By Samuel Peña Guzman
Foreign Investment Coodinator State of Nuevo Leon

Competitiveness in Mexico has been and still is a problem if compared to developed countries. Our main trade partners in North America have a clear advantage on this. This is mainly due to the fact that they were fully immersed in globalization and foreign trade when Mexico was starting to open its markets policies in the middle eighties, which were later implemented during President Salinas´ term at the beginning of the nineties.

Today, Mexican companies are exploring new mechanisms to increase competitiveness and growth in the fields and/or sectors considered ripe in Mexico.

Unfortunately, production costs in companies are still high. Sometimes it is good to question why we keep on "failing" in competitiveness, in spite of the fact that we are the example-country for developing countries, as far as internal markets liberalization is concerned. By the end of the eighties it was considered that opening to foreign markets would force companies, through neo-liberal policies, to work hard on competitiveness. This mechanism comes precisely from abroad by allowing multi-national companies to enter into our internal markets. Also, this markets liberalization happened in an economic situation quite similar to the one we are living now (low inflation, exchange rate stability), exploiting comparative advantages that are weakened every day by the competition from Asian countries.

On the other hand, with opening to markets in mind, Mexico has signed endless trade agreements, which have not been capitalized at their full, quite the opposite, our dependency from our north neighbor country has increased.

As mentioned before, economic and political circumstances when Mexico opened to foreign markets were temporary, as said circumstances usually are in developing countries. However, several circumstances have allowed for the stability we are currently living. Rather "cheap" labor, rate of exchange (Peso-Dollar) that allows for inexpensive imports, together with customs duties liberalization due to the trade agreements entered.

It would seem a joke, Mexico, being one of the countries with the largest number of free trade agreements is also one of the less competitive and the one with the less diversification in the world.

Economic policies that restrict competition in some issues include two-way duties protectionism (those who have and those who don´t) isolating domestic producers from the fierce competition abroad and therefore placing their products and services in domestic market at high and non-competitive at all, prices. Not to mention the low competitiveness financial institutions have in the Mexican banking system, which main characteristic is the lack of credit; when credit is granted, high interest rates increase cost of credit. Inefficient financial regulations translate into a lack of an innovating culture and therefore no new companies or job creation.

Also, Mexican companies are facing a strong Mexican Peso against the US Dollar, making of both, Economy and domestic companies, merely importers. This circumstance, in spite of economic stability, leads to a lower competitiveness in Mexican companies, mainly exporting companies, which in some cases go bankrupt for being unable to compete with a low rate of exchange that affects exports. As everything in life this has implications, which in this case translate into a lack of economic growth and an absence of welfare for Mexican families.