - - - - - - - - - - -
TIMBER DISPUTE SHIFTS
The U.S. government has finally accepted the latest finding of a
binational arbitration process in favor of Canada. The U.S. Trade
Representative and the Justice Department are now resisting a
court suit brought by the U.S. Coalition for Fair Lumber Imports,
which challenges the constitutionality of the arbitration process.
The dispute began in the 1980s, with U.S. lumber producers
complaining that Canadian provinces charged too little in
stumpage fees, thereby subsidizing the Canadian mills.
Canadian officials maintained, successfully, that the argument is
over different systems for pricing natural resources. The
United States government has not yet refunded the
countervailing duties collected during the years of the dispute.
Source: John Maggs, "US-Canada Dispute Takes New Twist,"
JOURNAL OF COMMERCE, 11/7/94.
- - - - - - - - - - - - - - - - - -
COSTA RICA FOCUSES ON TRADE
A free trade pact between Mexico and Costa Rica is scheduled to
take effect on January 1, after having been signed by both
countries' presidents and approved by a Costa Rican legislative
committee. Costa Rican President Jos Mara Figueres steered
the pact through the legislative approval process, overcoming
objections from the opposition and from his own party.
Costa Rica is also moving to attract U.S. manufacturers to locate
there, with incentives including a 12-year tax exemption for
businesses operating in free-trade zones and government-
funded training for workers. With a literacy rate of nearly 93
percent, Costa Rica offers a strong work force, with labor cost
averaging $3-4 per hour and the average Costa Rican general
manager earning only $6,100 yearly. Like other Caribbean and
Central American countries, Costa Rica fears the loss of the U.S.
trading base it had developed prior to NAFTA.
Source: "Costa Rica Set to OK Mexico Free Trade Pact," EL
FINANCIERO, 10/31-11/6/94; Brian Johns, "Seeking Nafta-Style
Gains in Trade, Costa Rica Pursues US Manufacturers," JOURNAL
OF COMMERCE, 11/1/94.
- - - - - - - - - - - - - - - - - -
CHILE MOVES ON WORLD STAGE
After becoming the second Latin American member of the
Asian Pacific Economic Cooperation forum, Chile is ready to talk
trade around the world. "Chile could act as a bridge with South
America, as long as we keep moving closer to regional markets,"
said Chilean President Eduardo Frei.
Chile has often been called the leading candidate to enter
NAFTA, but has been frustrated by the U.S. failure to pursue
negotiations in recent months. Canada has indicated its
willingness to pursue bilateral talks with Chile, though the
government's preference is expansion of NAFTA. Frei said his
country has had good experience with country-by-country
bilateral agreements, citing agreements with Argentina, Mexico,
and Colombia, as well as others under negotiation with Brazil
and Peru.
Chile's economy appears strong, with inflation projected at 8.3
percent for 1994. This will be only the second time in 30 years
that Chile has seen single digit inflation. Growth will be about
4.3 percent, but is projected to expand to more than 6 percent
in 1995. Chile currently shows a trade surplus, which is
expected to continue through the end of the year.
Source: Roger Atwood, "Chile Hopes to be Bridge for APEC, Latin
America," REUTER, 11/8/94; Barrie McKenna, "Chile Woos
Canada as NAFTA Hopes Dim; Country Feels Spurned by U.S,."
GLOBE AND MAIL, 11/2/94; "Frei Predicts Early Trade, NAFTA
Talks With U.S. After Election," ASSOCIATED PRESS, 11/8/94;
"Peru-Chile: Free Trade Zone Negotiations Resumed," IPS,
11/8/94; "Chile Inflation at Annual 8.3%," FINANCIAL TIMES,
11/10/94; "Trade Balance Shows Surplus Thanks to Copper,"
IPS, 11/8/94.
- - - - - - - - - - - - - - - - - -
RESOURCES/EVENTS
"Economic Justice Report." Ecumenical Coalition for Economic
Justice, 11 Madison Avenue, Toronto, Ontario MSR 2S2.
Telephone 416/921-4615; Fax 416/924-5356.
Subscriptions: $25-$40 annually for quarterly newsletter
covering global economic issues from the perspective of
progressive church people. Ecumenical Coalition for Economic
Justice also publishes a number of books and pamphlets on
topics ranging from "The Global Garment Industry: Industrial
Model of the Future" to "Ethical Reflections on North American
Economic Integration."
- - - - - - - - - - - - - - - - - -
The NAFTA and Inter-American Trade Monitor is available in
both English and Spanish on Association for Progressive
Communications (APC) computer networks on the conference
eai.news. It can also be faxed or sent via mail on request. We
welcome your comments and contributions.
- - - - - - - - - - - - - - - - - -
For more information about the Institute for Agriculture and Trade
Policy, send email to
[email protected].
- - - - - - - - - - - - - - - - - -
Produced by: Mary C. Turck, Institute for Agriculture & Trade
Policy, 1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414-
1546 USA
Tel: (612) 379-5980, Fax: (612) 379-5982, email:
[email protected]
