INTERNATIONAL ENVIRONMENTSAND BUSINESS OPERATIONS

CARLOS JAVIER ALVARADO VARGAS

1. The analysis of the current Mexican business environment for the industry you chose (the fictitious company).

1.1. The Mexican political system (corruption and transparency).Mexican united states are a democratic, federal and secular nation, with a congressman system. It is divided into three branches: legislative, executive and judicial. Mexico nowadays has a serious corruption problem. “Transparency International”1 gave Mexico a score of 35 out of 100 in the perception of corruption. This score drops Mexico to position 103 out of 175.In transparency terms, this organization has given a score of 52 out of 100, meaning that in this country the availability of information related to the politic system is low. Mexico government is working on reforms to reduce the corruption status, and to improve the transparency of the system, allowing the public population to take part in the national budget decision-making process.

1.2. The Mexican economic system and how it relates to that specific industry. It is oriented to Free Market system, in which sellers and consumers can agree the prices according to the offer-demand laws. Mexico is mainly dedicated to export goods.Nowadays Mexican politics have become vulnerable the economics of the country due to the low cost oil, which represents the 30% of incomes for it, Despite of this vulnerability and the economic pressures that Mexico experiences, the country expects a high economic growth for this year.Mexico consumes approximately 232.3 billion Kw/h2, positioning Mexico as the country number sixteen in energy consumption. Compared to China, Delegation who consumes nearly 4831 trillion Kw/h.The exports numbers of energy from Mexico to Belize and U.E. are around 1288 billion Kw/h. 3

1.3. The Mexican legal system and government regulations that apply to that industry.There is a series of regulations for the electrical industry, and a set of fines for those who don’t follow these norms. Below are a small list of some regulations related to the industry.NOM-002-SEE-1999: Safety requirements and energy efficiency for distribution transformers.NOM-001-SEE-2005: Electrical systems and their use.NOM-113-SEMARNAT-1998: Establishes environmental protection specifications for planning, design, construction, operation and maintenance of electrical power substations or distribution intended to be placed in urban, suburban, rural, agricultural, industrial areas, of urban equipment or travel services.NOM-114-SEMARNAT-1998: Establishes environmental protection specifications for planning, design, construction, operation and maintenance of transmission lines and electrical sub-transmission and distribution that are intended to locate in urban, suburban, rural, agricultural, industrial , urban equipment or travel services.NMX-ES-002-NORMEX-2007: Definitions and terminology of solar energy.NMX-I-007 / 2-41-NYCE-2007 and NMX-I-007 / 2-42-NYCE-2007: Guide to solar radiation test for computers and electronic-components of environmental testing methods and durabilityNMX-J-618/1-ANCE-2010: General requirements for the construction of photovoltaic modules.NMX-J-618/3-ANCE-2011: Requirements for thin film photovoltaic modules, design qualification.NMX-J-618/4-ANCE-2011: Requirements for crystalline silicon photovoltaic modules, design qualification.NMX-J-618/5-ANCE-2011: Test Method salt spray corrosion in photovoltaic modules.NMX-J-618/6-ANCE-2011: Method of UV (Ultraviolet) test for photovoltaic modules. .4

1.4. Foreign direct investments in Mexico (how they work and how big it is).Mexico has become mainly oriented to manufacturing. It has become the United States’ third largest source of imports and the second for exports.

1“ Corruption per country” http://www.transparency.org/country#MEX2 “Energy Consumption” https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html3“México le vende más energía a Belice y EU” http://www.eluniversal.com.mx/finanzas-cartera/2013/impreso/mexico-le-vende-mas-energia-a-belice-y-eu-106577.html4 “Normas Mexicanas”http://www.conuee.gob.mx/wb/CONAE/normas_y_nmx#normaselectricidad

1Corruption perception status. Transparency International

INTERNATIONAL ENVIRONMENTSAND BUSINESS OPERATIONS

CARLOS JAVIER ALVARADO VARGAS

According to S.E. (Secretaría de Economía )5 the amount of money invested in Mexico in the period of January-March 2014 is nearly 5800 millions of dollars (mod). Compared with the same period of the past year, this number has increased 16.7%. This 5800 mod have been reported by 1671 Mexican societies with direct foreign investments.These investments are mainly in the manufactory sector (42.7%), followed by financial services (24.5%).

1.5. How is the Mexican peso doing? An analysis of the current picture around it.The Mexican Peso has shown her weakness facing other currencies. In the wake of the exchange devaluation which occurred in 19946 threat the Mexican economic system as a detonating crisis element.The Mexican peso has not have stability facing the dollar, rising the inflation ratio, and reducing the investments attractiveness. The readjustments needed for the Mexican economic to grow, have make the peso to watch constant devaluations and interest-inflation risings.1 Mexican Peso equals 0.065 US Dollar (April 14, 2015) 15.27 Mexican peso equals 1 US Dollar (April 14, 2015)

1.6. Mexico’s culture (including the workplace).Mexican population is mainly composed by women between 15 and 19 years old7. The catholic church is fundamental part of the Mexican culture, which represents 82.7% of the total religion count. The people in this country are mainly kind and charismatic. This people respect their ancestors heritage about architecture, gastronomy, art and even the way they communicate to each others.

