Characteristics and performance of Japanese foreign direct investment in latin America

This paper describes the characteristics of Japanese foreign investment in Latin America. In examining FDI patterns, we identify the countries and industries most attractive to Japanese multinational corporations, the preferred modes of entry, and the post-entry performance of these subsidiaries. We find that most Japanese FDI has occurred in Brazil and Mexico, that joint ventures are the most common mode of entry, and that performance varies by country and mode. The observations have implications for three groups of executives: managers of non-Latin American firms, managers of Latin American firms, and public policy makers.     

The mexican financial crisis

In the period 1990-93 Mexico's economy experienced expansion and structural change. This was associated with economic opening, market deregulation, and large inflows of foreign capital. Mexico had dealt with the external debt problem through a Brady debt restructuring. This restructuring lowered the financial requirements of the public sector, improved market expectations, and set the stage for a decline in domestic interest rates.

In the early 1990s Mexico attracted fully one-fifth of all capital flows directed into developing countries. These inflows more than financed the current account deficit, and permitted Mexico to expand its official reserve holdings. The portfolio capital inflow bolstered the stock market, which appreciated in value. Mexico's entry into NAFTA provided another reason to be optimistic concerning economic and business prospects.

However, Mexico's external payments position was falling deeper into deficit. By mid-1994 it was possible to observe that the current account in Mexico's balance of payments had shifted further into deficit, and that the high unsustainable level of capital inflow was diminishing. Political violence and assassinations in 1994 caused foreign investors to look more carefully at investment prospects, and steadily rising interest rates in the United States created incentives favoring dollar rather than peso financial instruments. As peso interest rates began to rise, the Mexican government and commercial banks turned to dollar-indexed or outright dollar borrowing. By December 1994 this increased dollar liability position together with a runoff in foreign exchange reserves left Mexico in a difficult liquidity position. The December 20, 1994 devaluation failed to renew confidence in the viability of Mexico's payments position, and two days later the peso was floated. In the early weeks of 1995 a massive Mexican financial assistance package was provided by the United States, the International Monetary Fund, and others.

An analysis of the components of Mexico's GDP and balance of payments suggests that the financial disequilibrium was clearly evident by mid- 1994. Over the period 1993-94 domestic absorption had increased beyond the ability of the economy to sustain it. Parallel to this, the current account deficit had increased beyond the ability of foreign exchange resources to support this deficit. Failure by the government and central bank to take action in the third quarter of 1994 resulted in a runoff of foreign exchange reserves, speculative trading in the financial markets, growing skepticism concerning the viability of existing arrangements. Fiscal and monetary tightening early in 1995 produced an improved financial equilibrium, suggesting that similar action at mid-1994 might have avoided the near debt crisis that manifested itself in December 1994 jand the following weeks.     

Expanding the levels of analysis of fdi for improved understanding of policy issues: the case of mexico

Foreign Direct Investment (FDI) inflows are a key component of the restructuring and external integration now underway in many Latin American national economies. This paper suggests that understanding of policy issues concerning FDI can be enriched by two complementary shifts in the levels of analysis of FDI, each of which entails more detailed attention to the strategies and operations of multinational corporations (MNCs). At the macro-level, we show why it is beneficial to expand beyond the normal analytic concern with aggregate total FDI flows to focus instead on the separate, disaggregated components of those flows--that is, equity, reinvested earnings and other long-term and short-term capital flows between parent firms and their affiliates, as recorded in the national balance of payments capital account. The microlevel shift emphasizes the importance of focusing on varieties of types of FDI, not only across different foreign investors but within individual companies as well. It demonstrates the significance of switching from the usual concentration on firms as a whole to instead accentuating examination of individual projects and products--especially the dichotomy between market-access projects producing for the host country domestic market and production-efficiency projects producing for export markets, including the home country market. These two shifts in the level of analysis complement one another, and they interact in the sense that the mix of component flows can depend in part on the type of FDI. These analytic themes are developed using evidence concerning FDI in Mexico, with special reference to the automotive industry. Such improved comprehension of FDI is particularly germane for Latin American countries that are contemplating liberalization of foreign direct investment rules or have already undertaken them and witnessed the ensuing increase of inbound FDI.     

