From iatp@igc.apc.orgThu Jan 26 15:42:19 1995 Date: 20 Nov 94 20:46 PST From: IATP To: "Recipients of conference trade.news" Newsgroups: trade.news Subject: NAFTA & Inter-Am Monitor 11/21/94 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #26 November 21, 1994 - - - - - - - - - - - - - - - - - - HEADLINES PROPOSITION 187 ANGERS MEXICO PRIVATIZATION AFFECTS MEXICAN BANKING TELMEX STOCK FALLS MEXICAN EXPORTS TO U.S. INCREASE GM ANNOUNCES TRUCK EXPORTS POULTRY INDUSTRY SUFFERS UNDER NAFTA TIMBER DISPUTE SHIFTS COSTA RICA FOCUSES ON TRADE CHILE MOVES ON WORLD STAGE RESOURCES/EVENTS - - - - - - - - - - - - - - - - - - PROPOSITION 187 ANGERS MEXICO California's newly-passed Proposition 187 "creates the wrong spirit," according to U.S. Trade Representative Mickey Kantor. Mexicans agree. Delegations of California business leaders visiting Mexico in October were snubbed, with the Mexican commerce secretary and his undersecretary failing to show up at a trade show. Prominent Mexican guests were no-shows at a reception given by the U.S. ambassador. The American Chamber of Commerce of Mexico denounced Proposition 187, warning that it "potentially damages U.S.-Mexican relations and trade ... breeds distrust and damages years of collaboration ... [and] threatens to damage the promising future on both sides of the border." Proposition 187, which denies most public benefits to illegal immigrants and their families, was also the target of an election-day action at a McDonald's restaurant in Mexico City. Dozens of masked protesters invaded the McDonald's, throwing cash registers to the floor, overturning tables, and smashing windows. About 150 peaceful protesters gathered outside the U.S. embassy. Mexican Deputy Foreign Minister Andres Rosenthal recently pointed out that Mexico does $16 billion in trade with California yearly. California ships 10 percent of its exports to Mexico, making it second only to Texas among U.S. states trading with Mexico. Mexican President Carlos Salinas de Gortari suggested that the U.S. and Mexico need to enter into negotiations on a more free flow of Mexican migrant workers, just as they have agreed on free trade. Salinas noted that he had first proposed such an agreement when free trade negotiations began, but that the Bush administration had said that an immigration side accord was politically impossible. Source: "Measures Against Immigrants and Incumbents Pass," IPS, 11/9/94; "Ballot Issue May Hurt U.S.-Mexican Trade," EL FINANCIERO, 10/31-11/6/94; John M. Nagel, "US Executives in Mexico Denounce Calif. Proposition," JOURNAL OF COMMERCE, 11/7/94; Paul B. Carroll, "A McDonald's in Mexico City Is Trashed in Protest Against California Proposition," WALL STREET JOURNAL, 11/9/94; Ernest Sander, "Prop. 187 - Trade Fallout," ASSOCIATED PRESS, 11//7/94; Tim Golden, "Salinas Urges Talks on Free Migrant Flow," NEW YORK TIMES, 11/14/94. - - - - - - - - - - - - - - - - - - PRIVATIZATION AFFECTS MEXICAN BANKING Mexico's privatized banks have seen their return on equity fall from 40.59 percent in 1992 to 27.39 percent by June of this year. The number of domestic banks has risen from 18 to 37, and in October the Finance Secretariat authorized 18 foreign banking subsidiaries to begin operations. Mexico's private banks are handicapped by undercapitalization and past-due loan portfolios, as well as volatile interest rates and a sluggish economy. Bad loans have risen to a total of $12.02 billion in June 1994, up from $3.48 billion in June 1992. Problem loans include a large load of credit card debt, incurred when newly- privatized banks rushed to issue credit cards despite lack of credit bureau information. The three largest financial groups in Mexico, Banamex-Accival, Bancomer, and Serfin, hold a combined total of 60 percent of the market. For each of them, non-performing loans make up more than 10 percent of their debt portfolio, compared to an international average of about four percent. The nineteen newer banks, authorized in 1993, have the advantage of beginning without bad-loan loads, but they also lack existing