Foreign direct investment in Mexico and the 1994 crisis, a legal perspective

by Del Toro, Guillermo Emiliano

Since the 1994 economic crisis, Mexico's inclusion in the globalization era has been questioned. To discover if Mexico is moving in the right direction, this study has as its objective the examination of the different regulations that, in Mexico, are related to Foreign Direct Investment. These regulations include the 1993 Foreign Investment Law ( " Ley de Inversibn Extranjera " ); the Competition Act ("Ley Federal de Competencia Econbmicü); and the North Amencan Free Trade Agreement. The aim of this study is to find out if these regulations are capable of attracting Foreign Direct Investment, which is the most convenient foreign capital flow needed, in order to assist Mexico in its search for economic growth. The importance of the rule of law as an effective instrument to attract FDI is also an element considered in this study. Finally, this thesis, after the above examination, concludes that Mexico has the potential to overcome its latest economic cnsis by using its existing regdations. However, some improvements would benefit its place within the global cornpetition to attract FDI. Most of these improvements are needed at the multilateral level, where Mexico should address the importance that FDI has as a counterbaiance to the risks associated with short-term investrnents. As shown, short-terni investments were one of the conditions that provoked the 1994 crisis. Après la crise de 1994, l'insertion du Mexique dans l'ère de la globalisation a été remise en question. Cette thèse étudie les différentes législations relatives aux investissements étrangers directs (telles que la loi sur l'investissement étranger de 1993, la loi sur la concurrence et l'accord ALENA) afin d'apprécier si le Mexique est dans la bonne voie. Le but de cette étude est d'analyser si les législations sont en mesure d'attirer les investissements étrangers directs (IED), ceux-ci étant par ailleurs les capitaux les plus appropriés afh d'assister le Mexique dans sa recherche de développement économique. L'importance de la règle de droit en tant que moyen efficace d'attraction des !ED est un autre élément important pris en considération. Cette thèse conclut que le Mexique possède le potentiel de surpasser sa dernière crise économique a l'aide de sa législation actuelle. Cependant certaines améliorations favoriseraient l'extension des IED face à la concurrence mondiale. La plupart de ces améliorations devraient être effectués à un niveau multilatéral, là où le Mexique devrait mettre en évidence l'importance des IED comme contrepoids aux risques liés aux investissements à court-terme, ceux-ci ayant été un des éléments qui ont provoqué la crise de 1994. 1 would like to take this opportunity to express my gratitude to my thesis supervisor, Prof. Armand de Mestral, who helped me, in this year of mixed emotions. Without his advice 1would not ever have finished this study. As well, 1am gratefûl to the professors at McGill's Institute of Comparative Law for transmitting to me some of their vast knowledge, including Richard Janda, Gary Bell and David Stevens. My thanks are also addressed to those persons who have made possible my studies at McGill, in particular Professor Jeremy Webber and Ginette Van Leynseele, as well as the library's staff and my new friends fiom the program who helped during this difficult year. In Mexico, to CONACYT and the people who helped me, especially Jaime Carnil, Emesto Gil E., ksé A. Godez F., Oscar Lopez Velarde, Emilio Cirdenas E. and brge Flores M. Finally, 1 acknowledge my gratitude to those who helped me with my research, especially, Guillermo Aguilar A., Fernando Ortiz P., Celso Delgado, Oscar Santarnaria, Juancarlos Alarcon and Ignacio Vera. To Steve Ketyer, Melissa Knock, Siobain Murray and Anne-Hortense Joulie, 1 wish to thank you for helping me with the revision of my thesis. To my farnily, Fedenco Rios, Carolina, Victoria, Pauline and al1 the fnends who supported me, thank you dl.