Mexico, Page 1
Running Head: MEXICO’S CULTURAL, ECONOMICAL, AND POLITICAL STATE
Mexico’s Cultural, Economical, and Political State
For
Firms Pursuing Business In or With Mexico
By
Kashmala Khan
For
Athena Miklos, Professor
ECN 2025-102947
Tuesdays and Thursdays, 10:00-11:20 AM
College of Southern Maryland
La Plata, Maryland
November 15, 2012
Mexico, Page 2
Summary
Before a firm does business in Mexico it is imperative to understand the achievements
and pitfalls of its cultural, economic, and political forces. Although Mexico has improved
substantially with its technological development, investment policies, foreign exchange policies,
and tariffs, it still has significant pitfalls when it comes to honoring contracts, legal framework,
and enforcing laws.
The cultural forces of Mexico are largely dependent on social structure. Mexicans respect
authority and look to those above them for guidance and decision-making. This makes it
important to know which person is in charge, and leads to an authoritarian approach to decision-
making and problem solving. Since 92.7% of the total population in Mexico speaks Spanish
only, it will be beneficial to learn Spanish or have a translator at hand at all times. Shared culture
makes it easier to market and sell goods and services.
The economic forces in Mexico offer both favorable and unfavorable qualities. Mexico is
currently the second largest export market for U.S. goods. Some of the greatest achievements of
economic forces include physical infrastructures, telecommunication systems, production
capabilities, and technology. The unfavorable qualities of the economic forces include high
employment rate and unskilled labor.
The political forces in Mexico also play a great role in opportunities and pitfalls. The
opportunities include efficient settlements to disputes and reasonable trade regulations and
standards. The pitfalls include wars and terrorism caused by the drug wars and cartels.
There are numerous opportunities for firms in the Textiles and Clothing industry of
Mexico. A firm should be knowledgeable about the cultural differences in Mexican people in
Mexico, Page 3
order to undergo business successfully. A firm should also be aware of the potential profit
Mexico has to offer, as well as the potential problems. To conclude from this research, U.S.
firms should enter the Textiles and Clothing industry in Mexico because there are a lot of
opportunities and the Mexican economy will further expand in the near future.
Mexico, Page 4
Introduction
This paper will review and relay the most recent information regarding Mexico’s cultural,
economic, and political forces. The objective of this paper is to assist firms who are interested in
entering the Textiles and Clothing industry in Mexico by portraying the opportunities, issues,
and pros and cons of doing business in Mexico. Th ...
Mexico, Page 1 Running Head MEXICO’S CULTURAL, ECONOMI.docx
1. Mexico, Page 1
Running Head: MEXICO’S CULTURAL, ECONOMICAL, AND
POLITICAL STATE
Mexico’s Cultural, Economical, and Political State
For
Firms Pursuing Business In or With Mexico
By
Kashmala Khan
For
Athena Miklos, Professor
ECN 2025-102947
Tuesdays and Thursdays, 10:00-11:20 AM
College of Southern Maryland
La Plata, Maryland
November 15, 2012
2. Mexico, Page 2
Summary
Before a firm does business in Mexico it is imperative to
understand the achievements
and pitfalls of its cultural, economic, and political forces.
Although Mexico has improved
substantially with its technological development, investment
policies, foreign exchange policies,
and tariffs, it still has significant pitfalls when it comes to
honoring contracts, legal framework,
and enforcing laws.
The cultural forces of Mexico are largely dependent on social
structure. Mexicans respect
authority and look to those above them for guidance and
decision-making. This makes it
important to know which person is in charge, and leads to an
authoritarian approach to decision-
making and problem solving. Since 92.7% of the total
population in Mexico speaks Spanish
3. only, it will be beneficial to learn Spanish or have a translator
at hand at all times. Shared culture
makes it easier to market and sell goods and services.
The economic forces in Mexico offer both favorable and
unfavorable qualities. Mexico is
currently the second largest export market for U.S. goods. Some
of the greatest achievements of
economic forces include physical infrastructures,
telecommunication systems, production
capabilities, and technology. The unfavorable qualities of the
economic forces include high
employment rate and unskilled labor.
The political forces in Mexico also play a great role in
opportunities and pitfalls. The
opportunities include efficient settlements to disputes and
reasonable trade regulations and
standards. The pitfalls include wars and terrorism caused by the
drug wars and cartels.
