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U.S. DEPARTMENT OF STATE
MEXICO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                              MEXICO

                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)


                                    1992      1993      1994 1/

Income, Production and Employment:

GDP (current)                      329.3     360.5     368.0
Per Capita GDP (current USD)      3897.3    4186.6    4116.6
Real GDP Growth Rate
  (pct. over previous year)          2.8       0.4       2.8
By Sector:  (current)
  Agriculture/Forestry/Fishing      24.7      26.8      26.5
  Mining/Oil/Gas                    11.3      12.5      12.5
  Manufacturing                     75.0      80.6      82.1
  Construction                      17.3      19.5      19.0
  Electricity                        4.9       5.5       5.5
  Commerce/Restaurants/Hotels       85.8      92.4      94.5
  Transport/Storage/Communications  23.1      25.8      26.3
  Financial Services/Insurance/
    Real Estate                     35.9      41.0      41.3
  Social Services                   56.7      62.5      66.7
Labor Force (millions)              27.4      28.0      28.6
Open Unemployment Rate (pct.)
    (year-end)                       3.0       3.7       3.7

Money and Prices:  (annual percentage growth)

Money Supply (M2)                   20.4      14.4      16.0
Banks' Average Cost of Funds        18.8      18.6      15.3
Financial Savings Rate
    (M4 as pct. of GDP)             45.6      52.7      57.4
Consumer Price Inflation
    (Dec-Dec pct. change)           11.8       8.0       6.8
Wholesale Price Inflation           10.6       4.6       6.4
Exchange Rate (year-end Interbank rate)
(new pesos. 1NP=1,000 old pesos)   3.115     3.106      3.40

Balance of Payments and Trade:

Merchandise Exports (FOB)           46.2      51.9      57.2
  Exports to U.S.(U.S. Customs Data)35.2      39.6      47.0
Total Imports (FOB)                 62.1      65.4      74.7
  Imports from U.S.(FAS)            40.6      41.4      49.0
Aid from U.S.                        N/A       N/A       N/A
Aid from Other Countries             N/A       N/A       N/A
External Public Debt                75.8      78.7      81.4
External Debt Service Payments
 (public sector amort. & interest)  18.4      13.9      16.0
Gold and Foreign Exch. Reserves     18.6      24.5      19.5
Trade Balance                      -15.9     -13.5     -17.5
  Trade Balance with U.S.           -5.4      -1.8      -2.0


N/A--Not available.

1/ Estimated.



1.  General Policy Framework

    The new Zedillo Government's decision in mid-December to
devalue and subsequently to float the peso provoked a deep
financial crisis in Mexico and highlighted the vulnerabilities
of the Mexican economy.  Principal among these were the
overvalued peso, excessive trade and current account deficits,
and undue reliance on short-term capital to finance the
government and current account deficits.  The December crisis
has led the Zedillo Government to reinforce its policy
commitment to economic reform and adjustment and to enter into
discussions with the International Monetary Fund (IMF) on a new
macroeconomic stabilization program supported by an IMF
stand-by arrangement.  The government has also promised greater
foreign access in key sectors such as ports, railroads,
satellites, telecommunications and financial services as part
of its renewed commitment to economic reform and market opening.

    In doing so, the Zedillo Government continues to rely on a
general understanding with key labor and private sector groups
to underpin its economic policy approach.  Economic goals have
been set and implemented since December 1987 through a series
of 14 government/labor/private sector agreements known as
economic pacts.  Heretofore, the pacts combined dramatic
increases in government revenues and reductions in government
expenditures, tight monetary policies, and a managed exchange
rate policy with voluntary price and wage controls.  As a
result, 12-month inflation fell from 159 percent in 1987 to a
rate of 6.7 percent as of October 1994.  At the same time, the
average annual rate of economic growth between 1988 and 1994 is
expected to be 2.6 percent.

    Responding to the December crisis, the signatories of the
pact agreed on January 3, 1995 to a new set of austerity
measures.  Key goals:  to temper the inflationary impact of the
peso devaluation by tough measures and limiting annual wage
increases to seven percent, with additional increases possible
for productivity and a negative tax for the lowest paid
workers.  To reduce Mexico's reliance on foreign financing, the
government's new economic program aims to halve the USD 30
billion 1994 current account deficit and to boost domestic
savings.  Moreover, the program calls for continuing structural
reforms within the economy, including a cut in government
spending equal to 1.3 percent of GDP and a further wave of
privatizations in key sectors.  Monetary policy is expected to
be tight.

