Trade Barometer : Expo’s Poor Turnout Mirrors Mexico’s Money Crisis

Imagine the challenge for El Cajon-based Solid Gold Holistic, an “animal nutrition center” trying to market America’s only 100% natural dog food in a nation where a crippling economic crisis has left many people barely able to feed themselves.

“I’m a positive person--I’m not giving up,” Manny Rosillo, the company’s national sales manager, said this week as, for the second year in a row, he manned a booth at the U.S. Trade Center. “But this is my last card. It’s just so hard to here to break into the market right now.”

The folks at Blackcat Fashion Inc., a Los Angeles-based wholesaler of fine women’s apparel, had a different story to tell on the other side of the small exhibition hall.

“All the women just keep asking us which department stores are going to carry our line here in Mexico,” said an excited Ingrid Paredes, surrounded by clothing racks, black velvet and lace. “I know they’re having an economic crisis here, but some people still have money.”

At an adjacent booth, Multiplex Technology Inc. was attracting large crowds with perhaps the most salable item in the house. At a time when soaring prices and frozen wages have spawned a crime wave of burglaries and auto theft, the Brea-based firm was showcasing its much-sought centerpiece: the “Channel Plus” electronic-surveillance system for “security and vigilance.”

That was the scene at the two-day Expo-California ‘95, an annual event that has become something of a barometer on the state of U.S.-Mexican trade, confidence in the Mexican economy and the health of the North American Free Trade Agreement (NAFTA), the treaty that took effect Jan. 1, 1994, reducing tariffs and promoting trade among the United States, Mexico and Canada.

There were, in fact, just 17 exhibitors, compared to the 94 companies that attended last year, when--in the heady pre-crisis days of October, 1994--scores of California manufacturers sought niches in Mexico’s booming but credit-driven consumer market.

Now, at a time when Mexico’s peso devaluation and deep recession have burst the credit bubble, leaving millions of consumers deeply in debt, most of the Mexicans who attended this week’s trade fair were looking for work rather than wares.

“Last year was a whole different story,” said Bob Miller, the trade center’s director. Despite major successes reported by the handfuls that did attend this week’s show, he said the poor turnout “shows there clearly is a major lack of confidence--not only in California but in all of America--in the economy here.”

But the hard-core echoed the optimism of U.S. trade officials also present. Mexico’s economic crisis, they said, is transitory, its market potential enormous and the timing now critical to gain a foothold.

After reciting official 1994 U.S. Commerce Department figures that totaled U.S.-Mexican trade at $100 billion--a 23% increase over pre-NAFTA 1993--the U.S. Embassy’s commercial officer, Kevin Brennan, conceded in a speech opening the event that “NAFTA’s opponents could claim that these totals belong to the past, that the present shows an economic panorama totally different during the past year. . . . My only response to this argument is that NAFTA constitutes an irreversible change in our economies. Our commercial bonds are not going to weaken or break through temporary economic crises.”

Brennan also conceded that Mexico posted an unprecedented trade surplus with the United States of almost $2.9 billion in the first half of 1995--a clear sign, independent economists say, of how few Mexicans can afford to buy U.S. imports after the peso lost almost half its value against the dollar.

But Brennan stressed the upsides to the figures--that Mexico’s manufacturers have secured new international markets that will increase domestic production, provide more jobs and generate more spendable income in the future.

“The fact is, U.S. exports to Mexico have dropped only 9.6% against a devaluation of almost 50%,” he said in a separate interview. “What that tells me is that Mexico still needs our inputs to feed their export drive. And that’s something that will show even more in the future.”

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The Peso’s Fall

The devaluation of th Mexican peso along with a crippling recession, has triggered an economic crisis in Mexico. Pesos per dollar, weekly close:

October, 1995: Friday: 6.66

* Source: Bloomberg Busines News