Newspaper article The Christian Science Monitor

Devalued Peso Draws US Business, Tourists

Newspaper article The Christian Science Monitor

Devalued Peso Draws US Business, Tourists

Article excerpt

THINGS aren't all bad for Mexico: Nike Inc. has just announced it will start making shoes here this year.

The Beaverton, Ore., athletic-gear giant says a 40 percent devaluation in the peso will prompt it to shift some shoe manufacturing south of the border. The company says it wants to take advantage of the drop in Mexican production costs.

American consumers might assume that the only change Nike's decision means for them is a switch from the "Made in Taiwan" label on their cross-trainers. But it could also signal that President Ernesto Zedillo Ponce de Les emergency economic plan is having some of its desired effect: boosting domestic output and favoring exports while discouraging imports.

That would mean a more stable Mexico with more jobs. And that would affect the United States in areas ranging from illegal immigration - most experts expect it to grow in the short term, but job growth would relieve the principal reason for it - to transborder commerce.

After falling 13 percent in two days, the Mexican stock market rebounded a bit on Wednesday. The market fell apparently out of fear about the country's liquidity and mistrust of Mr. Zedillo's ability to make his emergency plan stick. Attention has been on immediate aspects of this financial crisis.

With more than $600 million of the bonds Mexico uses to finance its short-term debt coming due this week, the Bank of Mexico was forced to raise interest rates on the bonds to record-high levels in an attempt to draw investors to new issues. Even that step failed, and only about 20 percent of a Tuesday offering of $400 million in "Tesebonos" was sold.

Mexico's uncertain financial future caused a panic among both national and foreign investors, who pulled out of the Mexican stock market in droves. The exodus sent a wave of panic across Latin America, pushing down markets from Santiago, Chile, to Sao Paulo in Brazil, to Buenos Aires in Argentina, before rebounding Wednesday.

Many analysts say Mexico's stock crash reflects an unwarranted degree of pessimism about the country. But some say investors aren't likely to return in appreciable numbers soon, complicating an economic recovery. …

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