There are numerous opportunities for firms in the Textiles and
Clothing industry of
Mexico. A firm should be knowledgeable about the cultural
differences in Mexican people in
4. Mexico, Page 3
order to undergo business successfully. A firm should also be
aware of the potential profit
Mexico has to offer, as well as the potential problems. To
conclude from this research, U.S.
firms should enter the Textiles and Clothing industry in Mexico
because there are a lot of
opportunities and the Mexican economy will further expand in
the near future.
Mexico, Page 4
Introduction
5. This paper will review and relay the most recent information
regarding Mexico’s cultural,
economic, and political forces. The objective of this paper is to
assist firms who are interested in
entering the Textiles and Clothing industry in Mexico by
portraying the opportunities, issues,
and pros and cons of doing business in Mexico. The Social
Process Triangle Model was used to
analyze the environment. As a whole, it represents the big
picture of modern Mexico’s Textiles
and Clothing industry. The triangle is divided into three sub-
triangles, which are the Cultural
Forces, Economic Forces, and the Political Forces.
The sub-triangle, Cultural Forces, will discuss the cultural
forces that are contributing to
Mexico’s social process. This consists of factors such as
population, education, social structure,
family roles, the basis for a value system, and customs that are
practiced in Mexico. The sub-
triangle, Economic Forces, will discuss Mexico’s economic
forces that affect its social process.
This includes factors such as GDP, the selling of U.S. goods
and services, distribution systems,
6. financial services, capital resources, property ownership and the
workforce. Lastly, the sub
triangle, Political Forces, will portray the political forces that
influence Mexico’s social process.
This will include factors such as balance of payments, political
stability, trade regulations and
standards, laws regarding trade and commerce, Government
procurement, corruption, and
foreign trade controls. The information from this paper will
determine the outlook for firms
wanting to do business in the Textiles and Clothing industry of
Mexico.
Cultural Forces
Mexico is the eleventh most populous country in the world. The
population count in
Mexico is 114,975,406 people. Among the population, 27.8%
are between the ages of 0-14,
Mexico, Page 5
65.5% are between the ages of 15-64, and 6.7% are age 65 and
over. The median age in Mexico
is 27.4 years (CIA, 2012). According to this population data,
currently there are not as many
7. people that live up to be over the age of 65 years old. The urban
population consists of 78% of
the total population (CIA, 2012). Mexico City is the second-
largest urban agglomeration in the
Western Hemisphere, after Sao Paulo (Brazil), but before New
York-Newark (US). The
populations in the major cities in Mexico are 19.319 million in
Mexico City; 4.338 million in
Guadalajara; 3.838 million in Monterrey; and 2.278 million in
Puebla. With a growth rate of
1.086%, the population has remained essentially unchanged for
several years. Mexico’s birth rate
is 18.87 births out of 1,000 population and its death rate is 4.9
deaths out of 1,000 population
(CIA, 2012).
Mexico currently has a literacy rate of 86.1%, where literacy is
defined as those age 15
and over who can read and write. 86.9% of the males and 85.3%
of the female populations in
Mexico are literate (CIA, 2012). An average citizen spends 14
years in school from primary to
tertiary education. The net enrollment ratio for both males and
females in primary school is 94%.
8. The net enrollment ratio in secondary schools for males is 71%
and 72% for females. In tertiary
education, such as, College, University, and Vocational School,
females have a higher net
enrollment ratio than the males. The net enrollment in tertiary
schools for males is 36% and 46%
for females (UIS Statistics, 2010). This shows that the women
go further in education than the
men in this society.
Mexico is broadly a middle class society. Steady economic
growth rates, more open and
competitive markets, and the smaller families that result from
sharply declining fertility rates are
responsible for the country’s expanding, prosperous middle
class (Foreign Affairs, 2012). The
family is at the centre of the Mexican social structure. Mexican
society and business are highly
Mexico, Page 6
stratified and vertically structured. Mexicans emphasize
hierarchical relationships and the people
respect authority and look to those above them for guidance and
decision-making. It would be
9. disrespectful to break the chain of hierarchy. Furthermore, rank
is important, and those above
you in rank must always be treated with respect. This makes it
important to know which person
is in charge, and leads to an authoritarian approach to decision-
making and problem solving.
Mexicans are very aware of how each individual fits into each
hierarchy, be it family, friends or
business (Kwintessentials, 2010). The family roles in Mexico
are the same throughout Mexican
culture.
First, Mexicans consider it their duty and responsibility to help
family members.