Financial investment via ADRs in Mexico and South America

American depository receipts (ADRs) are dollar-denominated, negotiable instruments issued by a depository bank to represent ownership of a foreign security in the bank's possession. They are the primary method employed by Latin American corporations to raise equity capital in the United States. One flequently overlooked aspect about ADRs is that their investment performance provides a gauge not only on management's performance but also a measure of the foreign government's ability to provide a political, legal, economic and social climate that is conducive to international investment. This paper investigates the returns and risks associated with foreign investment in Mexico and South America. First, we show that the weekly returns to Latin American stocks are weakly correlated with the U.S. stock market which suggests that they can reduce the risk of a portfolio that is fully diversified within the U.S. market. Second, we find that ADRs from this region are more risky than U.S. common stocks. However, we find little evidence that foreign exchange rate risk should be a major factor in the investment decision. Third, we examine the effects of the devaluation of the Mexican peso and show that political factors can significantly increase the risk and reduce the return to foreign investment. Finally, the results show that investors do not pay a significantly larger relative transaction cost premium for investing in Mexican and South American equity vis-à-vis U.S. common stock. We conclude that ADRs provide the ability for the U.S. investor to realize potentially superior gains from companies located in these emerging economies. However, the willingness by the U.S. investor to disinvest means that politicians and managers have a powerful incentive to continue reforms that lead to improved standards of living for their citizens and employees.     

Government regulations and FDI: a historical perspective of mexico

This article analyzes the development of foreign investment regulations and their impact on FDI flows in Mexico. The study covers the evolution of sectoral and aggregate investment patterns from the independence period to the 1994 Peso crisis and its aftermath. The pattern followed by FDI in Mexico has paralleled the transformation of the Mexican economy itself, focusing initially on the extractive and agricultural sectors, then on manufacturing activities, and recently on the services sector. Mexico has continuously reformed and modernized its regulatory system in order to adapt to internal political changes and changes in the world economic environment. Recent economic reforms and liberalization of FDI regulations have had a major positive impact on capital inflows, but more needs to be done, especially in the area of financial services in order to achieve a higher level of economic efficiency and to prevent financial breakdowns like the one experienced in 1994.     

The determinants of value of incoming cross-border mergers & acquisitions in European transition countries

This research aims to determine variables that affect the aggregate value of incoming cross-border M&As in European transitional countries. Dynamic panel models have been estimated using Arellano and Bond GMM estimator for period between year 1994 and 2008. The ratio of the total value of cross-border M&A to GDP of the country is the dependent variable. Independent variables include following indicators: lagged value of cross-border M&A to GDP, lagged GDP per capita, lagged GDP growth, inflation, interest rate spread, lagged private credit to GDP ratio, market capitalization to GDP ratio, lagged rule of law and lagged control of corruption.     

Market structure and performance of US multinationals in Brazil and Mexico

This paper presents the results of a regression analysis of the market structure determinants of profitability among the Brazilian and Mexican manufacturing affiliates of US multinational corporations. The study employs data on 206 firms derived from a special survey specifically designed to obtain detailed information on their market structure environments and performance characteristics. Our estimates confirm that seller concentration, product differentiation, and relative market share are three sources of market power of these firms. Despite the many economic and noneconomic differences between Brazil and Mexico, there are no systematic differences between the two in their underlying structure‐performance relationships.     

The new business environment of latin america and the caribbean

Latin America and the Caribbean Region experienced dramatic changes in the 1990s. Politically, all but one country, are governed by a democratically elected government. Economically, import substitution industrialization policies (ISI) followed in the past, were replaced by liberalization programs aimed at reducing inflationary pressures and creating a competitive environment.

The significant increase in capital flows to Latin America in one single year, 1990, buried the 1980s as the “lost decade,” and the successful implementation of privatization programs region-wide prompted to affirm that the 1990s might constitute the “Latin America's decade.” Where does the euphoria come from? Is there any implicit promise to be derived from such international capital flows? Will the pattern be sustained? Has Latin America begun a new era? Are unfolding events on defiance of fundamentals?

