As a part of a team of Ford Motor Corporation, my task is to do a country risk assessment for Mexico for this year and clarify if it is reasonable to continue operating a franchise in this country. First of all, it is necessary to address the Office of the United States Trade Representative (n.d.) and clarify the latest conditions of trade agreements that may be developed between the United States and Mexico, as well as the possibility to exchange information in the context of these negotiations. This information should help to understand if Mexico has enough resources to develop working business relationships with other countries. However, even if the situation in the country is stable, it is necessary to consider certain economic, political, and financial factors that are the initial parts of any risk assessment.
A country risk assessment provides the Ford Company with an opportunity to learn Mexico’s possible economic and political risks and investigate if this country faces some financial uncertainties or expropriations (Eun & Resnick, 2015). Fiscal and monetary policies are prudent in Mexico. Trade plays an important role in its economy. Import and export are equal to about 70% of its GDP. Mexican stability in terms of its GDP is an attractive issue for consideration. Therefore, the country is ready to participate in different trade agreements at federal and international levels. Its public debt continues changing and can be decreased by 5% in the current year. At the same time, potential partners of Mexico should remember that employment is still unstable in the country, and its local authorities would like to get some guarantees to allow the penetration of the foreign companies to the market.
The analysis of the political aspect of the country is also an important step for the Ford Company. It is necessary to know that presidential elections may create an unfavorable political environment due to the required changes and unpredictable outcomes. In addition, these elections may change the conditions under which Mexico cooperates with the United States. Business confidence is questioned, and the ability of all Mexican organizations to deal with international relationships cannot be guaranteed. Still, such factors as the absence of military actions and a high dependence on the US economy prove the required sustainability of the relationships between the countries and the correctness of this choice. Mexico is the country that can be trusted, and the Ford Company will hardly lose a lot if investments continue.
Finally, certain attention should be paid to the local finances and identify how the country deals with challenges. In Mexico, the financial position is relatively sound due to the possibility to control the majority of financial decisions and recent achievements of the companies. At the same time, the financial sector of Mexico remains competitive with a properly organized banking system in terms of which foreign currencies and capitalization become possible. Compared to the US dollar, Mexican peso is weak. Therefore, high inflation is a dangerous aspect for many citizens. It is possible to use dollars, and many international and local agreements choose this particular currency to promote stability and avoid complications.
In general, the evaluation of risks in Mexico shows that the country is ready to cooperate with the American company at a high level with no serious problems or uncertainties. Still, there is one concern that cannot be ignored. Presidential elections may change the situation in the country so that several backup plans should be developed by its potential partners.
References
Eun, C., & Resnick, B.G. (2015). International financial management (7th ed.). New York, NY: McGraw-Hill Education.
Office of the United States Trade Representative. (n.d.). North American free trade agreement (NAFTA). Web.