    Mexico joined the General Agreement on Tariffs and Trade
(GATT) in August 1986 and unilaterally lowered its average
tariff level from 100 percent ad valorem to a structure with a
top rate of 20 percent.  At the same time it reduced or
eliminated many non-tariff barriers such as import licenses and
quotas.  Between 1986 and 1992, Mexico's merchandise imports
increased at an average annual rate of 25 percent, while its
exports increased at an average annual rate of only 13.5 
percent.  Consequently, Mexico began to run trade deficits in
1990.  The trade deficit is expected to reach USD 17.5 billion
in 1994.  U.S. companies have been the primary beneficiaries of
Mexico's trade liberalization since about 70 percent of all
Mexican imports come from the United States.  In 1994, with the
implementation of the North American Free Trade Agreement
(NAFTA), U.S. exports to Mexico will be about USD 50 billion,
an increase of about 21.7 percent compared to 1993.  Mexico has
ratified the Uruguay Round agreements and became a founding
member of the World Trade Organization (WTO) on January 1,
1995. 


2.  Exchange Rate Policies

    Prior to the mid-December decision to widen the exchange
rate band and subsequently to allow the free flat of the peso,
Mexico had relied since November 1991 on a regime by which the
peso was allowed to float within a designated band.  The rate
at which large foreign exchange transactions were conducted
fluctuated within a band that was defined by the rates at which
banks would buy and sell U.S. dollars on a cash basis.  Within
the band, the actual exchange rate was determined by market
forces with some government intervention.  In the run-up to the
December devaluation, Mexico's Central Bank reserves declined
substantially.  At the time of the decision to allow a 13
percent devaluation of the peso, the dollar sold in the
interbank market for 3.4647 new pesos.  In the final days of
December, the peso traded as low as six to the dollar.  It
closed the year at 5.505 to the dollar.

    The value of the peso in U.S. dollars changed little in
nominal terms between November 1991 and early 1994.  At the
same time, Mexican inflation was higher than that in the United
States.  As a result, during 1992 and 1993 the Mexican peso
appreciated in real terms by almost 10.5 percent against the
dollar.  This appreciation gave Mexican importers an incentive
to buy U.S. exports which gained a slight competitive advantage
over domestic goods, whose prices were rising more rapidly. 
Due to political uncertainty in 1994, steady capital outflows
caused the peso to lose value against the U.S. dollar.  Between
January and July 1994, the peso depreciated by about eight
percent in real terms.  Despite the depreciating peso, U.S.
exports to Mexico grew at a faster pace during 1994 than in
1993.  Between January and July, Mexican purchases of U.S.
goods rose by 18.5 percent compared to a 2.3 percent growth
rate in the same period of 1993.   Sales of Mexican goods to
the United States rose by 19.2 percent in the first seven
months of 1994 versus 12.6 percent growth in the comparable
period of 1993.  


3.  Structural Policies

    Prior to the financial crisis of the Zedillo Government's
early weeks, the Salinas Government sought during its six-year
tenure to modernize and increase efficiency of the Mexican
economy by promoting greater external and internal
competition.  The North American Free Trade Agreement (NAFTA)
implemented in January 1994, with its side accords for labor
and the environment, and a new dispute resolution mechanism, 
represents the cornerstone of future Mexican trade policy. 
Mexico also signed free trade agreements (FTA) with Chile,
Costa Rica, Bolivia and a trilateral (G-3) agreement with
Venezuela and Colombia.  Mexico is negotiating an FTA with the
"Northern Triangle" nations of Central America:  Guatemala,
Honduras, and El Salvador.  Mexico's other FTA's (except for
Chile, which was negotiated before NAFTA) track, with some
variation, the basic objectives of NAFTA.

NAFTA's key features include:

--  Progressive elimination of tariffs, non-tariff barriers and
quantitative restrictions on traded merchandise.

--  Phased and market-share limited opening of Mexico's service
industries, including financial services, to U.S. and Canadian
firms wishing to invest or provide cross-border services.

--  Gradual opening of Mexico's central government purchasing
and construction contracts to bidding by U.S. and Canadian
firms.

