Reforms in the Mexican Petrochemical Industry Have Not Increased U.S. Investment

T-NSIAD-91-22: Published: Apr 16, 1991. Publicly Released: Apr 16, 1991.

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GAO discussed issues regarding U.S. investment in Mexico's petrochemical industry. GAO noted that: (1) although Mexico's petrochemical industry grew rapidly since its inception in 1950, a 1982 debt crisis sharply reduced investment in the industry, causing continued shortages in both investment funds and feedstock supplies; (2) the lack of investment jeopardized the adequate supply of Mexican natural gas, the primary raw material for the petrochemical industry; (3) insufficient investment funds made it difficult for Mexico to complete 21 investment projects to meet petrochemical demands; (4) Mexico depended on imported basic petrochemicals to supply its industry, since it lacked adequate installed basic petrochemical capacity; (5) reforms Mexico instituted to increase foreign investment included deregulating more chemicals, allowing 100-percent ownership of secondary plants, repaying capital funds with petrochemicals, and reducing bureaucratic delays for obtaining processing permits; (6) impediments to increased U.S. investment included world market conditions, insufficient feedstock, reversible petrochemical reforms, inadequate protection of intellectual property rights, and lack of formal investment protection; and (7) factors encouraging increased U.S. investment included the established manufacturing infrastructure, location, and the complimentary nature of U.S. and Mexican companies.

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