Foreign Direct Investment in Mexico and the 1994 Crisis; a Legal Perspective

By del Toro, Guillermo Emiliano | Houston Journal of International Law, Fall 1997 | Go to article overview

Foreign Direct Investment in Mexico and the 1994 Crisis; a Legal Perspective


del Toro, Guillermo Emiliano, Houston Journal of International Law


I. Introduction

II. Foreign Direct Investment in Mexico

A. Introduction

B. From the 1917 Constitution to the 1989 Regulations

C. The Law to Promote Mexican Investment and to

Regulate Foreign Investment

D. The 1989 Regulations

E. The 1993 Foreign Investment Law

1. Participation of Foreign Investment in Different

Economic Sectors

2. Real Property

3. Neutral Investment

4. The Comision Nacional de Inversiones

Extranjeras--A New Approach

F. The NAFTA: The Entrance of Mexico into the Globalization Era

1. The NAFTA and the Foreign Investment Law

2. Performance Requirements.

3. Transfers

4. Expropriation

5. Dispute Settlement

G. Competition Law as the Last Regulatory Scheme tit an

Era, of Deregulation

1. MNCs and Competition Law

2. The Ley Federal de Competencia Economica

2. Houston Journal of International Law [Vol. 20:1

a. Mergers and Acquisitions

b. Sanctions

c. Remedies

H. Other Rules Affecting FDI

1. Domestic Level

2. International Level

III. FDI and the Crisis of December 1994

A. The Need for Capital in Mexico

1. National Conditions

2. The Competition for FDI

3. Conclusion

B. The Debt Crisis and the IMF "Conditions"

C. The December 1994 Crisis

1. Short-Term Foreign Investment As a Cause of the

1994 Crisis

2. Market-Based Debt Reductions

IV. An alternative scheme to enhance (long-term)

foreign direct investment

A. FDI as a Long-Term Investment Remedy

B. FDI's Role After the Crisis

C. The Rule of Law and FDI

1. Recent Developments in the International Arena

2. Lack of a Multinational Agreement in FDI

3. Protection Against Risks

a. Multilateral Investment Guarantee Agency

b. Exchange Risks (Devaluation)

V. Conclusions

I. INTRODUCTION

Presently, the world is experiencing an unprecedented revival of liberal, free trade theories. Globalization is the word of today. It mirrors the process of economic integration that is occurring worldwide. Markets are no longer isolated-they are interrelated in such a manner that domestic acts that appear to be circumscribed to a specific territory have important consequences abroad.

Within this context, flows of capital become the main factor in the development of specific countries, regions, and the globalized world itself. Mexico, as a participant in this movement, has a specific role to play. Globalization implies the interrelation of markets. Hence, any aspect, such as economic developments, regulations, and policies that Mexico experiences will have consequences within the global community.

The primary focus of this Article is foreign direct investment (FDI) in Mexico. FDI is the flow of capital that mainly multinational corporations (MNCs) supply in their operations throughout the world. This study is divided into three areas of analysis and examines links between economic development and FDI. It also examines how a country like Mexico can enhance FDI to foster economic growth and improve the wealth of its people.

The first area of analysis begins in Part II, which describes the different regulations that have ruled FDI in Mexico since its independence until the present day. First, a historical analysis of the regulation of FDI in Mexico is provided. The reader can see how Mexico has evolved from a protectionist, suspicious viewpoint towards FDI to a policy of FDI promotion. In Part II, the main subject is the past and present regulations governing FDI, such as the 1917 Mexican Constitution, the 1973 Law (Ley Para Promover la Inversion Mexicana y Regular la Inversion Extranjera), the 1989 Regulations (Reglamento de la Ley para Promover la Inversion Mexicana y Regular la Inversion Extranjera), the 1993 Foreign Investment Law (Ley de Inversion Extranjera), the Competition Act (Ley Federal de Competencia Economica), the North American Free Trade Agreement (NAFTA), and their institutions. …

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