--  Establishment of clear dispute resolution and international
arbitration procedures to provide proper protection to U.S. and
Canadian investors in Mexico.

--  Commitment from all parties to afford effective protection
for intellectual property rights.

    The disincorporation (privatization or elimination) of
about 900 state-owned companies since 1986 stands as a major
achievement and testimony to the government's belief in the
benefits of private enterprise.  The process of privatization
of state-owned companies has generated USD 22 billion in
government revenues and shrunk the number of state-owned firms
to under 200 today.  During President Salinas' administration,
important privatization sales included all 18 government-owned
commercial banks, the telephone company, a television network,
airlines, film theaters, several sugar and food processing
plants, large copper mines, and steel production facilities. 
The privatization drive also opened the door for private
investment in Mexico's surface transportation infrastructure
such as the modernization of air and maritime ports.  In its
early response to the December financial crisis, the Zedillo
Government has clearly signaled that it will continue to rely
on privatization as a key element of its structural reform
policy.

    Regulation of the Mexican economy has decreased
significantly since 1990.  In 1993, the government introduced
legislation to promote greater competition, limit monopolistic
behavior and prohibit practices to restrain trade.  A new
foreign trade law, adopted in July 1993, eliminated most
non-tariff trade restrictions and established procedures for
remedying unfair trade practices such as export subsidies and
dumping.  The number of unfair trade investigations has grown
steadily over the past five years, yet they are, with some
exceptions, considered to be conducted in an equitable and
transparent manner.  Most new regulations affecting U.S. trade
have been formulated in anticipation of increased trade under
NAFTA.  At times, however, these regulations have disrupted 
trade as a result of poor drafting and/or lack of coordination
between various government agencies responsible for their
implementation.  The Mexican customs service has been
modernized and automated, and a program to professionalize
personnel and weed out corrupt practices is ongoing.


4.  Debt Management Policies

    Prior to the December financial crisis, Mexico had made
considerable strides in regaining access to international
financial markets.  During 1993, Mexico reaped the benefits of
a sound macroeconomic program and the successful renegotiation
of its external debt, concluded in February 1990.  Greater
confidence among investors and creditors has resulted in large
investment capital inflows in late 1993 and early 1994 and
increased access to international credit markets at
progressively more favorable terms.  During  1993, public and
private sector Mexican companies made 77 issues on
international debt markets valued at USD 9.8 billion, or 138
percent above the 1992 level.  This situation was largely
reversed following the assassination of Luis Donaldo Colosio,
the ruling Institutional Revolutionary Party's presidential
candidate in March, 1994.  The fear and political uncertainty
generated by this event resulted in massive capital outflows
which were hastened again nine months later by the devaluation
crisis.  International borrowing slowed over the course of 1994
because political conditions in Mexico and interest rate trends
internationally made the environment less hospitable to new
issues.  Debt flows became increasingly short-term.

    Mexico's external debt increased by USD 12.6 billion during
1993 to USD 130.2 billion, or 36 percent of GDP.  Most of the
increase was on the part of private companies and commercial
banks.  Public sector debt has been declining as a proportion
of total debt.  At year-end 1993, public sector debt was 83.5
billion, an increase of USD 3 billion for the year, but USD 2.3
billion below 1988 levels and only 64 percent of all external
debt.  The ratio of debt service to exports fell to 24.9 in
1993 from 34.0 in 1992.


5.  Significant Barriers to U.S. Exports

    Import Licenses:  Mexico eliminated its universal regime of
import license requirements in 1985 and has committed, under
GATT and the NAFTA, to eventually eliminate all import
licensing requirements.  The Mexican Government still requires
import licenses for slightly under 200 product categories, many
of which are in the agricultural sector.  For U.S. and Canadian
exporters to Mexico, NAFTA replaced agricultural import
licenses with tariff rate quotas and, it may be argued, in some
cases with phytosanitary and zoosanitary requirements.  The
agricultural sector of the NAFTA negotiations was one of the
most difficult, with the result that many products will be
slowly liberalized over a fifteen-year span.  Readers who wish
more information in this area should contact the U.S.
Department of Agriculture to obtain specialized information.  

