As Mexico revels in its biggest political overhaul in more than 70 years, it’s looking like the Los Angeles economy could also become a big winner as a result of the landmark election. If Mexican president-elect Vicente Fox follows through on his campaign promises to strengthen his nation’s support of the North American Free Trade Agreement and reduce corruption, it could go a long way toward accelerating economic activity between L.A. and Mexico, according to local business leaders and academics. In essence, they said, the reforms promoted by Fox amount to a brand new rulebook that could ease the concerns of wary investors and businesses north of the border when doing deals in Mexico. “(Fox) is clearly a supporter of NAFTA,” said Fernando Guerra, director of the Center for the Study for Los Angeles at Loyola Marymount University. “He’s made no bones about wanting to further integrate the Mexican economy into the U.S. and Canadian economies.” That could translate into a number of benefits for L.A., including: >More daily commutes across the border. >More investment on both sides of the border. >Increased activity at the ports of Los Angeles and Long Beach. >More public-private partnerships to facilitate contact between Los Angeles and Mexican firms. Fox’s pro-business National Action Party, or PAN, won the Mexican presidency and control of that country’s legislature last week, becoming the first opposition party in nearly three generations to unseat the Institutional Revolutionary Party, or PRI. Fox has laid out primary goals of reducing corruption, reforming the judiciary, reducing the influence of the executive branch, and increasing financial accountability in the government all of which could serve to increase the stability of the Mexican economy. “These things speak to a much more open system, where investments can be pursued in a less-risky fashion,” Guerra said. “I think Fox, PAN, and Mexicans are going to look to the U.S. for support and investment, specifically to California and Texas.” But the resistance to such change is likely to be substantial. “All of the individuals who because of their political power, economic position and social relationships benefit from the existing system are going to be resistant to many of the changes Fox is going to attempt to implement,” Guerra said. “He can get everybody in (Mexico’s) congress to agree, but if nothing happens, corruption will continue.” In some ways, Fox will try to continue the already improving economic relations between Mexico and this country. For example, cross-border commerce, from daily commutes to capital investment, has been steadily increasing in recent years. “With the new president, it could expedite how quickly these things occur,” said Ross DeVol, director of Regional and Demographic Studies at the Milken Institute in Santa Monica. As an example of what could happen, DeVol pointed to Texas, where the governor’s office has a strong track record concerning open commerce with Mexico and where businesses view Mexican firms less as competition and more as part of their supply chain. That trend is especially strong among technology firms and border manufacturing operations, DeVol said. The strong relationship between Texas and Mexico is reflected in the volume of trade. In 1998, the latest year for which data are available, Texas exported $36.3 billion worth of goods to Mexico, compared to $13.3 billion exported to that nation by California. L.A. County’s portion of that 1998 export trade with Mexico totaled $2.8 billion, up dramatically from $1.2 billion in 1993, according to the Los Angeles Economic Development Corp. Local exports to Mexico are primarily manufactured goods, many of them components and textiles heading to Mexico for further assembly, and industrial machinery. So businesses in those sectors are clearly poised to benefit from improved trade under the Fox administration. Not everyone in L.A., however, is ecstatic about the future of Mexico under Fox. A possible increase in the number of U.S. manufacturing jobs lost to lower-paid workers in Mexico has local AFL-CIO officials withholding judgment until Fox’s intentions are more clearly spelled out. “Right now, we’re going to withhold comment on the election until we see concrete policies coming out of the new administration,” said Neal Sacharow, communications director for the Los Angeles County Federation of Labor. Owners of small firms in Los Angeles, however, are excited about the opportunities, said Ruth Lopez Williams, chairwoman of the Latino Business Association. “The opportunities are endless,” she said. Williams points out that 440,000 Latino-owned businesses in L.A. already share a language, culture and close family ties with Mexico. “There is one thing that is very powerful about our community, and that is we have larger families, and our families are on both sides of the border,” Williams said. “The doors will go back and forth probably a lot more.” Williams believes pro-business PAN policies will create a political climate that supports private-public partnerships that are likely to increase commerce. To that end, the LBA sponsored a local business-to-business event in March attended by Gov. Alberto Cardenas Jimenez of the Mexican state of Jalisco. The conference helped match up a total of 20 firms in Jalisco and California that could be interested in doing business with each other. Still, it’s unclear just how decisions made at the federal level in Mexico will affect the way local Mexican officials do business. “You would hope with the PRI losing the presidency and the legislature as well, there’s going to be a high turnover at the local level, and less state and government officials whose offices are almost institutionalized,” DeVol said. “They’ve been part of the crony system.” Williams agreed. “There’s a vast potential for Los Angeles, if Fox can follow through,” she said. “The jury is still out on that. But it creates a fabulous hope for some people that there is a possibility for change.”