Secondly, mothers are greatly revered, but their role may be
seen as secondary to that of their
husband. Outside of the major cosmopolitan cities, families are
still generally large. The
extended family is as important as the nuclear family since it
provides a sense of stability. Most
Mexican families are extremely traditional, with the father as
the head, the authority figure and
the decision-maker (Kwintessentials, 2010). Religion in Mexico
is dominated by Roman
10. Catholics, which consists of 76.5% of the total population.
However, 5.2% is Protestant, 1.1% is
Jehovah's Witnesses, other is 0.3%, unspecified is 13.8%, and
people with no religion make up
3.1% of the population (CIA, 2012).
Customs in Mexico consist of a meeting etiquette, gift-giving
etiquette, dining etiquette,
and business etiquette. Meeting etiquettes included waiting until
invited before using a Mexican's
first name; women pat each other on the right forearm or
shoulder in greeting situations; and men
shake hands every time they meet with each other until they
know that person well. Gift-giving
etiquettes include bringing a gift such as flowers or sweets
when invited to a Mexican’s house,
and if you receive a gift, open it and react enthusiastically.
Dining etiquettes include keeping
Mexico, Page 7
your hands visible while eating and leaving some food on your
plate after a meal. Business
etiquettes include making business appointments at least 2
weeks in advance and having all
11. written material available in both English and Spanish
(Kwintessentials, 2010).
According to all of the information about Mexico’s cultural
forces, there many
conclusions that can be made for the outlook of business in the
Textiles and Clothing industry in
Mexico. First, a large population will be able to meet the labor
demands of the firm. Secondly,
many unskilled workers will lead to lower wages and more
profit as well as increased training
costs. Thirdly, since 92.7% of the population speaks Spanish
only, firms should have means of
interpreting Spanish. Additionally, firms should observe
Christian holidays and local traditions
because of the dominance in religion in Mexico. Furthermore,
firms should organize their
company with a top down management style. As a result, shared
culture will allow firms to more
easily market and sell their products.
Economic Forces
Mexico is the world’s fifteenth largest economy when measured
at market exchange
rates, and twelfth when using purchasing power parity. With
12. Gross Domestic Product (GDP) at
USD 14,800 per capita and a real growth rate of 4%, Mexico has
a purchasing power parity of
USD 1.683 trillion. Mexico also has an official exchange rate of
USD 1.155 trillion (CIA, 2012).
GDP composition by sector consists of agriculture 3.8%,
industry 34.2%, and services 62%
(CIA, 2012). The selling of U.S. goods and services can be
advertised on billboards, featured on
internet campaigns, or firms can use direct marketing methods.
The direct marketing methods
include, radio, T.V. commercials, telemarketing, postal mail,
email, internet consulting, and the
use of databases.
Mexico, Page 8
In Mexico’s physical infrastructure, the country is open to
foreign investment. The
Mexican government has been actively seeking an increase in
private involvement in
infrastructure development in numerous sectors, including
transport, communications, and
13. environment. Improvement in the national infrastructure is seen
as a key element to
strengthening economic competitiveness and attracting
investment to disadvantaged regions of
the country. In July 2007, President Calderon presented the
National Infrastructure Program
2007-2012. A key aspect of this program is to increase private
investment through means of
Service Lending Projects (public-private partnerships) and
concessionary schemes. In 2011, the
Public-Private Associations Law was approved by the lower
house of Congress; the Senate had
approved the law in October 2010.
The Public-Private Partnership Law allows the government to
enter into infrastructure
and service provision contracts with private companies for up to
40 years. The law provides
more legal certainty to private investors by equally distributing
risks, facilitates access to bank
loans, and harmonizes existing state public-partnership models
under a single federal law (2012
Investment Climate Statement, 2012). Mexico’s well-developed
infrastructure enables the
economy’s productivity and consists of 1,724 airports (249
14. paved runways), 1 heliport, 17,166
km railways, 366,095 km roadways, and 2,900 waterways (CIA,
2012).
The Telecommunication Systems in Mexico are highly
developed systems undergoing
expansion and privatization. Long-distance telephone calls go
via mix of microwave and
domestic satellite links with 120 ground stations (2012
Investment Climate Statement, 2012).
Demand still exceeds supply for new telephones in homes, but
the situation is improving. There
are international calls via five satellite ground stations and
microwave links to the United States.