    Automobiles:  Investment and trade in the automobile sector
are subject to the restrictions of the Mexican Auto Decree, 
including such performance requirements as local content,
foreign exchange balancing, and quantitative import
restrictions.  Foreign ownership in most auto parts
manufacturing companies is limited to 49 percent, rising to 100
percent in January 1999.  The Automotive chapter of NAFTA has
created new opportunities for U.S. automobile manufacturers and
parts suppliers in Mexico.  One of the eye-catching commercial
stories in Mexico in 1994 was the success of new imported
automobile models in the Mexican market.  Mexican automobile
imports jumped from 3,278 units in 1993 to 25,729 units in the
first six months of 1994, capturing 13 percent of the domestic
retail market.

    Insurance:  Foreign ownership of Mexican insurance
companies is limited by law to 49 percent.  Under NAFTA, U.S.
insurers will be allowed to increase their equity participation
in new joint ventures to 51 percent by 1998 and 100 percent by
the year 2000, with no limitations on market share.  U.S.
insurers will also be permitted to establish wholly-owned
subsidiaries in Mexico, subject to aggregate market share
limits which will be eliminated in 2000.  U.S. insurers that
have ownership in existing joint-ventures may increase their
equity participation to 100 percent by 1996.

    Telecommunications:  The main restriction in the
telecommunications sector is a limitation on foreign investment
in telephone and value-added services to a 49 percent equity
position.  In addition, under the Mexican constitution,
satellite services and the operations of earth stations with
international links are reserved for the Mexican Government. 
In early 1995, the government announced it would open satellite
services to foreign participation.  Long distance telephone
service is reserved for Telmex until 1997 by a concession the
government announced in January 1995.  Numerous American
companies have shown interest in participating in this market
when it opens.

    Financial Services:  Mexico's Foreign Investment Law
permits foreign investors to own minority interests in most
Mexican financial services companies (banks, brokerages,
insurance companies, etc.) while they may not invest in foreign
exchange houses and credit unions.  The NAFTA provides an
exception for U.S. and Canadian companies which can establish
wholly-owned subsidiaries in most financial sectors, subject to
initial market share limits that will be eliminated in the year
2000.  U.S. and Canadian companies submitted 102 applications
to establish Mexican subsidiaries, and by late October 1994, 52
of these had been approved, including 18 requests to establish
banks.  Foreign banks and brokerage houses may also set up
representative offices in Mexico.  The government indicated in
early 1995 that it intends to accelerate the timetable for
foreign participation in financial services but full details
were not available as of the end of January.

    Motor Carriers:  As a result of bilateral consultations and
the Mexican Government's deregulation of truck and bus
operations, U.S. truckers and charter bus operators now have
substantial access to Mexico.  Although full trucking authority
for U.S. carriers is still limited to the border commercial
zone, U.S. freight carriers have open access for trailer entry
into Mexico and may thus deliver door-to-door.  Mexican 
tractors and drivers are required by law to haul all trailers
bound for interior points, but this has not been considered a
major obstacle by U.S. transportation companies.  This
practice, however, does increase risks for shippers of goods. 
U.S. charter tour buses now have full access to all points in
Mexico; regularly scheduled bus operations are restricted
reciprocally to the border zones.  Mexican authorities are
implementing new safety, weight and dimension regulations to
meet U.S. standards, and the two countries are preparing for
the standardization and reciprocal recognition of commercial
drivers' licenses.  A schedule for full liberalization has been
negotiated under NAFTA.  In December 1995, U.S. trucks will be
allowed access to all of Mexico's border states for the
delivery and haul-back of cargo.  By January 2000, this access
will be extended to all of Mexico's territory.

    Standards, Testing, Labeling and Certification:  The
Government of Mexico has traditionally been the primary actor
in determining product standards, labeling and certification
policy, with some input from the private sector and less from
consumers.  But the 1992 Law on Metrology and Standards
included a provision for the establishment of private
standardization and certification bodies, as well as for
private sector certification services to regulatory bodies.  A
U.S. Government officer will be stationed at the U.S. Embassy
permanently starting in January 1995 to cooperate in standards'
development.

    The 1992 law also provides for greater transparency and
access by the public and interested parties to the regulation
formulation process.  This exercise has resulted in a reduction
of obligatory product standards to just above three hundred. 

    Under the NAFTA, Mexico has reaffirmed its GATT obligations
to base its obligatory norms on international standards. 
Mexico is working to make its standards compatible with U.S.
standards in a number of sectors, and to recognize U.S.
standards-certifying entities beginning on the fourth year
after NAFTA's entry into force.  Toward the end of 1994, Mexico
revised its testing and certification procedures to require
more frequent re-testing of products or, in its stead,
certification of importers' quality control procedures to
ensure that tested products are representative of production
models.

