Major Trading Partners, 1993 and 1994 (in millions of United States dollars)1.265 International Logistics 2/26/03 Dan Allison, Jim Chow, Carlos Gonzalez, Lucia Wu MEXICO 1. What are the rough dimensions of the country in miles? Mexico is roughly 1,972,550 square kilometers. It is the third largest nation in Latin America (after Brazil and Argentina).1 2. What is the population? What percentage live in the 3 largest cities? As of July 2002, the population of Mexico was 103,400,165. The 3 largest cities of Mexico in terms of population (Mexico City, Guadalajara, Monterrey) have populations in 2000 of 17.787 million, 3.669 million, and 3.273, respectively. In 2000, this was 25% of population.2 3. What is the predominant language? How widely used is English in business? Spanish is the official language, spoken by nearly all. About 8 percent of population speaks an indigenous language; most of these people speak Spanish as second language. Knowledge of English is increasing rapidly, especially among business people, the middle class, returned emigrants, and the young.3 4. In the last three years have there been any instances of political instability? There have not been any major political instability issues in the last 3 years like the presidential candidate assassination in 1993 or the Zapatistas surge in 1994. Perhaps the most transcendental event in the last 3 years was the presidential transition in 2000 since not only it was a change of president, but also the first political party change in more than 70 years. Although there was not political instability (it was a smother transition than expected), there was a lot of speculation and uncertainty about the new government. 5. What is the currency? What is the exchange rate to US dollars? How has it changed in the past two years? The Currency is the peso, and the exchange rate as of February 21, 2003 is 10.9825 pesos to one dollar (or 1 peso to $.0911).4 In the past two years, the currency exchange started at around 9.7 in January 2001, then dipped in summer 2001 and then again for a two-year low March 2002 at 9.07, and then has steadily risen until now. 6. What time zones exist in this country? What time is it in the capital when it is noon in Cambridge, MA? 1 http://www.nphamigos.org/nphamigos/en/homes/mexico-statistics.shtml 2 http://www.euromonitor.com 3 http://www.du.edu/~kbarr/demographics.htm 4 http://www.x-rates.com1.265 International Logistics 2/26/03 Dan Allison, Jim Chow, Carlos Gonzalez, Lucia Wu Most of Mexico is in the Central Time Zone, although there are small parts on Eastern and Mountain time. Note that Mountain Time in Mexico is called Pacific time because these areas border the Pacific Ocean. At noon the Cambridge, MA (EST), Mexico City is 11 am. 7. What unique requirements exist for products sold in this country? (e.g. testing, packaging, language, safety, etc.) Products in Mexico often need to be customized for the local language (Spanish). Further, there are many issues with lack of clean water and deforestation. Issues include a scarcity of hazardous waste disposal facilities and natural fresh water resources; raw sewage and industrial effluents polluting rivers in urban areas; deforestation; widespread erosion; desertification; deteriorating agricultural lands; serious air and water pollution in the national capital and urban centers along US-Mexico border; and land subsidence in Valley of Mexico caused by groundwater depletion. The government considers the lack of clean water and deforestation national security issues. Finally, in 1992, the Mexican government established NOMS (Normas Oficiales Mexicanas), from which all mandatory standards are issued.5 Some unique NOMs are: • Where the size of the product permits, stickers stating NOM compliance (citing the NOM number) must be carried on all applicable products, both domestic and imported. • Only laboratories approved by the National System of Testing Laboratories (SINALP) may certify NOM compliance, and since no foreign labs have yet been approved, all testing must be done in Mexico. • Commercial information must be in Spanish in the same size font, format, and clarity as it appears in any other language on the same package. • A comma must be used as a decimal point in the quantity declaration. 8. What regulations or limitations exist regarding freight transport? The lack of well-developed infrastructure in Mexico is the biggest constraint. Few large cities represent 40% to 60% of the market. Because of the lack of well-developed infrastructure, it is somewhat difficult to distribute products between cities.6 Another issue is that no liability codes exist for cargo lost or damaged en route. The problem is that there is no uniform liability code for cross-border truck transport among the three members of the North American Free Trade Agreement. This means that freight is worth far less if it disappears in Mexico or Canada. Under Mexican law, in the absence of a higher declared value, a truck carrier's responsibility is limited to an amount equal to 15 days of minimum wages in Mexico's federal district for each metric ton. Mexican law does not recognize the concept of contract carriage. It also limits the time companies have for filing freight claims and lawsuits for cargo loss and damage.7 9. Are there saltwater ports which can handle large ships? How far are the major population centers from those ports? 5 http://strategis.ic.gc.ca/SSG/da91248e.html 6 http://www.atlantaclm.org/mex.ppt 7 “Mexico Freight Laws Lacking” (http://www.cbmu.com/mexico.html)1.265 International Logistics 2/26/03 Dan Allison, Jim Chow, Carlos Gonzalez, Lucia Wu There are no good natural harbors. On east coast, Veracruz is principal port for cargo; Tampico, Coatzacoalcos, and Progreso handle petroleum. Guaymas, Mazatlán, and Manzanillo are principal ports on Pacific. Sample distances between ports and major cities of Guadalajara and Mexico City (kilometers) Guadalajara Mexico CityManzanillo358 1091Mazatlán519 1166Tampico750 542Veracruz1014 433 10. What business terms and financial instruments are typically used for import commercial transactions? The government does not require export-credit insurance for all companies that obtain credit through programs of the Banco Nacional de Comercio Exterior (Bancomext), Mexico's trade development bank. The bank began