Mexico allows up to 49 percent FDI in companies that provide
fixed telecommunications
Mexico, Page 9
networks and services. There are more than 600 medium wave
amplitude modulation (AM)
stations, privately owned and 22 shortwave AM stations. There
are more than 1,400 radio
stations, most that are privately owned (CIA, 2012).
15. The exchange rate in Mexico, Mexican pesos per US dollar, is
12.423 (CIA, 2012).
Inflation continues to cause the devaluation of the peso. This is
good for Mexican exports but not
so good for foreign imports into Mexico. The Commercial bank
prime lending rate is 4.92%
(CIA, 2012), and the Central bank discount rate is 4.5% (CIA,
2012). The inflation rate went
from being 4.2% in 2010 to 3.4% in 2011; therefore, inflation is
going down. Mexico has
numerous production capabilities. The natural resources in
Mexico include petroleum, silver,
copper, gold, lead, zinc, natural gas, and timber. Exports from
Mexico include manufactured
goods, oil and oil products, silver, fruits, vegetables, coffee,
and cotton. Mexico’s agricultural
products include corn, wheat, soybeans, rice, beans, cotton,
coffee, fruit, tomatoes; beef, poultry,
dairy products and wood products. The industries operating in
Mexico are food and beverages,
tobacco, chemicals, iron and steel, petroleum, mining, textiles,
clothing, motor vehicles,
consumer durables, and tourism (CIA, 2012).
Mexico’s technology includes geothermal energy production,
16. nanotechnology, solar
technology, telephones, broadcast media, and the internet.
Mexico has the third greatest
geothermal energy production in the world which uses natural
resources to conduct electricity.
Nanotechnology is utilized in many of Mexico’s industries. For
instance, the clothing industry is
currently using embedded nanoparticles to create stain-repellent
khakis ("Current
Nanotechnology Applications," 2012). Solar technology is being
used in Mexico in order to
create Green Parking lots that will shelter cars from the vibrant
Mexican sun and allow for the
production of renewable energy (Sarah, 2012). The number of
telephone main lines in use are
Mexico, Page 10
19.684 million and the mobile cellular telephones in use are
94.565 million (CIA, 2012).
Broadcast media includes many TV stations and more than
1,400 radio stations, most that are
privately owned. There are 15.165 million internet hosts and
31.02 million internet users (CIA,
17. 2012).
Firms considering business with Mexico should know that they
have favorable property
ownership and establishment rights. Within a zone of 100
kilometers from the border or 50
kilometers from the coast, a foreigner cannot acquire the direct
ownership of land. These areas
are known as Restricted or Prohibited Zones. The purchase of
non-residential property can be
achieved through a Mexican corporation, which, under certain
conditions, can be 100% foreign-
owned (Foreign Ownership of Property, 2012). Mexico has a
labor force of 49.17 million people.
The labor force in agriculture is 13.7%, industry 23.4%, and
services 62.9%. The unemployment
rate is 5.2% (CIA, 2011). Underemployment may be as high as
25%.
According to all of the information about Mexico’s economic
forces, there many
conclusions that can be drawn for the future of business venture
in the Textiles and Clothing
industry in Mexico. First, there’s a large market for economic
growth, which creates many
18. opportunities for firms. Secondly, extensive land transportation
will allow firms to easily
transport products and receive materials. Thirdly, high interest
rates will make it difficult for
many firms to obtain loans. Furthermore, the variety of
industries allows many different firms
the opportunity to seek business ventures in Mexico. In
addition, the high unemployment (and
underemployment) rate means firms will have an abundance of
labor. Therefore, if there is high
underemployment it means that, there is skilled labor that is
underutilized and can be hired at a
reasonable rate.
Mexico, Page 11
Political Forces
Mexico’s balance of payments is of great importance to firms
wanting to do business
there. Last year, Mexico’s exports amounted to USD 349.7
billion and its imports totaled USD
350.8 billion. Its current account balance in 2011 was USD
8.789 billion, up from USD 3.094
19. billion in 2010. Its capital account was USD 229.88 billion in
2011, and its reserve of foreign
exchange and gold was USD 149.3 billion in December 2011
(CIA, 2012).
In Mexico, expropriation is governed by international law.
Firms are not allowed to
expropriate property except for a public purpose and on a non-
discriminatory basis.
Expropriation requires rapid fair market value compensation
including accrued interest. There is
currently war and terrorism occurring in Mexico. The Mexican
president declared war on the
country’s drug cartels. The cartels make kidnappings, torture,
and beheadings common
(Shootouts in Mexican Border, 2012). This is a huge problem
for Mexico because it ruins its
society. It causes corruption of police and government.
