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According to the featured speakers at “Uncertainties in Mexico: Update for Wisconsin Companies,” held on June 16, 2009, at the Fluno Center for Executive Education in Madison, the North American Free Trade Agreement (NAFTA) eased the way for U.S. companies to increase trade with and investment in Mexico, but concerns about drug-related violence remain.

NAFTA, implemented in 1994, “helped liberalize the Mexican economy,” said F. Miguel Noyola, head of the Mexico practice in Baker & McKenzie’s Chicago office. NAFTA led Mexico to open its border and welcome more imports, lift most restrictions on foreign investment, repeal its cumbersome transfer-of-technology law, lower its corporate tax rate, implement tax treaties with many countries, and abolish exchange controls, he said. Most industries in Mexico are also now privatized, Noyola said, allowing U.S. companies—including most in the agricultural and dairy industries, to make large purchases from foreign producers. Sigrid Emrich, the acting economic counselor at the U.S. Embassy in Mexico City, said that exports to Mexico have increased 198 percent since 1998, and U.S. companies provide almost 50 percent of goods sent to Mexican maquiladoras. These structural changes, along with Mexico’s labor costs and its proximity to the United States, give Mexico a competitive advantage over other markets, said Emrich.

BouMatic, an international dairy equipment manufacturer with headquarters in Madison, has a thriving business in Mexico. Jorge Prieto, the company’s sales director for Asia and Latin America, said the key to BouMatic’s success there is the local presence it maintains through its country manager. This manager “translates perception into reality,” said Prieto, and helps the company fine-tune its business strategy. It is important “to know who you’re dealing with— the environment and mentality of the people,” he said, which the country manager provides. BouMatic also relies on local distributors who have experience in Mexico’s major dairy regions and who establish and maintain relationships with the privately owned dairy farms that are the company’s end users.

Prieto said that NAFTA made it easier for BouMatic to move its products to Mexico, but the major change he has seen in the past few years is increased violence. The company’s employees and representatives take many precautions while traveling throughout the country, and the country manager’s role in building trust with BouMatic customers has become even more crucial as many large dairy farmers worry about kidnappings.

The Merida Initiative, a joint effort between Mexico and the United States, was proposed in 2007 by Mexico’s President Felipe Calderon and former U.S. President George W. Bush to break the power of drug cartels, which are responsible for much of the violence. This initiative includes creation of a more professional Mexican police force and improved crime prevention and intelligence efforts. Drug-related violence “won’t disappear until we work on decreasing demand” in the United States, said Emrich. But this initiative is one example of how Mexico and the United States have begun more closely coordinating on issues of mutual interest in recent years, she said, adding that the response to the H1N1 virus this past spring was another.

This event was sponsored by CIBER, the Madison International Trade Association (MITA), the Center for World Affairs and the Global Economy (WAGE), the UW-Madison Division of International Studies, and the UW-Madison Latin American, Iberian and Caribbean Studies Program (LACIS), and co-sponsored by the Madison Committee on Foreign Relations (MCFR).