These and many other questions can be raised regarding the spectacular transformation of Latin America and the Caribbean, particularly when analysts still debate about the Mexican crisis of 1994, investors eagerly pursue the agenda of a second privatization wave, experts around the world get fascinated with the high-tech push found in Latin America, bankers apply Latin American lessons to deal with the currency crisis in Asia, and casual observers recognize the value-creation process added by Latin American entrepreneurs who challenge the most adverse circumstances. Indeed, Latin America and the Caribbean is a land full of promises and contrasts, where there exists a head to head competition between globalization and nationalism, the haves and the have-nots, capitalism and communism, literature and high-technology, markets and governments, East and West, North and South, myth and reality, and … “despair and hope.”

There is no question, however, that Latin America and the Caribbean, being she a detached wide-land, is a region of great opportunity. Since the external debt crisis of 1982 and its aftermath, democracy, open markets, economic reform and privatization have blended to offer great expectations and opportunities for business and investment in the region. The new vision strongly questioned the status quo to render a new business environment to open the doors and light up the roads of the upcoming millennium.

It is the purpose of the International Journal of Public Administration to offer to its readers, for the very first time, a special issue devoted entirely to the discussion of the new business environment of Latin America and the Caribbean. We are, therefore, grateful to all the authors who generously are sharing with us the findings from their scholarly research. Given the far reaching consequences of their contributions, we, as guest editors of this special issue, had no other choice but to incorporate the fruits yielded by this symposium of thirty-seven papers in four issues in one single volume. The papers have been sorted according to the following four focal points: Privatization of State Owned Enterprises; Mexico; Economic, Financial and Foreign Investment Issues; and Economic Integration, Trade and Cultural Issues.

Part I of this special issue on “The New Latin American Business Environment” looks at one element of the broad economic strategy followed by most Latin American countries: Privatization of State Owned Enterprises. The role of governments is to provide the framework that will allow the private sector to create wealth. Notwithstanding, this partnership between the public and private sectors must ensure the inclusion of the poorer sections of the population. In many ways, the long-term sustainability of these economic programs will largely depend on this. The ten papers selected for this part, provide insight on how this phenomenon is affecting different Latin American countries.

The first paper by Shamsul Haque argues that there is a need to analyze the social consequences of privatization programs. Further research is needed to identify the main advocates and beneficiaries of privatization programs. According to the author, “critical economic conditions have not improved significantly after privatization, and in many instances, the conditions have deteriorated.” About fifty percent of Latin America's population of 470 million people live under poverty.

The late Sister Martin Byrne (1) documents in her paper, “Cananea Consolidated Copper Company from Nationalization to Privatization: 1972-1991 ,” the problems of ownership and management faced by La Cananea, a Mexican copper mine. Sister Byrne argues that “The Cananea mines were profitable under entrepreneurial and MNC ownership, but proved to be a financial drain on the government during the paraestatal period.”

The third paper by Garcia and Dyner, examined the reform and regulation of electricity in Columbia. According to the authors, the regulatory framework adopted by the government is going to determine the success of these programs. Furthermore, “the challenge is the change of public intervention in the sector, so that it regulates, supports, and supervises the decentralized activities of the firms, and liberates resources to be invested in other areas.”

Walter and Gonzalez provide interesting philosophical arguments on technology and human resources management derived from the cases of privatized companies in Argentina. The authors consider two variants, “systemic modernization and revamping of existing teams” to invite a reopening of the old debate on technological blending. They argue, however, that “to compete you do not necessarily need to ‘ be on the frontier.’”

Joan B. Anderson examines, the “Privatization, Efficiency and Market Failure: Transforming Ecuador's Public Sector,” privatization in Ecuador through the shift experienced by development theory with respect to the role of the public sector. In this paper the author points out that “while careful privatization can be positive, privatizing monopolies like the electric utility and/or quasi-public goods like highways are likely to be detrimental to long run economic development.”

Doshi identifies the successes and failures of the privatization program in Mexico by analyzing the cases of Mexicana Airlines, Aeromexico and Telmex. The author argues that even though the government was able to sell a number of state owned enterprises, a “successful” privatization program required appropriate macroeconomic policies and defining the role of foreign investment in economic development. One can argue then, that even though the size of the state is shrinking, its role is becoming more important.