Any firm wanting to do business with Mexico should
understand its trade regulations and
standards. Pursuant to the terms of the NAFTA, on January 1,
2003, Mexico eliminated tariffs on
all remaining industrial and most agricultural products imported
from the United States. On
January 1, 2008, Mexico eliminated remaining tariffs and tariff-
20. rate quotas on all U.S.
agricultural exports. On March 18, 2009, in response to the U.S.
cancellation of the United
States-Mexico Cross Border Trucking Demonstration Project,
Mexico imposed retaliatory tariffs
on 89 types of U.S. goods totaling about USD 2.4 billion in
exports from 40 U.S. states.
Retaliatory tariffs ranged from 5 percent on a few goods,
including hams and toilet paper, to 25
percent on some cheeses (Foreign Trade Barriers, 2012). There
are a few non-tariff trade barriers
Mexico, Page 12
in Mexico. First, minimum estimated prices, also referred to as
a “reference price,” no longer
affect goods other than used cars. Second, certain sensitive
products must obtain an import
license for which the difficulty varies according to the nature of
the product. Third, commercial
samples of controlled products shipped by courier are also
subject to these regulations. In the
case of liquid, gas or powdered products, as of June 2008, they
are no longer eligible to be
21. shipped by courier, even in small quantities (Trade Regulations
and Standards, 2011).
In accordance with intellectual property protection, Mexico
was listed on the Priority
Watch List in the 2011 Special 301 report. The report noted
Mexico’s improved enforcement
efforts, but noted that overall piracy and counterfeiting rates
remain high. Cooperation among
enforcement issues has continued to improve, but coordination
at the sub-federal level remains
weak. Concerns also remained over enforcement procedures and
the inconsistent issuance of
deterrent penalties. The United States welcomed Mexico’s
passage of legislation in 2009 that
would provide the Mexican Attorney General’s office and
certain Mexican enforcement officials
with ex officio authority to prosecute intellectual property
rights (IPR) infringement (Foreign
Trade Barriers, 2012).
Pursuant to antitrust, Mexican President Felipe Calderon,
seeking to strengthen
competition among companies, proposed bigger fines and jail
time for antitrust violations. The
22. country needs more competition to promote investment.
Calderon proposed fines of as much as
10 percent of revenue and possible jail time for colluding on
prices. He also proposed fines of as
much as 8 percent of revenue for "relative monopoly practices,"
or restrictions such as
exclusivity agreements that keep new competitors from entering
an industry. About 30 percent of
consumer spending goes to markets with a lack of competition,
causing Mexicans to spend 40
percent more than they would with better enforcement of
antitrust rules (Erik & Harrison, 2010).
Mexico, Page 13
The Transparency and Access to Public Government
Information Act, the country's first
freedom of information act, went into effect in June 2003 with
the aim of increasing government
accountability. Mexico's 31 states have passed similar freedom
of information legislation that
mirrors the federal law and meets international standards in this
field. Five years after its
passage, transparency in public administration at the federal
23. level has noticeably improved, but
access to information at the state and local level has been slow
(Bureau of Western Hemisphere
Affairs, 2012). Courts are fully available for foreign investors
in the event of investment
disputes. Chapter Eleven of NAFTA contains provisions
designed to protect cross-border
investors and facilitate the settlement of investment disputes.
Investors may initiate arbitration
against the NAFTA Party under the Arbitration Rules of the
United Nations Commission on
International Trade Law or the Arbitration Rules of the
International Centre for Settlement of
Investment Disputes (Bureau of Western Hemisphere Affairs,
2012). Pursuant to the investment
climate in Mexico, in 2010, U.S. investors accounted for 27.6
percent of all FDI in Mexico,
benefiting 23,360 companies. U.S. FDI was largely concentrated
in the manufacturing (46
percent) and commercial (19 percent) sectors. Despite Mexico's
relatively open economy, a
number of key sectors in Mexico continue to be characterized
by a high degree of market
concentration (Bureau of Western Hemisphere Affairs, 2012).
