The North American Free Trade Agreement (NAFTA) has been implemented with the intentions to eventually open the borders between Canada, the United States, and Mexico. This paper will only deal with the effects of the trade agreement on Mexico. This paper will attempt to show that the implementation of NAFTA and its guidelines have increased flows of U.S. foreign direct investment into the country of Mexico, and subsequently improved Mexico‘s economy.
With the United States, Mexico, and Canada signing the North American Free Trade Agreement (NAFTA), the ground rules are set into place to allow Mexico to prosper from inflows of Foreign Direct Investment (FDI). The rules of NAFTA will protect the investments of foreign investors by locking Mexico into NAFTA regulations on direct investing (Krueger 2000). Domestic U.S. firms will be eager to invest in Mexico for a competitive advantage made possible by the NAFTA agreement and Mexico’s economic conditions. This paper will discuss how NAFTA helped secure investment from the U.S. into Mexico. Additionally, why domestic U.S. firms would consider FDI into Mexico, and how U.S. FDI may have helped Mexico through its economic crisis in 1995.
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This is consistent with Garten’s (1996) view that FDI is a long-term commitment not significantly effected by short run concern. ventures (Wilamoski, Tinkler, 1999). The investors realize the benefits NAFTA has to offer. Graham says this slowdown of FDI can be explained. tax-free, or shipped to foreign markets (Krueger 2000). The agreement has provisions to secure investments. The plants provide about 60% of total employment in the Northern Border area of Mexico. This is because NAFTA allowed preferential treatment to member countries. FDI increased in NAFTA from 1990 to the present.
Since the crisis in 1995, the Mexican economy has continued to grow. Mexico started liberalizing its policies on investment in the late 1980‘s, and was met with immediate response by U.
Approximate Word count =
3341
Approximate Pages =
13 (250 words per page double spaced)
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