The article by Vetter and Zanetta analyze also the case of Argentina. The authors argue that in order to consolidate the economic reforms implemented by the national government, provincial reform has to take place. A number of important lessons were identified.

John M. Kirk and Julia Sagebien present, in “Cuba's Market Rapprochement: Private Sector Reform - Public Sector Style,” the highlights of Cuba's process of transition towards a market economy by analyzing the conditions that lead to a market opening as well as the ends, the means and the actors of the ensuing process of economic reform.

Walter T. Molano contributes a paper, “The Lessons of Privatization,” based on his book The Logic of Privatization: The Case of Telecommunications in the Southern Cone of Latin America by looking at privatization as a process that may end up in varied outcomes as seen from microeconomic-, macroeconomic-, and political perspectives of analysis.

The focal point of Part II is Mexico. It is very clear that since the beginning of the decade, Mexico has made major efforts to transform its economy in order to play a more significant role in the global economy. Different attempts have been undertaken leading to: first, address the aftermath of the debt crisis of 1982; second, modernize and open the economy through a structural change that have included, among other programs, privatization, deregulation, fiscal deficit reduction, and trade liberalization: and third, change the political landscape.

Ephraim Clark models, in his “Agency Conflict and the Signaling Snafu in the Mexican Peso Crisis of 1994,” the conflict as a government held option to default and introduce signaling by assuming that the Mexican government had monopolistic information on the economy's true situation. The author argues that “if steps had been taken in late 1993 and early 1994, the crisis element of the adjustment could probably have been avoided.”

Blaine's article examines the role of foreign capital in economic development. By studying the Mexican case, the author answers a number ofvery important questions: How are once protected markets going to react to a large inflow of foreign capital? How did Mexican authorities deal with these inflows? What are some of the lessons that could be derived from the Mexican experience?

Hazera's paper discusses the history and legal basis of Mexican financial groups. On the basis of various stock market and financial statement data, an examination is also made of the groups’ evolution from 1991 to 1994.

Eugene M. Salorio and Thomas L. Brewer consider, in “Expanding the Levels of Analysis of FDI for Improved Understanding of Policy issues: The Case of Mexico,” both macro-, and micro-level shifts of analysis which mutually complement one another, and yield, for example, a “components profile” of disaggregated national level FDI flows which depends on the type of the project. The authors identify far reaching implications for public policy that may be extrapolated from the case of Mexico to the new business environment faced by the Latin American countries.

Francis A. Lees suggests also, from another angle, that the crisis of December 1994 could have been avoided because the financial disequilibrium was clearly evident by mid-1994 just be looking at Mexico's GDP and balance of payments.

C. Bulent Aybar, Riad A. Ajami, and Marca M. Bear provide a comparative study of the recent experiences of Mexico and Turkey. The authors identify common elements in the development and eruption of the crises to conclude that “under capital mobility strong internal and external shocks may lead to explosive crises … even though overall macroeconomic balances are sound.”

James P. D’Mello shows in “An Analysis of Mergers and Acquisitions in Mexico: 1985-1996,” that the Mexican crisis has led to an escalation of corporate restructuring such as mergers, acquisitions and joint-ventures.

Jiawen Yang joins the current debate on the causes of the recent Mexican financial crisis by arguing that “capital inflows that are not well absorbed by the private sector will cause financial instability under a fixed exchange rate regime.”

Part III of the new business environment of Latin America and the Caribbean includes ten papers on Foreign Investment, Economic and Financial issues which add significantly to the understanding of the overall transformation carried out in recent years by this region of the world.

Christopher Korth and Ajay Samant, and Craig A. Peterson andK. C. O’Shaughnessy recognize, respectively in the following two papers, “American Depositary Receipts (ADRs) from Latin America: An Opportunity for American Investors.” and “Financial Investment Via ADRs in Mexico and South America,” the usefulness of ADRs for operationalizing international diversification.

Juan Espana surveys the literature on models and tools currently used to predict exchange rate movements, and aims to suggest market solutions, economic policy measures and institutional arrangements to currency crises. The author analyzes the origin and evolution of the 1994 Mexican Peso crisis, its contagion effects on other Latin American economies, and the measures taken by the affected countries to manage the crisis.