24. Pursuant to government procurement, the Mexican government
uses several “electronic
government” Internet sites to increase the transparency of
government processes and to provide
guidelines for the conduct of government officials (Foreign
Trade Barriers, 2012). Corruption is
pervasive in almost all levels of Mexican government and
society. In 2008, Calderon launched
"Operacion Limpieza," investigating and imprisoning alleged
corrupt government officials in
enforcement agencies. In 2010, the Mexican Congress
considered legislation to prevent the use
Mexico, Page 14
of money from organized crime groups in elections. The bill has
not yet passed, but Congress
will most likely take the law up again in 2011 (Bureau of
Western Hemisphere Affairs, 2012).
For foreign exchange controls, there are no controls on the
transfer of U.S. dollars. Profits can be
sent or brought back freely.
According to all of the information about Mexico’s political
25. forces, there many
conclusions that can be made for the outlook of business in the
Textiles and Clothing industry in
Mexico. First, the United States and Mexico have strong trade
ties so it will be easier to start and
continue doing business in Mexico than compared to other
countries. Secondly, drug wars may
limit the scope to which firms can do business in Mexico.
Thirdly, few tariff restrictions allow
firms to conduct business on a larger international scale
meaning more potential customers and
potential profits. Furthermore, corruption may hurt firms who
participate in unfavorable business
endeavors or hurt firms who pose as tough competition.
Additionally, lack of competition in
some sectors could provide a great opportunity to firms.
Opportunities/Threats
Mexico possesses many opportunities for firms seeking
business there. First, trade
between the United States and Mexico totals almost USD 850
million per day. Secondly, a
national infrastructure plan offers key projects in power, oil and
gas, airports, water supply and
26. water treatment. In addition, there are many market sectors that
show much promise including
agribusiness, auto parts and services, telecommunications
equipment and much more. Lastly,
shared culture makes it easier to market and sell goods and
services. Threats from doing business
in Mexico include the devaluation of the peso, high interest
rates that makes it difficult to get
loans and drug cartels which cause violence and insecurity in
areas (especially near border). The
Mexico, Page 15
economy thrives on the success of the U.S. economy, so if the
economy in the United States is
down then so is the economy in Mexico.
Conclusion
The reliance of Mexico’s economy on that of the United States
provides many
opportunities for firms who want to enter the Textiles and
Clothing industry. In Mexico, firms
have access to many factors of production needed to be
successful. The large population of
27. unskilled workers combined with lower minimum wages means
Mexico can produce
goods/services at a lower opportunity cost-comparative
advantage. The shared culture of the
United States and Mexico allows firms to more easily market
and sell their products.
Mexico, Page 16
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etiquette/mexico-country-profile.html
http://www.kwintessential.co.uk/resources/global-
etiquette/mexico-country-profile.html
http://www.tradingeconomics.com/mexico/unemployment-rate
http://www.bis.org/review/r121002f.pdf?ql=1
http://mexicotoday.org/article/cutting-edge-solar-technology-
used-jalisco-mexico%E2%80%99s-new-%E2%80%98green-
parking-lot%E2%80%99
http://mexicotoday.org/article/cutting-edge-solar-technology-
used-jalisco-mexico%E2%80%99s-new-%E2%80%98green-
parking-lot%E2%80%99
http://mexicotoday.org/article/cutting-edge-solar-technology-
used-jalisco-mexico%E2%80%99s-new-%E2%80%98green-
parking-lot%E2%80%99
http://latino.foxnews.com/latino/politics/2012/11/04/shootouts-
in-mexican-border-city-leave-dead/
http://latino.foxnews.com/latino/politics/2012/11/04/shootouts-
32. in-mexican-border-city-leave-dead/
Mexico, Page 18
Trade Regulations and Standards in Mexico. (2011, December
18). Retrieved October 3, 2012,
from http://www.globaltrade.net/f/business/text/Mexico/Legal-
and-Compliance-Trade-
Regulations-and-Standards-in-Mexico.html
UIS STATISTICS IN BRIEF. (n.d.). Retrieved October 3, 2012,
from
http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?
ReportId=121&IF_Langu
age=eng&BR_Country=4840
http://www.globaltrade.net/f/business/text/Mexico/Legal-and-
Compliance-Trade-Regulations-and-Standards-in-Mexico.html
http://www.globaltrade.net/f/business/text/Mexico/Legal-and-
Compliance-Trade-Regulations-and-Standards-in-Mexico.html
http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?
ReportId=121&IF_Language=eng&BR_Country=4840
http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?