client bases. Most of the new banks aim at regional rather than national coverage. Most of the private banks are run by non-bankers coming out of industrial or stock market backgrounds. Some attribute the banks' loan problems to the less conservative attitudes of brokerage firm presidents, while others point with concern to the increasing possibility of conflicts of interest when industrialists sitting on bank boards of directors approach those banks for loans. The financial groups that run banks are also active in other arenas. Bancomer brokerage, for example, plans to place a NAFTA Fund on the Mexican Stock Exchange in January. The fund, which is administered separately in each country, began operating in Canadian markets last week and will open on the New York Stock Exchange before the end of 1994. Meanwhile, the NAFTA opening is bringing foreign banks into Mexico. Citibank will invest $100 million in new financial operations in Mexico, and J.P. Morgan and Co. plans an initial capital base of $100 million, with operations beginning by early next year. Source: "Bancomer to Launch NAFTA Fund in January;" "Foreign Banks Announce Investment Plans;" "Dangerous Liaisons;" Claudia Fernandez, "The Rookie Season;" Jennifer Tierney, "Playing With Fire," EL FINANCIERO, 10/31-11/6/94. - - - - - - - - - - - - - - - - - - TELMEX STOCK FALLS Telmex, the Mexican telecommunications giant, suffered two blows in October, with a lower-than-expected third quarter earnings report followed by AT&T's announcement that it would compete against Telmex rather than joining with it to provide long distance services. Telmex shares fell eight percent, dragging the Mexican Stock Exchange, the Bolsa, along with them for a drop of almost five percent in a single day. Telmex makes up 26 percent of the Bolsa's entire capitalization. Telmex's American Depository Shares also dropped sharply on the New York Stock Exchange. Source: Barry Grant, "Telmex Sends Bolsa Into Tailspin," EL FINANCIERO, 10/31-11/6/94; Anthony DePalma, "Mexican Telephone Shares Drop Sharply," NEW YORK TIMES, 11/11/94; John J. Keller, Craig Torres, "AT&T Corp. and Grupo Alfa Plan Venture," WALL STREET JOURNAL, 11/10/94. - - - - - - - - - - - - - - - - - - MEXICAN EXPORTS TO U.S. INCREASE Mexican exports to the U.S. rose from $25.26 billion in the first eight months of 1993 to $31.34 billion for the same period in 1994. The increase is attributed to the healthy U.S. economy and to NAFTA's trade-enhancing effects. Source: "Mexican Exports to U.S. Reach $31 Billion," EL FINANCIERO, 10/31-11/6/94. - - - - - - - - - - - - - - - - - - GM ANNOUNCES TRUCK EXPORTS General Motors announced that its Janesville, Wisconsin plant has begun building Chevrolet Kodiak medium duty trucks for export to Mexico. GM plans to export 1,500 annually and will also begin building the truck in Mexico for sale there and in Central America. Source: "GM Exports Kodiak Trucks to Mexico," EL FINANCIERO, 10/31-11/6/94. - - - - - - - - - - - - - - - - - - POULTRY INDUSTRY SUFFERS UNDER NAFTA Five years ago the Mexican poultry industry was made up of a large number of small to medium size farmers. Today the industry is dominated by five companies with North American ties, which control nearly 70 percent of the 650 million broilers produced annually. The Mexican market, which also includes nearly 80 million egg-laying hens, is the second-largest in Latin America. Increasing importation of frozen poultry from North America has also angered local producers. Source: Ross Underwood, "Mexico's Poultry Industry Struggling with NAFTA Effects," FEEDSTUFFS, 10/10/94. - - - - - - - - - - - - - - - - - - TIMBER DISPUTE SHIFTS The U.S. government has finally accepted the latest finding of a binational arbitration process in favor of Canada. The U.S. Trade Representative and the Justice Department are now resisting a court suit brought by the U.S. Coalition for Fair Lumber Imports, which challenges the constitutionality of the arbitration process. The dispute began in the 1980s, with U.S. lumber producers complaining that Canadian