    Investment Barriers:  The National Foreign Investment
Commission, chaired by the Secretary of Commerce and Industrial
Development, decides questions of foreign investment in
Mexico.  The country's constitution and new Foreign Investment
Law of December 1993 reserve certain sectors to the state (such
as oil and gas extraction and the transmission of electrical
power) and a wide range of activities to Mexican nationals (for
example, forestry exploitation, domestic air and maritime
transportation, and gas distribution).  Despite these
restrictions, the Foreign Investment Law greatly liberalizes
the investment process and eliminates the requirement for
government approval in around 95 percent of foreign investment
applications.

    Provisions contained in NAFTA will open Mexico to greater
U.S. and Canadian investment by assuring U.S. and Canadian 
companies' national treatment, the right to international
arbitration and the right to transfer funds without
restrictions.  NAFTA will also eliminate some barriers to
investment in Mexico such as trade balancing and domestic
content requirements.  Mexico has already implemented its
commitment under NAFTA to allow, since June 1993, the private
ownership and operation of electric generating plants for
self-generation, co-generation, and independent power
production.  The NAFTA will also lift Mexican investment
restrictions in the chemical sector on all but eight basic
petrochemicals reserved to the state. 

    Investment restrictions exist prohibiting foreigners from
acquiring title to residential real estate within 50 kilometers
of the nation's coasts and 100 kilometers of the borders.  The
new Foreign Investment Law eliminated these restrictions for
all non-residential property.  Foreigners may acquire the
effective use of residential property in the restricted zones
via a trust through a Mexican bank.  In addition, both
foreigners and Mexican citizens may encounter problems with
enforcement of property rights.  Only Mexican nationals may own
gasoline stations, whose gasoline is supplied by Pemex, the
state-owned petroleum monopoly.  These gasoline stations only
carry Pemex lubricants although other lubricants are
manufactured and sold in Mexico.  

    Government Procurement:  There is no central government
procurement office in Mexico.  Government agencies and public
enterprises use their own purchasing offices to buy from
qualified domestic or foreign suppliers, subject to guidelines
issued by the Finance Ministry.  Suppliers from all countries,
whether GATT members or not, may bid on government tenders, and
requirements for participation are the same for foreign and
domestic suppliers.  In 1991, Mexico abandoned the rule that
state-owned enterprises give preference in procurement to
national suppliers.  But Mexico's new procurement law, enacted
in 1994, distinguishes between procurement contests open to
national versus international suppliers.  The law vaguely
acknowledges Mexico's procurement obligations under NAFTA and
other international trade agreements.  Still, Mexican nationals
enjoy preferential treatment, both official and unofficial, in
bidding for government orders.  A specific preferential
treatment in public procurement is granted to domestic drug
suppliers (which includes foreign companies established in
Mexico).  NAFTA will increase U.S. suppliers' access to the
Mexican Government procurement market, including the
state-owned oil company, PEMEX, and the Federal Electricity
Commission, CFE, which are the two largest purchasing entities
in the Mexican Government.  Under NAFTA Mexico immediately
opened 50 percent of PEMEX and CFE procurement to U.S.
suppliers and this percentage will increase in steps until all
PEMEX and CFE procurement is open by the tenth year.

    Customs Procedures:  The Mexican Government introduced in
1993 a system to combat under-invoicing of certain imports for
customs purposes.  The system, ostensibly aimed at Mexico's
large informal sector, established a "reference price" on which
duty would be charged, absent evidence that the lower declared
price was a valid arms-length commercial transaction.  Fine
tuning of this directive has allowed large, frequent importers
to be exempted from its bond-posting requirements.

    In September 1994, the Mexican Government began to require
certificates of origin for all goods subject to Mexican unfair
trading orders, and imposed more stringent proff of origin
requirements for textiles, apparel and footwear produced in
certain South and East Asian countries.  The directive has
disrupted some U.S. retailers' inventory and logistics systems,
precluding them from exporting such third-country goods to
stores in Mexico.  The Mexican Government is expected to come
to an understanding to exempt certain large volume U.S.
exporters from the directive's most burdensome requirements.