Prakash L. Dheeriya and Mahendra Raj provide, in “An Investigation in Exchange Rate Behavior of Emerging Countries,” insights on the role that exchange rate risk plays by identifying similarities and differences through international comparisons.

Kumar's paper examines the important role of foreign direct investment in promoting economic development. The emphasis here is on the transfer of technology through foreign direct investment.

Neupert and Montoya study the characteristics of’ Japanese foreign investment in Latin America, with a focus on Brazil and Mexico. The authors looked at the preferred modes of entry and the post-entry performance of these subsidiaries.

Thomas M. Fullerton, Jr. shows, in “Currency Movements and International Border Crossings,” through two ARIMAmodels that “northbound bridge traffic to El Paso is nonrandom and follows fairly well defined patterns each year.”

Trevor Campbell makes, in “A Note on the Current and Capital Accounts Compilation of Barbados under the Fourth and Fifth IMFEditions,” a comparison with respect to the composition and structure of the current and capital accounts of Barbados.

Janet Kelly and Alexeis Perera argue, in “Antitrust Policy in a Hostile Environment: Institutional Building in Venezuela's Procompetencia,” that the theories of bureaucracy in Latin America generally stress institutional weakness, political volatility and the politicized nature of government agencies which motivated, in Venezuela, the creation of the anti-monopoly agency called “Procompetencia.”

G. Scott Erickson and Andrea Nhuch recommend in ‘The Latin American Business Environment: Patent Protection Issues” a general hybrid system to deal with patent rights issues.

Finally, Part IV deals with a blend of Trade, Economic Integration and Cultural issues. Since much of the world still tends to view Latin America and the Caribbean in terms of stereotypes, it seems appropriate to end this special issue on the new business environment of the region with a group of papers that revisits the rich mosaic of Latin America, and permits appreciate her new reality.

Isaac Cohen argues, in “Hispanics and Foreign Policy.” that though the primacy of economics in Hemispheric relations provides an opportunity for Hispanic businesses, yet this community will have to act deliberately to benefit from the opportunities that are emerging.

Eva Kras contributes, in “The Viable Future of Mexico and Latin America: A New Business Paradigm,” with a South looking North approach for doing business that challenges the traditional view of business relations.

Guillermo Duenas argues, in “Cultural Aspects in the Integration of the Americas,” that managing cultural integration successfully requires a process of “intercultural learning.”

Andres A. Thompson, Francisco B. Tancredi and Marcos Kisil introduce, in “New Partnerships for Social Development: Business and the Third Sector,” the novel argument that corporate philanthropy can make the difference in social development because grantmaking is still the least frequent used strategy in Latin America and the Caribbean region.

Chris Robertson, Pol Herrmann and Kevin Duffy measure, in “Exploring Perceptions of Technology Between the United States and Ecuador,” perceptions of technology on the basis of the typology of motivators and inhibitors of technological growth.

Melissa H. Birch argues, in “Mercosur: The Road to Economic Integration in the Southern Cone,” that Mercosur represents, in contrast to the historical record of economic integration in the region, an adaptation to the contemporary political climate.

Wu and Longley discuss the rationale for extending NAFTA to Chile. Their study examines also how NAFTA negotiators may address issues such as trade and investment rules, intellectual property rights, and labor and environmental standards among other things.

Roger Kashlak and Srinath Beldona identify, in “Partner Reciprocity, Telecommunications Flows and Balance of Trade Patterns Between the United States and Latin America,” partner reciprocity as the issue at the core of the international long-distance industry.

Ines Bustillo extends, in “Overview of Economic-wide NAFTA Models” computable general equilibrium models to the case of NAFTA.

We hope that this special issue is informative and interesting to business-decision makers, regulatory policy makers, and students concerned with gaining an understanding of the ongoing transformation of Latin American and the Caribbean.

Finally, we are again most grateful to the contributors of articles for making this special issue possible. We would also like to thank Jack Rabin, editor-in-chief of the International Journal of Public Administration, for trusting us the delicate mission of providing to the readers a fresh view of the new business environment of Latin America and the Caribbean.     