ReportId=121&IF_Language=eng&BR_Country=4840
Macroeconomics
ECN 2025-102947
Kashmala Khan
33. October 23, 2012
Page 1
Mexico
I. SUMMARY
II. INTRODUCTION
A. The Social Process Triangle Model was used to analyze the
environment. As a
whole, it represents the big picture of modern Mexico’s Textiles
and Clothing
industry. The triangle is divided into three sub-triangles, which
are the Cultural
Forces, Economic Forces, and the Political Forces.
III. CULTURAL FORCES
A. Population
1. Count is 114,975,406 as of July 2012
2. Urban Population: 78% of total population
3. Speak Spanish only: 92.7%
B. Growth Rate
1. Mexico’s growth rate is 1.086% as of 2012
2. Mexico’s birth rate is 18.87 births out of 1,000 population as
of 2012
3. Mexico’s death rate is 4.9 deaths out of 1,000 population as
of July 2012
C. Literacy
1. Age 15 and over can read and write
2. The total population for literacy is 86.1%
3. Broken down is Male: 86.9% and Female: 85.3%
34. D. Education
1. An average citizen spends 14 years in school (primary to
tertiary education)
a) Male: 14 years
b) Female: 14 years
2. Primary school (Elementary School) Net enrollment ratio:
a) Male: 94% (2010)
b) Female: 94% (2010)
3. Secondary school (Middle to High School) Net enrollment
ratio:
a) Male: 71% (2010)
b) Female: 72% (2010)
4. Tertiary school (College, University, Vocational School) Net
enrollment ratio:
a) Male: 36% (2010)
b) Female: 46% (2010)
5. The education expenditure is 4.8% of GDP (2007)
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E. Social Structure
1. Mexico is broadly a middle class society.
35. 2. Steady economic growth rates, more open and competitive
markets, and the
smaller families that result from sharply declining fertility rates
are
responsible for the country’s expanding, prosperous middle
class
3. The family is at the centre of the social structure
4. Mexican society and business are highly stratified and
vertically structured.
5. Mexicans emphasize hierarchical relationships.
6. People respect authority and look to those above them for
guidance and
decision-making.
7. Rank is important, and those above you in rank must always
be treated with
respect.
8. This makes it important to know which person is in charge,
and leads to an
authoritarian approach to decision-making and problem solving.
9. Mexicans are very aware of how each individual fits into
each hierarchy--be it
family, friends or business.
10. It would be disrespectful to break the chain of hierarchy.
F. Family Roles
1. Mexicans consider it their duty and responsibility to help
family members.
2. Outside of the major cosmopolitan cities, families are still
generally large.
3. The extended family is as important as the nuclear family
36. since it provides a
sense of stability.
4. Most Mexican families are extremely traditional, with the
father as the head,
the authority figure and the decision-maker.
5. Mothers are greatly revered, but their role may be seen as
secondary to that of
their husband.
G. Basis for Value System
1. Religion: Roman Catholic 76.5%, Protestant 5.2%
(Pentecostal 1.4%, other
3.8%), Jehovah's Witnesses 1.1%, other 0.3%, unspecified
13.8%, none 3.1%
(2000 census)
2. Ethnic Groups: Mestizo (Amerindian-Spanish) 60%,
Amerindian or
predominantly Amerindian 30%, white 9%, other 1%
H. Customs
1. Mexico has a meeting etiquette, gift giving etiquette, dining
etiquette, and
business etiquette.
2. Meeting etiquette:
a) When greeting in social situations, women pat each other on
the right
forearm or shoulder, rather than shake hands
37. Macroeconomics
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October 23, 2012
Page 3
b) Men shake hands until they know someone well, at which
time they
progress to the more traditional hug and backslapping.
c) Wait until invited before using a Mexican's first name
3. Gift giving etiquette:
a) If invited to a Mexican's house, bring a gift such as flowers
or sweets.
b) Gift-wrapping does not follow any particular protocol.
c) Do not give marigolds as they symbolize death.
d) Do not give red flowers as they have a negative connotation.
e) White flowers are a good gift, as they are considered
uplifting.
f) Gifts are opened immediately.
g) If you receive a gift, open it and react enthusiastically.
4. Dining etiquette:
a) If you are invited to a Mexican's home: arrive 30 minutes late
in most
places because arriving on time or early is considered
inappropriate.
b) At a large party, you may introduce yourself.
c) At a smaller gathering, the host usually handles the
introductions.
d) Always keep your hands visible when eating. Keep your
wrists resting on
38. the edge of the table.
e) Do not sit down until you are invited to and told where to sit.
f) Do not begin eating until the hostess starts.
g) Only men give toasts.
h) It is polite to leave some food on your plate after a meal.
