Vicente Fox on the Importance of Open Markets for Global Collaboration (Manufacturing Operations Management Talk)

I was privileged last week to hear Vicente Fox, former President of Mexico, talking about the importance of open markets and trade agreements like NAFTA in today’s complex global trading economies. It was the highlight of AMR Research’s 2008 Supply Chain Summit and most of the people I talked with were very impressed with the speech.

I admit that it is easy to question trade agreements like NAFTA when we see so many U.S. manufacturing jobs moving overseas. But the arguments in favor of open trade are strong and need to be considered. I will try to share some of Vicente’s thoughts in this article and I urge that you also keep an open mind. Even if we don’t agree with some of his message, we can respect that it comes from someone that has done a lot of research, collaborated with international leaders, and has a lot of international business experience. Before entering politics, Vicente Fox was a successful President for Coca-Cola Latin America.

I would also like to note that Vicente Fox is a very clear and charismatic speaker. He was able to engage us, make his points with humor, and keep us focused on topics that are usually full of boring political rhetoric. If you ever have a chance to listen to him, don’t miss it.

Paraphrasing some nuggets from the former President...

In the 70-80’s, nationalism and protectionism was the name of the game. Several dictatorships and corrupt governments made it hard to do business and make a profit. While other parts of the world were advancing, Latin America was falling behind. We had to change and let go of the dictators. We needed new leaders with great vision.

Today we know that in Latin America, democracy and open markets work. We are finally returning to growth in the region. Capital per person is increasing. We are making a small dent on poverty numbers but we know this path works. We need to continue increasing our middle class.

The theme of this conference, Globalization Comes Home, is very important, because globalization is still not a fully accepted concept around the world. Mexico has one of the most open markets in the world with a large number of trade agreements. A lot of of the world’s exported products move through Mexico.

I am surprised that this US nation is moving back toward protectionism. We are also concerned about China, but building walls is not a long term vision. I don’t believe that thinking global translates to losing jobs.

Mexico, US and Canada are all losing jobs to China and we could benefit from working closer together. There are also many other stable countries in Latin America like Chile, Brazil, and even Colombia who has been trying to control problems with drug trafficking.

There are also currently a few countries like Venezuela that are causing worries in Latin America. It seems that we have not learned our lessons from the past. Fortunately globalization does not really enable Totalitarian governments to thrive in the global economy. Hugo Chavez withdrew from the G3 Trade Agreement between Colombia, Mexico and Venezuela. The current few dissident Latin American leaders opposing free markets have eroded the process, but it will come back.

I am not just talking optimistically about democracy and open markets. We have sound figures that show us the results and point to what we have to do to move forward in the future. What we need the most is leadership and institutions that generate those leaders. So we are creating initiatives like Mexico’s Presidential Library to help educate the next generation of leaders for Latin America. We need to recover the time lost during the 20^th century in Latin America.

We hope this great US nation comes back to show its leadership in the area of globalization and open markets; a nation with great ideas and innovation like the Internet.

Not everything that shines is gold. The race to China might be overrated. A big advantage of doing business in Mexico for US companies is the benefit to logistics from the proximity. As an example, in the maquinadoras industry we can turn around raw materials into final product and have it back in the US in one day.

Mexico also represents a huge local market for the United States. Mexico still has 33% poverty; we need to continue growing the middle class. But the 77% that consume represent a big buying market. Imports from the US to Mexico are bigger than for the rest of Latin America together. Mexico as a market is bigger than several European nations together. Around 70-75% of imports into Mexico are from the US.

Q: Your book, “Revolution of Hope”, talks about a “Super NAFTA” can you elaborate?
A: We must study and learn from models like the Europe Union. We are learning in Latin America and making some progress. For example, it is not necessary to have a passport to move between Guatemala and El Salvador. We should pay attention and learn from what is working over there.

Q: How much can Chavez derail progress in Latin America?

A: We have not increased education levels enough and middle class enough in Latin America, so these leaders have been able to hold on to power. I don’t believe that 21^st century socialism is going anywhere. It is just a nostalgic concept and does not have a plan for future prosperity. There is no long term vision.

Education and democracy is the only way to prosper in the future. It gives people choices. Authoritarian governments will try to keep people ignorant so they don’t have choices. We learned the lesson in Mexico and we have been educating. Now 100% of schools have IT technology and a big percent of them are connected to the Internet. We expect the returns not only in numbers but also in the quality of the education.

I believe that we need to be able to handle more than one issue at a time. We cannot just focus on terrorism. We also need to address issues of trade, immigration, and manufacturing globalization. I have campaigned a lot, and when you campaign you make a lot of promises. Once you sit on the chair, you feel the weight on your shoulders and you ask yourself “Now what are you going to do Vicente?” After the elections, the same will happen here and we will need to more seriously address issues like immigration and the NAFTA trade agreement.

“Better tomorrow” is a great Mexican concept :) But some of these issues need attention now and we should act soon. We need to figure out soon how to turn issues like immigration into a plus for each country.

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More references on Vicente Fox:

http://www.elbalero.gob.mx/kids/government/html/gobierno/bio_foxkids.html

http://en.wikipedia.org/wiki/Vicente_Fox

Information on NAFTA:

http://www.fas.usda.gov/info/factsheets/NAFTA.asp