How has NAFTA changed the business environment in Mexico since the treaty took effect, in 1994?
NAFTA represents the culmination, not the beginning, of a period of trade liberalization between Mexico and the United States that began in the early 1980s. NAFTA, in effect, told investors that they could have confidence that there would be no backsliding in Mexico. Q: Did the large devaluation of the peso in 1994 and 1995 shake investors’ confidence in the Mexican economy? A: Many businesses were decimated, especially those selling to the Mexican market. But some big companies changed their strategies. Automotive-industry executives, for instance, no longer thought so much about the Mexican market but instead focused on exporting to the United States. Mexico became a place where U.S. companies went to take advantage of cheap labor and the low cost of assets, such as factories and land. Mexico has become, in a sense, an export platform within North America. Q: Is there a danger of another major devaluation? A: If the Brazilian economy collapses, the effect on Mexico could be devastati
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