Table of Contents
2.0 Political instability in Mexico.
3.0 Particular aspects of Mexico’s political structure and processes should be taken into account when assessing political risk.
3.1 Politics of Mexico.
3.2 Legislations in Mexico.
Political bribery and corruption in Mexico.
Intellectual Property Problem in Mexico.
3.3 Democracy and it’s future in Mexico.
3.4 Rule of Law and Human Rights.
3.5 Political Economy of Mexico.
Political risks faced by international businesses refer to risks of strategic, financial and intellectual property loss due to political instability (Jha, 2011). When a government faces political risks or political instability it faces several challenges in executing diplomatic and military, growing economy, implementing legislation, rules of laws and human rights, developing peaceful communities (Jensen, 2018). Political risks in a country are mainly classified as micro-risk and macro-risk. Micro risks of a country mainly affect a particular industrial sector or business. For example, corruption and prejudicial actions interrupt international business to introduce in the local market. Macro risks affect international businesses in insurrection or expropriation (Sottilotta, 2015).
This paper aims to critically analyze the political structure and process of Mexico to assess the political risks, what about an international firm’s concerns to introduce their products in the Mexican local market. Mexico is a developing country that has been facing political instability for ages, which ultimately keeps the international firm under pressure to develop their business in Mexico. This paper, first, analyzes the cause and effects of political instability in Mexico. Then, this paper analyses Mexico’s political structure and processes that should be taken into consideration by the international firm in assessing political risks and developing business strategies to introduce its products in Mexico.
2.0 Political instability in Mexico
Political instability refers to the propensity for the region or government change that may cause violence or political upheaval in the country (Alberto et al., 2016). A useful framework that is widely used to analyze political instability and the political rate of a particular country is called ‘J Curve’. This model develops the relationship between Political stability and openness in a country. The countries which show higher on the graphs in this model are more politically stable and more open (Bremmer, 2007). The political stability of a country depends on its rule of law, well-functioning economics and safe and secure domestic environment (Jha, 2011). On the other hand, openness relates to democracy in a country, individual freedom, freedom of trade, investing and traveling facilities abroad (Bremmer, 2007).
In terms of stability, Mexico is not politically stable. A report published by Ultius (2017) showed that the key reasons for political instability in Mexico are regional differences and variations, the rise of caudillismo, lingering effects of Mexico’s colonial legacy, and diminished power of the Catholic Crunch. In addition, the stranglehold of the military over the government, cost of freedom outweigh citizen’s needs, liberal and conservative bickering (Leslie, 2015).
According to a report published by World Bank (2017), the average value of Mexico’s political stability was -0.58 from 1996 to 2016, where the maximum point was 0.06 points in 2002 and minimum points were -0.97 points in 1996. Overall, the stability of Mexico’s politics is far below the standard points. A study by Woody (2017) revealed that Mexico’s political and criminal worlds are shifting towards a higher rate of violence than ever before. This instability seriously affects the economy and trade of Mexico, most importantly in the way welcoming international businesses and foreign investors.
On the other hand, in terms of openness, Mexico is a country of contrasts. Mexico has been progressing its economy by overcoming the turbulent economic as well as political fortunes in the 1980s and 1990s, even during the global economic crisis in 2008/2009. This is because Mexico has been able to create an open free-market economy that has significantly attracted global businesses in its local markets. In addition, Mexico offers a low-cost location that attracts international businesses to its market. Thus, the proposed can take these opportunities to start its products in Mexico. However, there are big inequalities between rich and poor, and drug trafficking and its related violence are significantly seen in Mexican societies. Then, the outbreak of ‘swine flu’ in 2009 also disrupted Mexico’s economy and the lives of Mexican (Harrison, 2011). Therefore, the proposed business should keep these issues in mind when developing its business in Mexico………………………