Mexico woos foreign capital

Press, 6 March 1984, Page 20

Mexico woos foreign capital

By

Bjorn Edlund,

of Reuters, through NZPA

The Mexican Government, seeking to help the country’s economic recovery, has opened the door to foreign companies taking majority holdings in key sectors of industry. Mexican law calls for 51 per cent domestic capital in new joint ventures, but the Government has announced that foreign control will now be allowed in 34 industrial areas, including farm machinery, generators, computers, pharmaceuticals and plastics. . Investors from abroad will still need government approval for new ventures. Under the new guidelines, this will be easier to obtain if the planned ventures are exportorientated, bring in new technology, use domestic suppliers, and

are situated in economically depressed areas. The changes came after months of heated debate in the Govern-

ment and were opposed by Leftist administration officials. With foreign investment at $ll billion, or 4.2 per cent of total investment, members of the foreign business community welcomed the change — but with some reservations. Nobuo Fujiwara, the head of the Japanese Chamber of Commerce, saw: “There is still a lot of confusion among foreign investors, and a lot of red tape in the procedure of getting approval” In spite of the low volume of foreign capital, companies with A

foreign participation account for 30 per cent of Mexico’s non-oil foreign exchange income, official statistics show.

With foreign currency reserves low, and up to 75 per cent of exports income depending On oil safes, President Miguel de la Madrid has been moving toward actively seeking foreign investment Mexico came close to default on an $BO-billion foreign debt in 1982, and de la Madrid implemented a tough austerity programme when he took office at the end of that year. Billions of dollars were transferred out of the country during 1982, when the fall in oil prices badly damaged the economy, and

few industry analysts expect that money to return. Government economists say that Mexico’s industry is now running at only half capacity, and a multimillion dollar programme to aid import substitution has yet to show effects.

Investment dropped 25 per cent last year, following a 13 per cent fall in 1982, official figures show. Mexico business leaders have praised the new rules, saying that they showed “the Government has a positive attitude.” The Government’s investment drive comes after it moved to make exports easier by abolishing a host of bureaucratic procedures for companies selling abroad.