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ELECTIONS '94: IMPACT ON BUSINESS : Prop. 187's Passage Threatens to Disrupt Ties With Mexico : Trade: While some experts doubt long-term effects, others issue dire warnings from Mexico City.


California's Proposition 187, the anti-illegal immigration ballot proposal approved by voters, threatens to disrupt Mexico's burgeoning trade relations with California and spoil some of the good will generated by the passage earlier this year of the North American Free Trade Agreement.

While several trade experts said they doubt the measure will have serious long-term effects on the state's business relationship with Mexico, others issued dire warnings from Mexico City. The measure has already led to recriminations against California trade representatives, who shut down their office in Mexico City for the day Wednesday as a precautionary move.

There are also unconfirmed rumors of possible consumer boycotts against U.S. products, shifts of Mexican investment and trade away from California toward other states, and other actions.

"It's clear the Mexican business community is very interested in trade and investment in California, and U.S. companies continue to be interested in the same thing, very much," said Reinhold C. Schrader, the state's chief trade representative in Mexico. But, he added, "it's an emotional issue now."

So far, there is little evidence of changes in the state's business dealings with Mexico, and Proposition 187 is likely to be tied up in litigation for years.

But that hasn't protected Schrader or other U.S. representatives from becoming lightning rods. When a Mexico City cabdriver found out Schrader represented California, he stopped the vehicle and, in terms "that you wouldn't be able to print," told the Mexican-born Schrader to get out.

And when Schrader and California businesses hosted a reception at the state's first major trade exposition in Mexico City last month, not one of the more than 100 invited Mexican government officials showed up, Schrader said.

Business officials hope the fallout is limited to such symbolic gestures. At stake is an expected $7 billion in state exports to Mexico in 1994, a nearly 10% increase over 1993. But with emotions running so deep, some argued that the economic ties are fragile.

"We feel U.S.-Mexican trade may well become one of (the) tragic casualties," said a statement from the American Chamber of Commerce in Mexico City, which represents 85% of the billions of dollars worth of U.S. investment in Mexico.

One danger, said Gil Partida, president of the San Diego Chamber of Commerce, is that California firms will suffer when bidding on the expected plethora of Mexican government contracts to expand and improve roads, telecommunications and other lucrative infrastructure projects.

"Are we going to be in a position as competitive as companies from Texas or Arizona or Illinois?" Partida asked. "It's highly doubtful."

On Wednesday, Schrader shut down the trade office to avoid trouble, such as earlier demonstrations at the nearby U.S. Embassy or the vandalism Tuesday at a McDonald's restaurant in the Zona Rosa tourist district. There were no incidents Wednesday.

Duane H. Zobrist, chairman of the U.S.-Mexico Chamber of Commerce and a Los Angeles international trade lawyer, had been arranging a January meeting in Mexico City between California chief executives and President-elect Ernesto Zedillo.

"Now we are being asked to bring people from outside California as well," he said.

Zobrist said he spent most of Wednesday calming the fears of his Mexican business clients. "They're very concerned . . . that white, Anglo Americans won't be able to distinguish between undocumented workers and legal workers of Mexican descent."

On Oct. 29 and 30, Mexican consumers boycotted U.S. products in Tijuana, Schrader said. But Wednesday it was business as usual at one of the two Tijuana McDonald's, said manager Gustavo Figueroa.

In the long run, said economist Manuel Pastor at Occidental College in Los Angeles, "the tight trade relations between the two countries will persist. Trade, even if dampened, will resume, and probably so will investment, particularly U.S. investment in Mexico."

Staff writers Mark Fineman in Mexico City and Jesus Sanchez in Los Angeles contributed to this report.

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