Mexico: Surprising Land Of Opportunity
"Corruption is still a huge problem in Mexico. The telecommunications sector is one of the worst when it comes to corruption and payoffs."
"A lot of Mexicans are open to changing the labor laws to attract foreign business investment," says Peter Susser, chair of the international employment law practice group at Litter Mendelson. "But many others might not like the new rules and give up what they have."
To help workers, many companies are making the transition into an industrialized world by offering old world perks, says Alejandro Bustamante, senior vice president of operations in Mexico for Plantronics , an electronics firm based in Santa Cruz, California, with a manufacturing plant in Tijuana that employs 2,300 people.
"We've created a school to teach our associates how to be parents to allow them more time to concentrate on their families," Bustamante explains. "We've also brought a museum and symphony to the plant and we try to get our workers involved in the community. We are very focused on our workers and other firms are doing the same."
There are of course, major caveats for any type of business investment in Mexico. While Mexico avoided a major setback from the global recession, it suffered a slowdown that could happen if another recession hits. That's because of its dual-edged sword of being tied to the U.S., says Antonio Garza.
Predictions say Mexico will pass Brazil
"The U.S. economy is key for Mexico," Garza explains. "It's not the only factor, but to think that a neighboring country as big as the U.S. wouldn't have an impact on Mexico if there's economic trouble is wrong."
Besides outside forces, internal problems in Mexico can't be ignored, says Josh Miller, general manager in Mexico for Control Risks, a global risk consultancy firm.
"Corruption is still a huge problem for businesses in Mexico, as are extortion threats and hijacking along the production chain," Miller says. "Telecommunications is one of the worst sectors when it comes to corruption and payoffs. That raises prices and costs for firms."
And there's the deadly violence from the drug cartel wars that's killed some 48,000 people during the last five years. But the murders, as awful as they are, don't create a full picture of Mexico, says George Haley. (More:What's the Next Global Manufacturing Superpower?)
"It's having an affect and can't be dismissed, but it's limited to about five of the country's 31 states," Haley says. "Mexico is perceived as an extremely violent country but its crime rate, even with the cartel violence, is about middling for Latin America and the Caribbean."
For all its problems, experts say Mexico is still a good investment bet. A return of the Institutional Revolutionary Party (PRI) to presidential power has many believing the march toward business reforms will continue—as will the fight to control the drug lords.
Meanwhile the economy keeps growing. One analysis says Mexico's economy could surpass Brazil as the number one economy in Latin Americain 10 years. Goldman Sachs has predicted that Mexico could be 5th largest economy in the world by 2050.
In the end, analysts say, the question is really not why — but why not? — invest in Mexico.
"There's a lot of reform ahead including labor, energy, along with more transparency and stability in the government," says Garza, former U.S. ambassador to Mexico. "If you ask me, the big risk for investors is not being in Mexico."