U.S. Latino Investors Courted by Mexico

In a tiny room at the National Council of La Raza’s conference in Los Angeles, council President Raul Yzaguirre and Mexican official Roger Diaz de Cossio answered questions twice, in Spanish and English, before a handful of reporters and a battery of television cameras.

Though repetitive, the bilingualism was fitting. The two had just announced the Mexican government’s new $20-million fund to encourage U.S. Latinos to invest in Mexico--a program they said would strengthen the ties between Mexico and the nearly 24 million Latinos in the United States.

The Nacional Financiera Hispanic Reserve, whose debut coincided with final negotiations on the proposed North American Free Trade Agreement, seeks to ensure that U.S. Latino entrepreneurs will not miss out on economic opportunities presented by formation of an enormous North American common market.

It also represents, in the opinion of some analysts, an attempt by the Mexican government to court Latino support for the trade agreement at a time when more questions are being raised about just who will benefit from free trade.

U.S., Mexican and Canadian officials completed work on the trade accord last month, but it must still be ratified by national legislative bodies of the three countries.

In announcing the reserve fund, Diaz de Cossio said, “This is only a small symbol that we want the Hispanic community to invest in Mexico because they’re the natural bridge.”

Latino business leaders, who say Mexico has never before regarded them as “players” in the U.S. economy, lauded Mexico for reaching out to Latinos north of the border. But many cautioned that the $20 million--which represents only 83 cents per U.S. Latino--was indeed only a small symbol.

“It’s a tribute to the savvy (of U.S. Latino leaders) that they are able to get some benefit for the Hispanic community,” said Antonio Gonzalez of the Southwest Voter Research Institute in Los Angeles. “But much more needs to be done . . . $20 million is a very small amount.”

Under the program, Nacional Financiera, Mexico’s largest development bank, will provide loans and equity to small- and medium-size Latino businesses forming joint ventures with Mexican partners. In addition, the bank and the Mexican Investment Board will provide technical advice and help investors locate potential Mexican partners.

Mexico is especially eager to attract investment in the furniture, textile, agriculture, telecommunications and service industries. Investment in oil and other energy industries will be restricted.

“The people in office down there . . . now see us as an asset, as an ally,” said Danny Villanueva Sr., president of Villanueva Capital in Los Angeles. “It bodes well for the relationship between these two communities that really do need each other.”

Advocates of the reserve fund say that, despite its timing, the program is not linked to the trade agreement and will proceed whether or not the agreement is ratified.

In early August, as President Bush announced that negotiators had completed the accord, debate on the agreement’s merits heated up. Democratic Party and labor leaders warned that Americans would lose jobs if businesses relocated to Mexico because of cheaper labor or lax enforcement of environmental regulations.

“The treaty has a whole lot of things in it for people who want to invest money and nothing for labor practices (or) for the environment,” Democratic presidential candidate Bill Clinton warned in August. Generally, however, Clinton has supported the free trade idea.

Los Angeles labor leader Steve Nutter cautioned that low-wage industries, which employ large numbers of Latinos, would be among the first to move south of the border if trade barriers are removed. Nutter, vice president and West Coast director of the International Ladies Garment Workers Union, estimated that 40,000 Latino garment workers could lose jobs in the first years of a free trade agreement.

“One of the big losers in any North American Free Trade Agreement is going to be the large mass of Latino workers in Southern California,” Nutter said.

In that context, some Latinos see the investment fund as a public relations effort by the Mexican government to swing Latino opinion behind a free trade agreement.

“This wouldn’t exist without the free trade negotiations, let’s not fool ourselves,” said Gonzalez of Southwest Voter. He predicted that the program would not assuage the fears of many Latinos that a free trade agreement would cost them their jobs.

“They like that idea (of closer ties to Mexico), but it’s not enough to say, ‘Put my job on the line,’ ” Gonzalez said. He added that most Latinos who do own businesses run mom-and-pop stores that could not expand into international trade.

“I don’t see (the investment fund) as really helping the retail type of business,” concurred Jose Fernandez, president-elect of the Sacramento Hispanic Chamber of Commerce. He estimated that a business would need at least $2.5 million in annual sales to even consider international operations--a total much greater than what most of the estimated 750,000 Latino-owned businesses nationwide generate.

Still, even those who say the investment program is not enough acknowledge that it is a step in the right direction. Some liken the potential for cooperation between U.S. Latinos and Mexico to that between American Jews and Israel.

“Mexico had been missing an opportunity,” said Villanueva. “Whether or not (the Free Trade Agreement) happens, we’ve got the seeds of a new relationship that can only have positive effects on both sides of the border. . . . I think we’ve got the makings of a romance here.”

BACKGROUND

Negotiations began in June, 1991, to extend the existing U.S.-Canada free trade zone so it would stretch from Canada’s frozen north to the Mayan jungles of Mexico, an area encompassing 360 million consumers with $6 trillion of annual economic output. The U.S. Congress agreed in 1991 to place the agreement on a fast track for ratification, meaning no amendments will be allowed in either house of Congress. However, separate legislation must be enacted to implement the terms of the agreement.