    Traders and Mexican customs brokers (by law, imports into
Mexico must be handled by Mexican customs brokers) agree that
Mexican customs procedures have improved in recent years. 
Remaining complaints center on vaguely worded regulations that
prescribe excessively strict penalties, and a general increase
in customs' assessment of minor infractions and fines.


6.  Export Subsidies Policies

    The Mexican Government has no export subsidy program and
has informed the U.S. Government that it is in full compliance
with a 1986 bilateral understanding on export subsidies.  The
U.S. International Trade Commission found in April 1990 that
past Mexican export subsidy programs have either ended or the
subsidy element has diminished.  Provisions for promoting
exports in Mexico's new foreign trade law are limited to
training and assistance in finding foreign sales leads, project
financing (at market rates) for export oriented business
ventures, and special tax treatment for companies that have
significant export sales.  There is no provision for export
subsidies.


7.  Protection of U.S. Intellectual Property

    Mexico is a member of the major international organizations
regulating the protection of intellectual property rights (IPR)
-- the World Intellectual Property Organization, the Berne
Convention for the Protection of Literary and Artistic Works,
the Paris Convention for the Protection of Industrial Property,
the Universal Copyright Convention, the Geneva Phonograms
Convention and the Brussels Satellite Convention.

    The Mexican Government strengthened its domestic legal
framework for protecting intellectual property by amending its
1991 industrial property law (patents and trademarks),
effective October 1, 1994, to create the Mexican Institute for
Industrial Property (IMPI) and give this agency enhanced powers
to implement and enforce Mexico's IPR laws.  The amended law
clarifies the protections afforded inventions related to living
materials by excluding specific processes from patent
protection.  It also incorporates Mexico's IPR obligations
under NAFTA.  These NAFTA provisions will further strengthen
IPR protection by providing for nondiscriminatory national
treatment of IPR matters, establishing certain minimum
standards for protection of sound recordings, computer programs
and proprietary data, and by providing express protection for
trade secrets and proprietary information.  Product patent 
protection was extended to all processes and products,
including chemicals, alloys, pharmaceuticals, biotechnology and
plant varieties.  The term of patent protection was extended
from 14 to 20 years from the date of filing.  Trademarks now
are granted for 10-year renewable periods.  One of the new
features of the amended law is that it is sufficient for a
company to have its mark recognized among the U.S. industry to
be protected in Mexico.  

    At the same time, Mexico has requested and received over
600 pages of private sector comments on amending its copyright
law of August 1991 to bring it into accord with the most
up-to-date international practices.  The amended copyright law
should be promulgated in early 1995.  The 1991 copyright law
provides protection for computer programs against unauthorized
reproduction for a period of 50 years.  Sanctions and penalties
against infringements were increased and damages now can be
claimed regardless of the application of sanctions.

    Although raids by federal authorities led to the
confiscation and destruction of several million pirated audio
and video cassettes between 1992 and the end of 1994, music
industry sources estimate that two out of every three audio
tapes sold in Mexico still are pirated products (an annual loss
of about USD 240 million).  These raids have affected street
vendors and have closed some pirate cassette fabrication
operations.  However, the ease in which pirate tapes may be
fabricated and the continued growth of the informal sector
economy create a major challenge for the Mexican Government. 
In an effort to put teeth into its IPR laws, the Mexican
Government formed a commission in October 1993 to cut through
the bureaucratic obstacles hindering effective action.  Much
work remains to be done in combatting piracy in Mexico, but the
Mexican authorities have demonstrated their interest in making
substantial progress in intellectual property enforcement.


8.  Worker Rights

    For an introduction to the Mexican labor law, see "A Primer
on Mexican Labor Law" (USDOL) and "A Comparison of Labor Law in
the United States and Mexico an Overview" (USDOL 1992).  In
general, worker benefits mandated by law include paid
vacations, maternity leave, end-of-year bonuses, generous
severance packages, mandatory profit sharing and social
security coverage, including comprehensive medical care, plus
mandatory individual savings and retirement accounts to which
employees and employers must contribute.

