Sample donated: Kristy Fleming
Last updated: September 19, 2019
NATFA, which standsfor North American Trade Agreement, was very crucial to the development ofMexico. It was signed in December 17, 1992 and entry into force was on January1, 1994. The free trade agreement was signed by Mexico, Canada and the UnitedStates. According to INC, NAFTA “eliminated tariffs barriers to agricultural,manufacturing, and services; to remove investment restrictions; and to protectintellectual property rights.
” By eliminating these barriers, it creates jobs,attracts foreign direct investments, and government revenues. According toInvestopedia, property rights were “theoretical and legal ownership of specificproperty by individuals and the ability to determine how much property is used”.Mexico had poor property rights because there was no enforcement when theselaws were broken. NAFTA protected better property rights law, which includescopyright, trademarks, trade secrets and patents. Trade secret is especiallyimportant then because technology started to advance. After NAFTA, Mexicogovernment was required to protect trade secrets, which prevented unauthorizeduses of confidential information.
Foreign DirectInvestment (FDI) is when an individual or company makes an investment in aforeign country. For example companies from the United States making aninvestment in Mexico would be considered a foreign direct investment. Foreigndirect investment was crucial to developing a country because it was a sourceof income.
Mexico’s foreign directinvestment was very low before NAFTA because the government did not enforceproperty right laws strictly. With low protection of property rights, foreigncountries were fearful to enter the country and make an investment knowing thatthey are not safeguarded of their legal rights. For example, a foreign countrycould develop a product and later another local company could make the sameexact product and just change the name of the product. By doing so, the foreigncompany’s copyright were being violated and there would be no consequence forthat local company. After this agreement, Mexico is compelled to enhance theirproperty right laws.
By doing so, big companies felt safer to investment inMexico. By doing so, it will help with Mexico’s economy. Below is a datagraph taken from the FRED database, which shows the great improvement sinceNAFTA has been taken into effect. During the time from 1990- 1993, FDI earningswere between 6.8 million to 1 billion dollars. Once NAFTA took into effect in1994, FDI flew up to double the amount to 2.7 billion dollars that year.