Maryland's exports to Mexico soared by 28 percent to a record $71.4 million as the North American Free Trade Agreement took effect in the first nine months of 1994, according to records kept by the International Division of the state Department of Economic and Employment Development. Then, in December, the Mexican government devalued the peso and touched off a financial crisis that continued to deepen last week.
What impact will the peso crisis have on Maryland companies that do business with Mexico? Will Maryland companies rethink their business plans for Mexico?
Carroll D. Nordhoff
Executive Vice President, McCormick & Co.
McCormick de Mexico is a 48-year relationship in a 50-50 joint venture with Mexico's largest food company. It has the No. 1 market share in products such as mayonnaise, mustard, marmalades and spices. Last year, we purchased McCormick Pesa, which supplies products for food companies. So we have both retail and industrial operations in Mexico.
There really is a lot we don't know yet about this crisis and the Mexican government's plans to resolve it, and a lot will depend on the confidence level that can be established moving forward. My own opinion is that in the future we will look back on this as a hiccup -- a big hiccup, but still only a hiccup. We certainly don't see any changes in our long-term plans or in our role in the Mexican market.
When I read all these articles about capital flight from Mexico, we certainly are not part of that flow. Mexico remains a very attractive place to do business, and McCormick intends to be part of that. Our commitment to Mexico is long-term, and events like this will not change that.
Raymond L. Harris
President, Harris International Health Care Ltd.
We provide training for health care personnel in many countries, and we were the only service company among the seven firms that went to Guadalajara last April when the Maryland International Division organized a trip under the sister states program, for companies to explore opportunities that NAFTA might create. I was interviewed by 18 people, all in private practice or clinic directors or heads of private hospitals.
Some of them were interested in nutrition training programs for their staffs, and we were in discussions with seven of those organizations until the peso crisis arose in December. Because we deal in services rather than products, we found it easier to make proposals than the others on the mission. But now, suddenly the fax machines have stopped moving papers, and the telephones have stopped ringing. Even before December, the weak peso already was making it prohibitively expensive for Mexican organizations to send people to the U.S. for our training, and now it appears that the December crisis will also make it too expensive even to have Americans come to Guadalajara to conduct sessions.
Before we went, we were cautioned that it can take six months or a year to get a contract, and now it appears that it may take longer than that. We also were advised that when problems arise, it's not abnormal to have the other side just sort of stop communicating. I get the feeling that they are just not able to think about anything that requires dollars right now, so I'll just be patient.
I also sell some medical products in Mexico, and I had always deposited payments to my local counterpart in pesos in Guadalajara. But in December, he asked me to stop payments in pesos and to deposit the payments in dollars instead in an account he has in Laredo, Texas. He said the peso was losing value too fast and the dollars would be worth more to him.
Thomas M. Schoewe
Vice President and CFO, Black & Decker Inc.
We have a very substantial operation in Mexico, with revenues between $70 million and $100 million a year. It has two main pieces, one of which supplies a fairly high share of the local Mexican market for power tools and home products, the other of which is a significant exporter of irons to our household products division in the United States.
The currency crisis will disrupt the Mexican market, so that's a significant negative for our retail operations on that side. But the cost of the irons we import from Mexico will be significantly reduced, so that's a significant positive on the export side. We think these two factors will likely offset each other.
This kind of event definitely affects a company's thinking about a place where it is doing business. A disruption raises the volatility of the marketplace, and that raises the risk level, and a company will set higher demands for its return levels when it sees higher risk levels. But Mexico is an important part of our business, and we will continue our presence in that market. Over the long term, it is a place we will want to be.