American depositary receipts (ADRs) from Latin-America: an opportunity for American investors

American Depositary Receipts (ADRs), based on stocks of firms registered in Latin-America, are rapidly gaining popularity among investors in the U.S. ADRs serve a dual purpose. First, they enable Latin firms to raise capital in the US without having to meet cumbersome security listing requirements. Second, they enable US investors to benefit from possible high returns in Latin-American securities without the inconvenience of having to deal with foreign currencies or the inconvenience of buying and selling in foreign stock markets. In academic literature, there has never been a thorough examination of the nature of ADRs issued by Latin-American firms. This study presents an overview of the patterns and trends of ADR utilization within the Latin-American region: by country; by industry; by security exchange; and, by “sponsorship”, the role played by the issuing company.     

Attempting developmental regionalism through afta : The domestic sources of regional governance

The asean Free Trade Area ( afta ) has conventionally been explained as a project of open regionalism adopted by the asean member governments to attract foreign direct investment to the region through the 'carrot' of the single regional market. Yet, when the same governments incorporated an investment liberalisation component programme within the afta project in 1998, they opted to accord full national treatment and market access privileges to foreign (non- asean ) investors at least 10 years later than to domestic or asean national investors. Although member governments removed this particular discriminatory clause in September 2001, the fact that a distinction between foreign and domestic investors was adopted and maintained for a three-year period is puzzling given afta 's acknowledged role as a magnet for foreign investment. Although afta is clearly a response to the pressures of globalisation, the available theoretical models of the relationship between globalisation and regionalism are unable to account for this empirical anomaly because they do not make a distinction between foreign-owned and domestic-owned capital. This paper advances the notion of 'developmental regionalism' as a way to incorporate domestic-owned capital in analysing the globalisation-regionalism relationship, which allows for a more robust explanation of the empirical puzzle outlined above.     

MNE Affiliation,Firm Size and Exports Revisited: A Study of Information Technology Firms in India

In this study we argue that the export performance of affiliates of multinational enterprises (MNEs) in developing countries is determined differently from that of licensees of foreign firms or of domestic firms. Our empirical results for the information technology sector in India show that exports of MNE affiliates are greater when they have larger foreign equity stakes that bring more tacit knowledge transfer and complementary FDI advantages and when they import more explicit technology from the purchase of licences. Standard export determinants such as firm size and capital intensity do not matter for MNE affiliates, but they do for licensees and domestic firms.     

On the apparent benefits of higher productivity: An arithmetical illustration a comment

During the 1980s, like many other developing countries Nepal attempted actively to attract direct foreign investment. This article reports the results of a survey of the foreign‐owned firms in operation at the end of the 1980s. The motives of firms for their investment decisions in Nepal are summarised. The impact of foreign investment is assessed quantitatively using both financial and economic cost‐benefit criteria. In general, it appears that foreign investment has been beneficial to both the foreign investors and the national economy. Foreign investors from India have played a particularly important role. However, much of the national returns from foreign investment is derived from the payment of taxes, so that an excessively generous policy of tax incentives may not maximise national returns.     

Automotive global value chains in Mexico: a mirage of development?

ABSTRACT

International monetary organisations argue the ‘developing countries’ should foster linkages to the world economy as a means to overcome backwardness. In this article we refute the narrative that Mexico has experienced industrial upgrading. Rather, industrial growth in Mexico over the last 40 years has been shaped by neoliberal economic policies which have turned the Mexican economy into an export-led manufacturing platform designed to supply the North American market, sustained by a precarious labour market. As a result, Mexico occupies the most labour-intensive and low value-added segments of regional production chains. To make this argument, we perform an in-depth analysis of the Mexican automotive industry, demonstrating that instead of being an engine for domestic industrial development, the auto industry has become a dominant economic sector through productive hyper-specialisation concentrated in the northern Mexican border states, a reliance on transnational capital, particularly from the United States, a disconnect with domestic markets, and the super-exploitation of labour.     