1.7. Relevant environmental regulations.“The General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y Protección al Ambiente) (hereinafter Ecology Law) is divided into six Titles which regulate the following areas: air pollution, hazardous waste, water quality, soil use and conservation, naturally protected areas, public participation, right to environmental information, land use, environmental impact assessments and noise.”8

1.8. Mexican employment practices, minimum wage and the role of labor unions.The commission in charged for the employment in Mexico, is the The Secretariat of Labor and Social Welfare of Mexico. This commission sometimes gives more benefits to the workers than to the employer. One important Fact is that an employer's work force must be at least 90% Mexican, not counting management, officers and directors. The minimal wage is governed by the geographical area, divided in “A” and “B”, which in terms of money are $70.10 and $66.45 respectively. The maximum workload must not exceed the eight hours per day, and not to be more than 48 hours per week. If the worker do more hours, he must be paid the overtime. Overtime is paid the double per hour if the worker do up to 9 extra hours per week, and if he works more than this, he must be paid the triple.Also, the employee must be paid for Statutory Holidays, Vacations (one week per year, and a plus day for each year worked in the company), part of the company profits (10% of the company profits are distributed between the employees), Christmas bonus and if in case, Termination and severance (fire employees).Labor Unions are organizations of wage earners or salary workers, established with the purpose of protect their collective interest. This labor unions are found mainly at industrial places; Also provides support to the employees when they face difficulties, like but not reduced to unfairly dismissing, and when companies don’t want to fulfill agreements.

1.9. Mexico’s trade policy details that are relevant to that industry (tariffs, subsides, import quotas, antidumping duties).Mexico is improving its legal and judicial systems, it also has improved its membership in international organizations such as the NAFTA, the Organization for Economic Cooperation and Development, the World Trade Organization, and the Asia-Pacific Economic Cooperation.

5“Informe estadístico sobre el comportamiento de la inversión extranjera directa en México (enero-marzo 2014)“ http://www.economia.gob.mx/files/comunidad_negocios/ied/enero_marzo_2014.pdf6

José Vargas Mendoza. “Las relaciones cambiarias del peso frente al dólar norteamericano y la problemática actual del valor de la moneda mexicana”

http://www.azc.uam.mx/publicaciones/cotidiano/68/doc11.html7 http://www.inegi.org.mx/lib/olap/consulta/general_ver4/MDXQueryDatos.asp?#Regreso&c=277708 “Summary of environmental law in Mexico“ http://www.cec.org/lawdatabase/mx04.cfm?varlan=english

2Popultaion pyramid

INTERNATIONAL ENVIRONMENTSAND BUSINESS OPERATIONS

CARLOS JAVIER ALVARADO VARGAS

“The main objective of the new industrial policy is to achieve efficient operation of the markets and promote competition, given that it is believed that this is the best route to enable private initiative to make decisions concerning investment, production and employment. As a result of the structural reforms and signing nafta, the Mexican State ceased to fulfill its role as promoter of economic development. State action was reduced to create conditions for the “efficient” operation of the market through deregulation, lack of protection, privatization, rules, private property rights and human and physical infrastructure, not all of which was negative. It is recognized that the State has its faults, however it should be noted that the mark et al so has them.”9

2. The analysis of the environments that prevail in the regional/national market(s) that the Mexican PyME is trying to reach.

2.7. Relevant environmental regulations that the Mexican PyME might face.PYMES are a very important part of the Mexican economy (produce nearly 52% of the Mexican GDP). Many of the business running on Mexico are PYMES.(Medium and small Companies);they are classified by the number of employees they have.10 Mexican Government through training and funding, enables PYMES to have a dynamic grow, giving them a boost to reach the ability to export goods to other countries.When a PYME did a market research, and brings a very sturdy concept, it have all the possibilities to expand overseas, and a very little risk on failing on business.PYMES Foment local development, and due to their small size, can have the potential to reach international markets. The new technologies foments the dynamic grow of this kind of business, because it opens opportunities to export products.The lack of economic resources restricts the train and recruitment for PYMES. This lack of updated personal can bring a negative economic balance due to a low customer service.Mexican government has given special attention to PYMES, because the y represent a potential export source, and in consequence, a big open economy. PYMES can have access to fiscal support

Bibliography:

“¿Dónde se encuentra México en el Índice de Percepción de la Corrupción 2014?”http://www.tm.org.mx/ipc2014/ “¿Cómo anda México en corrupción? El peor de la OCDE, según Transparencia Internacional” http://www.animalpolitico.com/2014/12/como-

anda-mexico-en-corrupcion-el-peor-de-la-ocde-segun-transparencia-internacional/ “Corruption by Country / Territory” http://www.transparency.org/country#MEX “Government structure” http://countrystudies.us/mexico/82.htm Lic. Roberto Lopez Díaz. “El Modelo Económico Constiticional Mexicano, La Propiedad Privada Y El Impacto De La Globalizacion En Nuestro Marco

Legal Y Constitucional.”http://www.unla.mx/iusunla21/opinion/El%20Modelo%20Economico%20Constiticional%20Mexicano.htm “The world Factbook” https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html Mexican Federal Labor Law Reform: What Companies Doing Business in Mexico Need to Know

http://www.laboremploymentlawblog.com/2013/05/articles/international-employment-and-mobility-law/mexican-federal-labor-law-reform-what-companies-doing-business-in-mexico-need-to-know/

Adriana Peréz “Know The Law In Mexico - Employment Law And Practice” http://www.mexconnect.com/articles/1825-know-the-law-in-mexico-employment-law-and-practice

“Information on Mexico ”http://www.sice.oas.org/ctyindex/MEX/MEXNatlDocs_e.asp “Doing business in Mexico: general legal, business & entry issues”http://www.mexconnect.com/articles/13-doing-business-in-mexico-general-legal-

business-entry-issues “Labor Unions”http://www.referenceforbusiness.com/encyclopedia/Kor-Man/Labor-Unions.html

9 Industrial policy in Mexico? http://www.probdes.iiec.unam.mx/en/revistas/v43n170/body/v43n170a5_9.php10 “PYMES” http://www.mexicoemprende.org.mx/?option=com_content&task=view&id=50&Itemid=67