World Trade - November 2008 - (Page 19)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - High hopes for President Felipe Calderon: “He gets things done where his predecessors were unable to.” medium-sized company can expect to pay an average of 27 different taxes and spend 552 hours managing the administrative tasks related to these payments”—as compared with the OECD average of 183 hours. It’s even worse than the regional average of 407 hours. And even with regulatory reform in some parts of the economy, Mexico has particularly weak corporate governance rules, especially when it comes to shareholder protection. A recent study by Atradius found that 24 percent of foreign companies operating in Mexico have had difﬁculties with debt collection and 23 percent believed the legal system was too slow and inefﬁcient. And these are companies that have nevertheless decided to do business in the country; many others have opted not to. “The improvement of investor protection would require rather radical changes in the legal system and/or unilateral internal company-level governance changes,” concluded economists Alberto Chong and Florencio Lopez-de-Silanes in a 2006 paper by the Inter-American Development Bank. And it’s not just the lack of protection that is keeping foreign investors out of the Mexican economy—it is the lack of access to local capital. Eighty-ﬁve percent of Mexican banks are foreign-owned, and almost all the available capital is external. Commercial loan opportunities exist, but they are rare and unreliable enough that most companies in Mexico prefer to rely on retained earnings to expand. The Mexican Stock Exchange is miniscule, with most public companies seeking a spot on the New York stock listings instead. The ratio of IPOs to population is almost 50 times lower than in the United States, and the ratio of domestic ﬁrms to population is some 13 times lower. Bureaucracy and legal obstacles are a particular challenge in the transportation sector, where U.S. and Canadian companies are allowed to own 100 percent of Mexican operators but have often met with agonizing tie ups in Mexican courts. “It’s a challenging business market, and one you have to take a big step into,” said Con-way’s Schmidt. Size matters in Mexico for another reason: Several sectors are concentrated in just a few ﬁrms, many of them state-owned or otherwise well-connected to government ofﬁcials, making it prohibitively difﬁcult for all but the biggest outside ﬁrms to get in the door. This is, unfortunately, the case in many of the sectors in which foreign businesses have the most potential for growth: telecommunications, commercial transportation, infrastructure development, and resource extraction. An added complication is pervasive corruption and fraud. A 2008 study by KPMG found that 77 percent of businesses in Mexico reported being the victims of fraud—46 percent of which was internal—totally $900 million in annual losses. Moreover, 44 percent of companies in Mexico reported being SUPPLY CHAIN THER In transportation, it’s about more than linking point A to point B. It’s about linking possibilities to solutions. By using our innovative thinking, you receive unique solutions that the others just can’t put together. And as a member of the YRC Worldwide family, our expertise in delivering innovative solutions is even easier. 800.610.6500 myyellow.com © 2008 YRC Worldwide. All Rights Reserved. http://www.myyellow.com http://www.myyellow.com

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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