provinces charged too little in stumpage fees, thereby subsidizing the Canadian mills. Canadian officials maintained, successfully, that the argument is over different systems for pricing natural resources. The United States government has not yet refunded the countervailing duties collected during the years of the dispute. Source: John Maggs, "US-Canada Dispute Takes New Twist," JOURNAL OF COMMERCE, 11/7/94. - - - - - - - - - - - - - - - - - - COSTA RICA FOCUSES ON TRADE A free trade pact between Mexico and Costa Rica is scheduled to take effect on January 1, after having been signed by both countries' presidents and approved by a Costa Rican legislative committee. Costa Rican President Jos Mara Figueres steered the pact through the legislative approval process, overcoming objections from the opposition and from his own party. Costa Rica is also moving to attract U.S. manufacturers to locate there, with incentives including a 12-year tax exemption for businesses operating in free-trade zones and government- funded training for workers. With a literacy rate of nearly 93 percent, Costa Rica offers a strong work force, with labor cost averaging $3-4 per hour and the average Costa Rican general manager earning only $6,100 yearly. Like other Caribbean and Central American countries, Costa Rica fears the loss of the U.S. trading base it had developed prior to NAFTA. Source: "Costa Rica Set to OK Mexico Free Trade Pact," EL FINANCIERO, 10/31-11/6/94; Brian Johns, "Seeking Nafta-Style Gains in Trade, Costa Rica Pursues US Manufacturers," JOURNAL OF COMMERCE, 11/1/94. - - - - - - - - - - - - - - - - - - CHILE MOVES ON WORLD STAGE After becoming the second Latin American member of the Asian Pacific Economic Cooperation forum, Chile is ready to talk trade around the world. "Chile could act as a bridge with South America, as long as we keep moving closer to regional markets," said Chilean President Eduardo Frei. Chile has often been called the leading candidate to enter NAFTA, but has been frustrated by the U.S. failure to pursue negotiations in recent months. Canada has indicated its willingness to pursue bilateral talks with Chile, though the government's preference is expansion of NAFTA. Frei said his country has had good experience with country-by-country bilateral agreements, citing agreements with Argentina, Mexico, and Colombia, as well as others under negotiation with Brazil and Peru. Chile's economy appears strong, with inflation projected at 8.3 percent for 1994. This will be only the second time in 30 years that Chile has seen single digit inflation. Growth will be about 4.3 percent, but is projected to expand to more than 6 percent in 1995. Chile currently shows a trade surplus, which is expected to continue through the end of the year. Source: Roger Atwood, "Chile Hopes to be Bridge for APEC, Latin America," REUTER, 11/8/94; Barrie McKenna, "Chile Woos Canada as NAFTA Hopes Dim; Country Feels Spurned by U.S,." GLOBE AND MAIL, 11/2/94; "Frei Predicts Early Trade, NAFTA Talks With U.S. After Election," ASSOCIATED PRESS, 11/8/94; "Peru-Chile: Free Trade Zone Negotiations Resumed," IPS, 11/8/94; "Chile Inflation at Annual 8.3%," FINANCIAL TIMES, 11/10/94; "Trade Balance Shows Surplus Thanks to Copper," IPS, 11/8/94. - - - - - - - - - - - - - - - - - - RESOURCES/EVENTS "Economic Justice Report." Ecumenical Coalition for Economic Justice, 11 Madison Avenue, Toronto, Ontario MSR 2S2. Telephone 416/921-4615; Fax 416/924-5356. Subscriptions: $25-$40 annually for quarterly newsletter covering global economic issues from the perspective of progressive church people. Ecumenical Coalition for Economic Justice also publishes a number of books and pamphlets on topics ranging from "The Global Garment Industry: Industrial Model of the Future" to "Ethical Reflections on North American Economic Integration." - - - - - - - - - - - - - - - - - - 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 Policy, 1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414- 1546 USA Tel: (612) 379-5980, Fax: (612) 379-5982, email: mturck@igc.apc.org