From iatp@igc.apc.org Date: 01 Sep 94 14:40 PDT From: IATP Reply to: "Conference trade.news" To: "Recipients of conference trade.news" Newsgroups: trade.news Subject: NAFTA & Inter-Am Monitor 8/29/94 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #14 August 29, 1994 - - - - - - - - - - - - - - - - - - HEADLINES US MARKETING IN MEXICO NON-TARIFF TRADE BARRIERS ALLEGED MEXICAN TELEVISION CHALLENGE TELMEX PRIVATIZATION BRINGS NEW PLAYERS TEXACO TOPS ENVIRONMENTAL BLACK LIST IN ECUADOR RESOURCES/EVENTS - - - - - - - - - - - - - - - - - - US MARKETING IN MEXICO US businesses, particularly in Texas, are looking to an expanded border region for new markets and opportunities. La frontera amplianda sometimes goes hundreds of miles across the actual border, and NAFTA is expected to continue a trend that began before January 1. During 1993, Texas shipped $20.4 billion worth of goods to Mexico, 49 percent of the US total, followed by California with $6.5 billion. Neiman Marcus is planning a catalog for Mexico and J.C. Penney will open a store in Monterrey next year. Dallas Mayor Steve Bartlett gave Mexican Secretary of Commerce Jaime Serra Puche the keys to the city this summer, telling him, "We in Dallas have staked our economic future on NAFTA." Despite the Texas enthusiasm for doing business with Mexico, Wal-Mart, Kmart, and other US retailers have encountered a sales slump after the initial splash of their grand openings in Mexico. US retailers count on NAFTA to create a growing middle class that can patronize their stores, but retail stores are growing faster than their putative market. Mexico's median per-capita income is still only $1,956, according to Mexican government figures. While some observers predict that a middle class will take 10-20 years to develop, retailers hope to begin making money by 1996. Wal-Mart has been hurt by prices, higher by 15-20 percent in its superstore in Monterrey than in its Laredo, Texas store, a mere two-hour drive away. Wal-Mart explains higher prices as a result of duties that still haven't been phased out and of distribution systems that deprive its Mexican stores of the economies of scale enjoyed by its US stores. Cultural differences also handicap Wal-Mart, as Mexican consumers prefer neighborhood butcher shops, bakeries, tortillerias, fruit stands, and egg shops, which can offer fresher food than large chains. Wal-Mart officials hope that they can change shopping habits in Mexico, as consumer habits changed in the US over time. A less visible avenue for US corporations to sell their products in Mexico is via their maquiladoras. Until NAFTA, maquilas shipped all of their production home. Now they are allowed to sell up to 50 percent of their production in Mexico. New market analysis and sales plans will be needed to take advantage of the new legal opening. Restrictions on imports from Asia will now apply to maquiladoras, making it difficult for some to continue to obtain materials for processing. Mexico has launched a maquiladora supplier program to help Mexican companies to obtain materials needed to supply maquiladoras. Source: Bob Ortega, "Wal-Mart Is Slowed by Problems of Price and Culture in Mexico," WALL STREET JOURNAL, 7/29/94; Allen R. Myerson, "The Booming, Bulging Tex-Mex Border," NEW YORK TIMES, 8/7/94; Don Nibbe, "New Trends in Maquilas," TWIN PLANT NEWS, 8/94; "Mexico Launches Maquiladora Supplier Program," INTER-AMERICAN TRADE AND INVESTMENT LAW, 8/12/94; Kevin G. Hall, "Mexico Maquiladoras Face Uncertainty Under Nafta," JOURNAL OF COMMERCE, 8/12/94 - - - - - - - - - - - - - - - - - - NON-TARIFF BARRIERS TO TRADE ALLEGED California peach growers and egg producers and the US Biscuit & Cracker Manufacturers' Association separately complained of non-tariff barriers to trade with Mexico in August. The peach (and nectarine) growers object to Mexican phyto-sanitary standards supposedly aimed at preventing infestation by coddling moths. California officials agree that the Mexican standards are being used as non-tariff barriers, but add that Mexico feels that the California quarantine on avocados (ostensibly to prevent seed weevil infestation) is a similar non- tariff barrier. California peaches were the state's 25th-largest export crop in 1993, earning $53 million. Total edible fruit and nut exports from Mexico last year were valued at $103 million. Phyto-sanitary standards also sparked a dispute over California egg exports to Mexico, with Mexico quarantining California eggs for two months earlier this year. California officials said egg farmers suffered a heavy blow, since about a million dollars worth of eggs is exported weekly. The Biscuit & Cracker Manufacturers' Association objects to labeling regulations recently proposed by the Mexican Ministry of Commerce, which would require Spanish-language consumer information to be "an integral part of the label or packaging as it is produced at the point of manufacture." This language might prohibit the current practice of affixing Spanish- language stickers to products once they reach Mexico, instead requiring complete redesign of packages. The regulation is not yet final, and the manufacturers plan to comment by the September 20 deadline. US exports of baked goods to Mexico in 1993 totaled more than $38 million, including $22.3 million in cookies and crackers. Some US exporters claim that extra-legal means are also being used to discourage dairy imports, including threats, burglaries, mob attacks, and arson. Mexican commerce officials insist that the dairy exporters' problems are police matters, not trade issues. US dairy producers also charge that Mexican inspectors are delaying US delivery trucks at the border. Source: Kevin G. Hall, "Calif. Peach Growers Missing Fruits of Nafta in Mexican Barrier Dispute," JOURNAL OF COMMERCE, 8/3/94; "Mexican Proposal Would Disallow 'Stick-on' Labels on Imports," MILLING & BAKING NEWS, 8/9/94; "Milk Being Spilt Along U.S.-Mexico Border," AGRI-NEWS (Cox News Service), 8/11/94; - - - - - - - - - - - - - - - - - - MEXICAN TELEVISION CHALLENGE Television Azteca and General Electric's NBC signed an agreement that has NBC buying a three-year option to purchase a 10-20 percent share in Grupo Azteca for $120-300 million in July. Television Azteca paid $645 million for a package of government-owned media enterprises last August, and has won a 20 percent market share for its two channels, along with $30 million in World Cup advertising during the first half of 1994. Though still lagging far behind Televisa, which formerly monopolized Mexican television, Azteca posted a $2 million profit for the first six months of 1994. Ricardo Salinas Pliego, the head of Televison Azteca, said that NBC will bring ads into the Mexican market. He also plans to develop four new soap operas and to use NBC news assistance to compete with Televisa's coverage of the August presidential elections. Source: Craig Torres, "As New Mexican Broadcaster Sees It, Grupo Televisa's One-Man Show Is Over," WALL STREET JOURNAL, 7/29/94 - - - - - - - - - - - - - - - - - - TELMEX PRIVATISATION BRINGS NEW PLAYERS Telfonos de Mexico (Telmex) was privatized in 1990, but it still holds a monopoly on telephone services. That monopoly will crack at the end of 1996, when the lucrative long-distance market will be opened to competition. MCI-Banamex, Iusacell/Bell Atlantic, Motorola/Protexa, Grupo Domos, and Alfa are among the companies that have announced their plans to offer long distance service after January 1, 1997. The market is lucrative, with long distance and international calls providing $4.23 billion or more than half of Telmex's revenues, in 1993. In exchange for promises to extend telephone services to remote areas, Telmex will keep a monopoly on local service until 2026. Telmex must install at least one telephone in every town of 500 or more people by the end of 1996. Since privatization in 1990, Telmex has doubled the number of public pay phones, provided digital service on 70 percent of its lines, built a national fiber optic network, and increased the number of phones in Mexico from 6.6 lines per 100 to 8.8 lines per 100, a 33 percent increase. In a get-tough move on July 19, Telmex cut