POWER May 2010 - 85

POWER IN MEXICO
Three Keys to Success for the
Service and Manufacturing Sector
NAFTA was both good and bad for Mexico. In both cases, it required a different
approach to doing business, and the effects of that shift are still
playing out.
By Clotilde Bonetto and Mark Storry, Global Business Reports
M
exico is home to both very strong
local players and a full array of
multinational service providers
from around the world. Since the North
American Free Trade Agreement (NAFTA)
was signed under President Carlos Salinas,
Mexico has been forced to open up its
economy and integrate with international
markets. This treaty influenced greatly, for
better or for worse, the Mexican economy.
Carlos Gottfried, president of Potencia
Industrial, an electrical motor producer,
details the background of Mexican
economic policy: " The government was
pursuing an import substitution policy,
together with an active policy of building
up Mexican expertise throughout all sectors,
but especially in core industries such
as electricity and the oil and gas field. It
is my belief that these policies were very
successful. The country grew extensively.
It did present some problems, such as high
outlay for imports, and there was a cost to
the end consumer, but this was balanced
out by the huge advantages to Mexican
companies. If you were producing quality
goods at a reasonable price, you could
grow. This situation was radically changed
in the late 1980s by the growing influence
of the Chicago School economists within
the Mexican administration. These U.S.educated
bureaucrats came back [to Mexico]
with ideas of laissez-faire capitalism
and the free market. When Carlos Salinas
came to power in 1988, he told us that he
would introduce these free-market ideas
slowly over his six-year term. In fact,
within six months the border was open
and Mexican firms began to suffer. They
closed down 200,000 Mexican companies,
four and a half million Mexicans lost their
jobs, and industry suffered. Many of these
skilled workers moved permanently to the
U.S., seriously damaging the Mexican
economy. "
Others would argue that it became easier
to invest in Mexico, and while NAFTA
opened up Mexican companies to compete
May 2010 | POWER
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85
with the best and most experienced global
companies, it also opened the international
market to Mexican companies.
Rogelio Lopez-Velarde, lawyer at
LVHS, argues: " My opinion is that the
NAFTA agreement forced the liberalization
of the electricity sector, and the fact
that it came from an external rather than
an internal driver is something overseas
investors need to consider. "
Felipe Ochoa, chairman of Ochoa y
Asociados, explains the impact of NAFTA
on energy projects: " Until 1994, when we
signed the NAFTA agreement, there was a
strong participation of local firms, both in
construction and the engineering and design
of energy projects. Previously, most
of the engineering and design took place
within the ministries; they had very strong
teams for these activities. After NAFTA
many of these teams were dismantled, so
we lost a lot of this capacity. "
This transformation is what makes the
Mexican environment unique. The movement
from a national, inward-looking
economy where Mexican companies were
protected from international competitors
and enjoyed the active support of the
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