World Trade - November 2008 - (Page 18)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - COVER STORY BRINGING YOUR TOGE to $10.2 billion, and by 2005 it was a mere $5.9 billion. What these dramatic drops reflect is the rather superficial advantage that Mexico offered to U.S. investors postNAFTA: cheaper labor, combined with geographic proximity. The goal of NAFTA was never to simply open up markets. Rather, it was to open markets as a way of spurring economic and political reform in Mexico, which would quickly lift the country into the ranks of the almost-developed world. The failure to achieve that sort of socioeconomic critical mass ensured that as soon as Asian export capacity and telecommunication technology made investment in manufacturing and services overseas a possibility, investors ﬂed. The things that might have kept them—a healthy regulatory structure, good infrastructure, all the elements promised by NAFTA—simply did not exist. Take the regulatory structure. It takes 74 days to start a business in Mexico, double the OECD average. Exporting a standard shipment takes ﬁve documents and 17 days, at an average cost of $1,302 per container, well above even the regional average. To be fair, Mexico has taken great strides in expanding regulatory transparency and getting new laws on the books. The Federal Commission on Regulatory Improvement (COFEMER), a government body, requires regulatory agencies to prepare impact statements for all new rules, and in 2007 the government launched an eight-year constitutional overhaul of the country’s legal system. But enforcement is another matter. Mexican courts are infamously slow and corrupt. “Few cases end up in court, because when you end up in court it can take years to get a conviction,” said Karel van Laack, Mexico country manager for Atradius, a credit insurer. This has kept much of the Mexican economy from rooting itself in the rule of law and the regulatory system— individuals and companies alike would rather negotiate the insand-outs of the informal economy than deal with an entrenched bureaucracy that can’t promise better results. It’s a similar story with the tax system. While Mexico has the lowest tax-collection rates among OECD nations, the system is nevertheless especially onerous on businesses. According to a 2008 World Bank study, “During the course of a year, a FOLD ON THE DOTTED LINE. BRING TO OPPOSITE PAGE

Table of Contents Feed for the Digital Edition of World Trade - November 2008

World Trade - November 2008 Contents Unexpected Responses to Unanticipated Change Reading the States of Risk in Today’s Global Economy Supply Chain Watch Tradewinds Failed Promise: Mexico and NAFTA, 15 Years Later The Short Tale Marrying Trade Finance and Transportation into a Single Transaction Trucking Gets a Double Whammy Are We Safe Yet? Logistics Resurrects the Rust Belt Keep on Compressing

World Trade - November 2008

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