the lines that enabled Access Telecom to provide long distance services. Access had purchased time from MCI and offered long-distance rates 22 percent below those of Telmex. Access got significant market share, despite a complicated system requiring clients to dial as many as 36 digits. Since it bought from MCI, which has a contract with Telmex, and since it discounted transmission in the US and not in Mexico, Access claims it did not violate Telmex's current monopoly on the long-distance market. In 1990, the government's controlling stake in Telmex was purchased for $1.76 billion by a consortium of Southwestern Bell, France Telecom, and Grupo Caruso, a Mexican holding company owned by Carlos Slim Hel. In 1994, Telmex stock accounts for 26 percent of local capitalization of the Mexican stock exchange and 23 percent of its daily volume, and its depository receipts are usually among the most active Wall Street issues. Sixty percent of Telmex's $33.5 billion capitalization is held by foreigners, mostly from the US. Source: Anthony DePalma, "Telmex in Competition, So Far With Just Itself," NEW YORK TIMES, 7/18/94; Damian Fraser, "Mexico in Telephone Liberalisation," FINANCIAL TIMES, 7/4/94; Craig Torres, "Phone Giant in Mexico Seeks to Crush Rivals," WALL STREET JOURNAL, 8/8/94 - - - - - - - - - - - - - - - - - - TEXACO TOPS ENVIRONMENTAL BLACK LIST IN ECUADOR Texaco, a US-based oil company that worked in Ecuador's Amazon region from 1972-1992, was named as the worst environmental offender on a list prepared by Ecuador's major ecological organization, the Nature Foundation, and two Ecuadoran daily newspapers and a television station. Texaco sources called the listing "unjust," and said that recent threats by Ecuadoran President Sixto Duran-Ballen to sue the company for refusal to compensate for damage to the Amazon are not serious. An independent environmental commission jointly contracted by the Ecuadoran government and Texaco reported in last December with findings unacceptable to both Texaco and the government. Further investigation is underway, while Texaco also faces charges in a New York court by a group of Ecuadoran indigenous people who demand $1.5 billion for damage to the Amazon. Texaco was the first company to discover and exploit major Amazonian minefields in Ecuador. According to official reports, 450,000 barrels of oil have been spilled in the Ecuadoran Amazon over the last 22 years. Source: "Texaco Tops Environmental Black List," IPS, 7/25/94 RESOURCES/EVENTS "Trade and Migration: NAFTA and Agriculture," Philip L. Martin. INSTITUTE FOR INTERNATIONAL ECONOMICS, 1993. 158 pages. Institute for International Economics, 11 Dupont Circle NW, Washington, DC 20036-1207. Telephone (202)328- 9000; fax (202) 328-5432. Analysis and prediction of NAFTA's impact on immigration, concluding that NAFTA will increase immigration in the 1990 s, but that Mexican land reforms and privatization will have a greater impact on increasing immigration. Recommends vigorous enforcement of labor and immigration laws to reduce availability of work to immigrants. February 27-March 1, 1995: Internet Seminar in Miami: Florida International University's College of Urban and Public Affairs invites all Internet users in Latin America to attend a free seminar on Internet software and Internet usage at the Hotel Intercontinental in Miami. For information, e-mail: RAMOSR@SOLIX.FIU.EDU - - - - - - - - - - - - - - - - - - The NAFTA and Inter-American Trade Monitor is available in both English and Spanish on Association for Progressive Communications (APC) computer networks on the conference eai.news. It can also be faxed or sent via mail on request. We welcome your comments and contributions. - - - - - - - - - - - - - - - - - - For more information about the Institute for Agriculture and Trade Policy, send email to iatp-info@igc.apc.org. - - - - - - - - - - - - - - - - - - Produced by: Mary C. Turck, Institute for Agriculture & Trade Policy1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414- 1546 USATel: (612) 379-5980, Fax: (612) 379-5982, email: mturck@igc.apc.org