Country Analysis of Mexico

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International Business Paper

Country Analysis of Mexico

Table of Contents

I.Introduction
II.Political Risk
Form of Government
Living Standards and Income Distribution
Labor Market Conditions
Orderliness of Leadership Succession
Cultural and Demographic Characteristics of population
Integration within International Economic System
Security Risk
III.Economic Risk
Size of External Debt
Debt Service Burden and Ability of Policy Makers to Manage External Debt Payments Structure of the current Account
Adequacy and composition of capital flows
Resource endowment, level of development and economic diversification Size and Composition of Savings and Investment
Rate and Pattern of Economic Growth
Willingness and Ability to Ensure Economic Balance
Effectiveness of Fiscal and Monetary Policies
Structural Economic Projections
Long-term Economic Projections
Cost of Policy Trade-offs
III.Recommendations
IV.Conclusion

I.Introduction
The purpose of this project was to conduct an in-depth country analysis of Mexico to determine its suitability for foreign direct investment.
Mexico is 761,606 square miles total, which is approximately three times the size of Texas. Mexico shares its boarders with United States to the north, the Gulf of Mexico to the east, the Pacific Ocean to the west and Guatemala and Belize to the south. According to the CIA Factbook, in July 2008 it is estimated that Mexico will have a population of 109,955,400 people. Mexico gained its independence from Spain on September 16, 1810 but Spain did not recognize Mexico’s independence until September 27, 1821 (CIA-the World Factbook-Mexico).

The current President is Felipe de Jesús Calderón Hinojosa who assumed office on December 1, 2006 after his opponent, Andrés Manuel López Obrador, challenged the election results due to voting irregularities and fraud. Calderón was elected for a six-year term without the possibility of re-election under the conservative National Action party (PAN). Calderon was the President of PAN from 1996 to 1999 and then became Vicente Fox’s - President, 2000-2006 - environment minister from 2002-2004. Fox was the first PAN candidate to win an election after 71 years of the Institutional Revolutionary Party (PRI) rule (Felipe Calderón).

Mexico is a federal republic, which consists of 31 states, 1 federal district and 6 tourist regions. The 31 states (estados, singular - estado) and 1 federal district* (distrito federal) are: Aguascalientes, Baja California, Baja California Sur, Campeche, Chiapas, Chihuahua, Coahuila de Zaragoza, Colima, Distrito Federal*, Durango, Guanajuato, Guerrero, Hidalgo, Jalisco, Mexico, Michoacan de Ocampo, Morelos, Nayarit, Nuevo Leon, Oaxaca, Puebla, Queretaro de Arteaga, Quintana Roo, San Luis Potosi, Sinaloa, Sonora, Tabasco, Tamaulipas, Tlaxcala, Veracruz-Llave, Yucatan, Zacatecas (CIA-The World Factbook-Mexico). Each of Mexico’s 31 states has its own constitution modeled on the national charter and has the right to legislate and levy taxes other than interstate customs duties (Mexico). The 6 tourist regions of Mexico are Northern Mexico, Central Mexico, the Yucatan Peninsula, the Pacific Coast and the Baja California Peninsula (Visit Mexico).

The ethnic groups in Mexico are divided into two main categories of Mestizo and Indian/Amerindian. “Mestizo” is a person of solely European background. “Indian” or “indigenous” people are those who use an indigenous language in daily speech, remain actively involved in indigenous communal affairs, or participate in religious ceremonies rooted in Native American traditions (Mexico). Approximately 60 % of the population is Mestizo, 30 % Indian/Amerindian, 9 % white or European, and 1 % “other.” Spanish is the dominant language for both the Mestizo and Indian populations. Approximately 6 million Mexicans spoke an indigenous language as a first language in 2000. 83 % of...
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