The Fox Effect

by Joe Scarry

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Mexican president Vicente Fox came to Chicago July 16 to advance his policies with two extremely important constituencies: influential Mexican citizens living in the U.S. -- of which there are 1.4 million in the Chicago area, more than in any other city outside Mexico except Los Angeles -- and the enormously important Midwestern U.S. business community.

In a word, Fox is seeking a common market in labor between Mexico and the U.S. Below is a recap of Fox's arguments in favor of this policy, and my own thoughts about what such a policy will mean for the metalcasting industry.

(1) Putting Mexico's house in order

Mexico is making progress in assuring transparency and procedures for good management. In particular, a new banking law is being put into effect.

For investors, Fox says his administration has set up "single window" service so that U.S. companies can come and set up a business in Mexico in a single day.

Similarly, Fox says his administration is using the Internet to eliminate corruption in government procurement. "Every purchase -- I don't care if it's just a stick of chewing gum -- is published on the Internet: prices, quantities, vendors, everything."

(For information see Mexico’s Federal Regulatory Improvement Programme website.)

(2) Macroeconomic Convergence

According to Fox, Mexico's economy is becoming more and more normal in comparison with the U.S.:

• inflation below 6-1/2% (and below the U.S. level for the Jan-May period)
• interest rates down to 8-1/2% in July, from 18-1/2% in January
• two-way trade of $350 billion, making Mexico #8 in the world

(For information see Mexican Treasury Dept. website.)

(3) Demographics

Mexico is a perfect complement to the U.S., according to Fox. "In the U.S., the 'boom generation' is retiring; in Mexico, we are just welcoming our 'boom generation.' It is an opportunity for both of us."

(Click here to view a chart showing U.S. vs. Mexican population data.)

(4) The Overall Vision

Fox asserts plainly: migration will be the issue of the 21st century in the global economy -- and this is completely consistent with the daily-growing emphasis on knowledge and procuring the best talent in current business theory.

In Fox's view, migration must follow free market principals -- the same governing trade and investment.

The U.S. and Mexico already have a de facto symbiosis in labor and migration, one that, despite many problems, still works better and on a bigger scale, than such arrangements anywhere else in the world. If the two countries can address this symbiosis directly, and focus on making it work better for everybody, Mexico and the U.S. can achieve unequaled economic prosperity in the years ahead.

What does this mean for the metalcasting industry?

First, Mexican labor can breath new life into the U.S. metalcasting industry. The U.S. industry faces growing shortages of workers willing to undertake metalcasting careers, and workers from Mexico can fill that need. Until now, the many undocumented Mexican workers in the U.S. have offered no benefit to U.S. metalcasters, because those companies simply cannot hire illegal workers -- unlike some other industries, notably construction and agriculture. Not only will legal workers give a boost to U.S. metalcasters -- by migrating away from Mexico they will limit the competitive threat from Mexican metalcasters. The more skills workers have, the more they will gravitate toward the labor market that pays more and provides a better workplace.

However, that advantage won't last forever. In the long run, workers who come from Mexico and work in U.S. metalcasting operations will obtain technical skills, business know-how, and savings that they will inevitably use to return to Mexico and start successful metalcasting businesses there. U.S. metalcasters will have to be prepared for that day. At the same time, those returning Mexican entrepreneurs will be looking for partners with resources, offering another type of opportunity to their former employers. U.S. firms that hire Mexican workers to work in U.S. plants today should expect to go into business with some of them as partners in Mexico tomorrow.

Take, for instance, Mexican immigrant dishwasher turned garment-district millionaire Jaime Lucero, who has pledged to spend more than $21 million to build at least six plants in Mexico to assemble women's clothing for export to the U.S. "I left in search of the famous American dream. But I must confess to you that I always held firmly on to a fantasy of returning to my homeland, of returning to my state or returning to my country. That was my constant dream." (Reported in The New York Times, 7/30/01.)

US-Mexican integration has big implications for sales growth, too. Mexico offers a market of 100 million people, and as their economic welfare increases, their consumer purchases (such as cars and appliances) as well as their infrastructure purchases (equipment for construction projects, and for manufacturing) will all increase, too. And that means market opportunity for U.S. metalcasters.

A Prediction

Of course, it is difficult to generalize about what the consequences of a common market in labor between Mexico and the U.S. will mean for the U.S. metalcasting industry. But I can make one prediction with confidence: Vicente Fox will get the agreement he is seeking.

Fox is the kind of person who inspires confidence the minute he opens his mouth. Hearing Fox address 1,200 business leaders over breakfast -- eloquently, confidently, and in English -- reminded me of something ad-man David Ogilvy once wrote:

When Aeschines spoke, they said, "How well he speaks."

When Demosthenes spoke, they said, "Let us march against Philip."

Well, in Chicago, on July 16, when Fox spoke, they said, "Let us do more business in Mexico."