Coming to a store near you? Mexico's dust-busting doormat
A push is on to help small firms join NAFTA and close Mexico's rich-poor gap.
When Mexican businessman Antonio Jacques flies to a Las Vegas trade show next week, he will literally roll out the welcome mat. Mr. Jacques makes a doormat from a secret mix of plastics that he says collects more dust than any mat available in America.
After 14 years of selling his product to Mexicans, Jacques is ready to take his company, Dust Control Mexico, to the US. Last Friday, he was busy checking the English spelling on the banner that he'll display in his booth in Nevada. It proclaims, "Dust Control Mexico: High Technology Welcome Mats." He hopes it will interest a US distributor, preferably one that feeds a big retailer, and allow him to break into the world's biggest market.
Jacques and other Mexican small-business owners are part of a new breed of would-be free traders. A decade after the 1994 North American Free Trade Agreement (NAFTA) went into effect, a move is underfoot to help Mexico's mom-and-pops compete with the world's export behemoths. While Dust Control is going it alone, a reinvigorated government program is helping small- and medium-sized businesses engage in cross-border commerce. And with officials from the US, Mexico, and Canada looking to meet this year to evaluate the continental pact, little guys like Dust Control are hoping to move to the top of the free-trade agenda.
Mexico has plenty of reason to give a leg up to potential exporters, economists say. For one, it could help narrow Mexico's staggering rich-poor gap, which refuses to shrink although exports to the US and Canada skyrocketed by more than 200 percent since NAFTA went into effect, according to a new report by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). The study found that the richest 10 percent of Mexicans earn 43 percent of the country's wealth, while the bottom tenth earn just 1 percent. Firms that export can pay wages, on average, up to 50 percent more than companies that only serve Mexico's internal market, according to Mexico's Institute of Statistics, Geography, and Information.
Building a new class of exporters could also help shrink Mexico's huge informal workforce. For every worker at a bona fide Mexican company, there are two who work off the books, according to the Center for Development Research (CIDAC), a think tank here. "The problem is that the business environment for small companies isn't friendly," says Oliver Azuara, an economist at CIDAC. He says more incentives are needed to convince prospective entrepreneurs to form proper businesses, pay taxes, and face the risks of climbing the free-trade ladder.
When President Vicente Fox took office in 2000, he said his would be the "entrepreneurial" administration. Now in the fifth year of his six-year term, his program to promote small firms is "just getting off the ground," says Víctor González, head of the government's small-business financing office. "The consensus is growing that this type of program is needed to help our economy grow," he says.
A slice of the government program allows entrepreneurs to get seed capital at lower rates. The government program also backs "incubators" that help small businesses fine-tune their strategies for survival. About 100 such incubators are in place, and about 50 more are due to be created this year. "Eight out of every 10 new businesses die here within the first year," says Mr. González. "The ones we work with tend to have a much better success rate." Of the 2,000 or so small businesses helped by incubators, nearly 40 percent are now entering the world of exports, he says.
González considers Chile the model in Latin America. In recent years, small Chilean firms branching into foreign trade have seen exports increase by more than 20 percent. They are helped by antitrust laws, better access to financing, and associations that match budding exporters with multinational heavyweights.
Back at Dust Control, located in one of the capital's many industrial pockets, the staff is rooting for Jacques to return with a new contract in hand. "Then we'd be more then just surviving," he says.
"We're small, but getting this business off the ground and staying afloat has been a titanic operation," says José Martínez, Jacques' business partner. He ticks off the economic body blows that Dust Control has endured: the 1994 peso crash, a bankruptcy in 2001 as the company struggled to invest in new technology, and last year's rising inflation - not to mention a credit line with an 18 percent interest rate, competitive by Mexican standards.
"So why are we doing this?" quips Mr. Martínez. After a pause, Jacques replies: "I suppose it's the idea of doing something the right way, legit, and hoping it grows."