Relevance of nationality in cross-border economic transactions

How relevant is nationality in global economic behavior? The aim of this paper is to scrutinize the relevance of nationality affiliations and nationality conceptions in cross-border economic transactions, using the case of foreign investment exchanges. In particular, I examine how nationality affiliations may shape the types of commitments that actors will want to realize through foreign investment transactions, and how nationality categorizations influence the evaluation of potential partners in economic transactions. I also stipulate when nationality affiliations and categorizations play a more- or less-salient role. To develop these propositions I use illustrations from cases of foreign investment attempts in which investors from the West try to acquire firms in post-socialist Slovenia. The analysis is grounded in economic sociology and advances a relational understanding of nationality, seen as interpretive codes embedded in actors' cultural repertoires, situationally invoked, and made relevant (or not) in interactions.     

Current challenges of the mexican state and of mexican public administration

This article deals with the problems that the Mexican government will need to face in order to go on with the reform of the state. The cycle of such a reform (privatization, liberalization and democratization) is already closing down. While ending this process, however, Mexico also started to see an increasing number of demands calling for administrative reform and, above all, the federalization of government and public administration. This is what the author calls the strategic agenda of the Mexican government.

In order to implement the administrative reform, the author favors enhancing the accountability of the Mexican government, by increasing public participation in the policy and decision making processes. With regard to the federalization of government and public administration, Aguilar proposes the implementation of policy tools never used in Mexico, such as fiscal federalism (categorical and block grants, for instance), together with new constitutional, political and administrative arrangements.     

Building Ladders out of Chains: China's Hybrid-led Technological Development in Disaggregated Value Chains

In China, entrepreneurs hailing from ethnic Chinese transnational technology networks have linked up with global capital to create hybrid firms that combine relatively efficient foreign financing with a strategic commitment to intensive utilisation of domestic resources to create their core corporate competencies. This article refers to these firms as global hybrid firms and to development driven by these firms as hybrid-led development. Hybrids, given their generally small scale and scope, work best in sectors exhibiting disaggregated value chains, fast clockspeeds and high technology-intensity. Patent data demonstrates that hybrids outperform other firms generally and especially in sectors exhibiting these three characteristics.     

Capital and Labour Mobility and their Impacts on Mexico's Regional Labour Markets

Abstract

This paper studies the effects of capital and labor mobility on real wages across Mexican states for the period 1997–2006. Employing dynamic panel data methods, we find: (1) strong positive effects on real wages from foreign direct investment (FDI) and from migration; (2) domestic and foreign migration provide similar wage effects; and (3) alternative partitions indicate that real wages are more sensitive to FDI-related fluctuations across states with relatively lower wages and migration levels. Overall, these results provide support that real wages respond positively to fluctuations in capital flows and labour movements as predicted from the theory.     

Volatility of Short-term Capital Flows and Private Investment in Emerging Markets

Using micro-level panel data, the paper analyses the impacts of short-term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets – Argentina, Mexico and Turkey. The empirical results, including sensitivity tests, suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms. Accordingly, a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1–1.7, 2.3–15, and 1 per cent in Argentina, Mexico and Turkey respectively.     

An interpretation of argentine economic growth since 1930∗Part I

This study uses pairing of Mexican‐owned manufacturing firms and firms with direct United States investment, to examine the effects of ownership structure on firms’ performance and sources of technology. Results suggest that in terms of profitability, growth and export performance the Mexican firms were competing successfully during the period 1966–73. Furthermore, the basis for this strong posture by the Mexican manufacturers was not due to a heavy reliance on foreign technology imported through formal channels, but rather is linked with internal innovative activity and the use of domestic consultants.     

Behind an Offshore Mask: sovereignty games in the global political economy

This study of global financial flows and offshore financial centres (OFCs) draws on the concept of nomadology as developed by Gilles Deleuze and Felix Guattari to argue that OFCs not only facilitate the circulation of global capital, but also serve to create the means for identity arbitrage. This concept highlights the use of the offshore in order to benefit from the variety of preferential measures offered to foreign firms and investment capital. State sovereignty authorises legislation by regimes to attract and regulate foreign investment. International banking statistics are examined for indications of the use of and impact from exploiting the offshore to establish a different national identity in pursuit of the greatest available return on investment. The paper concludes that the design of legislation by onshore states is just as complicit in the positive and negative effects of the offshore economy as are the small sovereign economies that host an OFC.