    a.  The Right of Association

    The Mexican Federal Labor Law (FLL) gives workers the right
to form and join trade unions of their own choosing.  Mexican
trade unionism is well developed with thousands of unions and a
number of labor centrals.  Once formed, unions must register
with the labor secretariat or equivalent state government
authorities to acquire legal status to function.  In theory,
registration requirements are not onerous, involving the
submission of basic information about the union.  However,
there are allegations that the federal or state labor
authorities use this administrative procedure improperly to 
withhold registration from groups considered disruptive to
government policies, employers, or unions.  Unions and labor
centrals are free to join or affiliate with international trade
union organizations and do so.

    b.  The Right to Organize and Bargain Collectively

    The FLL strongly upholds the right to organize and bargain
collectively.  On the basis of only a small showing of interest
by employees, or a strike notice by a union, an employer must
recognize the union concerned and make arrangements for a union
recognition election or to negotiate a collective bargaining
agreement.  The degree of private sector organization varies
widely by states; while most traditional industrial areas are
heavily organized, states with a small industrial base usually
have few unions.  Workers are protected by law from anti-union
discrimination.  Collective bargaining had been
institutionalized in many sectors in the "Contrato Ley,"
industry or sector-wide agreements that carry the weight of law
and apply to all firms in the sector whether unionized or not,
but this is less-and-less common.

    c.  Prohibition of Forced or Compulsory Labor

    The constitution prohibits forced labor.  There have been
no credible reports for many years of forced labor in Mexico.

    d.  Minimum Age for Employment of Children

    The FLL sets 14 as the minimum age for employment by
children.  Children age 14 to 15 may work a maximum of six
hours, may not work overtime or at night, and may not be
employed in jobs deemed hazardous.  In the formal sector,
enforcement is reasonably good at large and medium-sized
companies; less pervasive at small companies.  As with employee
safety and health, the worst enforcement problem lies with
small companies and the informal sector.  Eighty-five percent
of all registered Mexican companies have fifteen or less
employees, indicating the vast scope of the enforcement
challenge just within the formal economy.  In 1992, the Mexican
Government increased from six to nine the minimum number of
years that children must attend school and made parents legally
liable for their children's non-attendance.

    In 1991, the Secretariat of Labor and Social Welfare (STPS)
and the U.S. Department of Labor undertook joint studies of
both the child labor problems and the nature of the informal
economies in Mexico and the United States.  The studies were
published in late 1992 and are serving as a basis for
cooperative efforts to discourage child labor in both our
countries.  In 1993, the International Labor Organization (ILO)
was developing a national action plan against child labor with
the Mexican Government's Social Development Secretariat
(SEDESOL).  There were also Mexican government and
non-governmental organization media campaigns to convince
parents to keep their children in school.

    e.  Acceptable Work Conditions

    The Constitution and the FLL provides for a minimum wage
for workers, set by the Tripartite National Minimum Wage 
Commission (government/labor/employers).  In December 1987,
this commission agreed on an accord to limit wage and price
increases, which has since been renewed annually.  Generally in
the private sector in the past few years, wages set by
collective bargaining agreements have kept pace with inflation
even though the minimum wage did not.  In January 1994, the
minimum wage was increased.

    The FLL sets 48 hours as the legal workweek and provides
that workers who are asked to exceed three hours of overtime
per day or work any overtime in three consecutive days be paid
triple the normal wage.  For most industrial workers,
especially unionized ones, the real workweek has declined to
about 42 hours.  Mexico's legislation and rules regarding
employee health and safety are relatively advanced.  All
employers are bound by law to observe the "General Regulations
on Safety and Health in the Work place" issued jointly by STPS
and Mexico's Institute of Social Security.  The focal point of
standard setting and enforcement in the work place is in
FLL-mandated bipartite (management and labor) safety and health
committees in the plants and offices of every company.  These
meet at least monthly to consider work place safety and health
needs and file copies of their minutes with federal or state
labor inspectors.  Government labor inspectors schedule their
own activities largely in response to the findings of these
work place committees.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                                (1)
Total Manufacturing                                   10,802
  Food & Kindred Products                   2,334
  Chemicals and Allied Products             2,392
  Metals, Primary & Fabricated                (1)
  Machinery, except Electrical                (1)
  Electric & Electronic Equipment             605
  Transportation Equipment                  2,218
  Other Manufacturing                       2,438
Wholesale Trade                                          823
Banking                                                  (1)
Finance/Insurance/Real Estate                            912
Services                                                 316
Other Industries                                       2,258
TOTAL ALL INDUSTRIES                                  15,413   

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)


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