Mexico Looking to Branch Out

GUADALAJARA, Mexico — When Mexican President Vicente Fox opens today's two-day summit of leaders from the European Union, Latin America and the Caribbean here, trade will be near the top of his busy agenda. Fox is eager to form an alliance with the nations of Mercosur, the South American common market. Earlier this month, he barnstormed three European capitals trying to lasso more business for Mexican firms.

That's a lot of hustling for a country that's already far and away Latin America's No. 1 exporter. But just as he did when he was a business executive, Fox has scrutinized the numbers.

He doesn't like what he sees.

While Mexico's exports have more than tripled since the 1994 signing of the North American Free Trade Agreement -- transforming the developing nation into the world's 10th-largest economy -- Mexico finds itself almost totally dependent on a single customer, the United States. American consumers and businesses purchased nearly 90% of Mexico's $165 billion in exports last year.

Such a heavy reliance on a single buyer and one primary industry, manufacturing, has left Mexico vulnerable in a changing world.

The recent U.S. recession pummeled Mexico's economy, particularly the all-important maquiladora export factory industry, which has shed nearly 275,000 positions, 20% of its job base, since employment peaked in the fall of 2000.

What's more, Mexico's 10-year head start into the American market under NAFTA is shrinking fast. China last year surpassed Mexico as the United States' No. 2 source of imports, behind Canada. And the Asian nation is attracting billions in foreign investment and factory jobs that might otherwise have flowed to Mexico.

With the U.S. now looking to boost its trading relationships with the rest of the hemisphere through a Free Trade Agreement of the Americas, some fear that Mexico's 11% share of the U.S. import pie has nowhere to go but down.

"It's very worrisome," said Luis Martinez Arguello, president of the Foreign Trade Business Organizations, a Mexico City-based consortium of trade groups. "The American market is one that everyone wants to get into."

And though Mexico is inextricably linked to the partner that has helped make it one of the world's premier trading nations, Fox is clearly trying to elevate Mexico's vision beyond the boundaries of North America.

"We need to move rapidly on other fronts" and diversify trade, Fox said earlier this week. "I would say that we have lost decades, particularly the last 10 years."