5. Business etiquette:
a) Business appointments are required and should be made at
least 2 weeks
in advance. Reconfirm the appointment one week before the
meeting.
b) Reconfirm the meeting again once you arrive in Mexico and
make sure
that the secretary of the person you will be meeting knows how
to contact
you.
c) It is important that you arrive on time for meetings, although
your
Mexican business associates may be up to 30 minutes late.
d) Have all written material available in both English and
Spanish.
e) Agendas are not common. If they are given, they are not
always followed.
I. What does this mean for the industry you selected wanting to
do business in
this country?
1. Large population will be able to meet the labor demands of
the firm
2. Many unskilled workers will lead to lower wages and more
profit as well as
39. increased training costs
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Kashmala Khan
October 23, 2012
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3. Since 92.7% of the population speaks Spanish only, firms
should have means
of interpreting Spanish
4. Firms should observe Christian holidays and local traditions
5. Firms should organize their company with a Top down
management style.
6. Shared culture will allow firms to more easily market and sell
their products
IV. ECONOMIC FORCES
A. GDP
1. Purchasing power parity:
a) USD $1.683 trillion (2011)
b) USD $1.619 trillion (2010)
c) USD $1.534 trillion (2009)
2. Official Exchange Rate: USD $1.155 trillion (2011)
3. Real Growth Rate:
a) 4% (2011)
b) 5.5% (2010)
c) -6.3% (2009)
40. 4. Per Capita (PPP):
a) USD $14,800 (2011)
b) USD $14,400 (2010)
c) USD $13,900 (2009)
5. Composition by Sector:
a) Agriculture: 3.8%
b) Industry: 34.2%
c) Services: 62% (2011)
B. Selling U.S. Goods and Services
1. Advertise on billboards
2. Internet campaigns
3. Broadcast media: many TV stations and more than 1,400
radio stations, most
are privately owned
4. Direct marketing methods:
a) Radio
b) T.V. commercials
c) Telemarketing
d) Postal mail
e) Email
f) Internet consulting
g) Databases
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Kashmala Khan
October 23, 2012
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41. C. Distribution Systems
1. Physical Infrastructure
a) Open to foreign investment
b) The Mexican government has been actively seeking an
increase in private
involvement in infrastructure development in numerous sectors,
including
transport, communications, and environment.
c) Improvement in the national infrastructure is seen as a key
element to
strengthening economic competitiveness and attracting
investment to
disadvantaged regions of the country.
d) In July 2007, President Calderon presented the National
Infrastructure
Program 2007-2012. A key aspect of this program is to increase
private
investment through means of Service Lending Projects (public-
private
partnerships) and concessionary schemes.
e) In 2011, the Public-Private Associations Law was approved
by the lower
house of Congress; the law had been approved by the Senate in
October
2010.
f) The Public-Private Partnership Law allows the government to
enter into
infrastructure and service provision contracts with private
42. companies for
up to 40 years. The law provides more legal certainty to private
investors
by equally distributing risks, facilitates access to bank loans,
and
harmonizes existing state public-partnership models under a
single federal
law.
g) 1,724 airports (249 have paved runways)
h) 1 heliport
i) Pipelines: gas 16,594 km; liquid petroleum gas 2,152 km; oil
7,499 km;
oil/gas/water 4 km; refined products 7,264 km; water 33 km
j) Railways: 17,166 km
k) Roadways: 366,095 km (132,289 km are paved)
l) Waterways: 2,900 km
m) Merchant Marine: 52 (bulk carrier 5, cargo 3, chemical
tanker 11,
liquefied gas 3, passenger/cargo 10, petroleum tanker 17, roll
on/roll off 3)
n) Ports and Terminals: Altamira, Coatzacoalcos, Lazaro
Cardenas,
Manzanillo, Salina Cruz, Veracruz
2. Telecommunication Systems
a) Mexico allows up to 49 percent FDI in companies that
provide fixed
telecommunications networks and services
b) Highly developed system undergoing expansion and
privatization
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October 23, 2012
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c) Long-distance telephone calls go via mix of microwave and
domestic
satellite links with 120 ground stations.
d) International calls via five satellite ground stations and
microwave links to
United States.
e) Demand still exceeds supply for new telephones in homes,
but situation
improving
f) More than 600 medium wave amplitude modulation (AM)
stations,
privately owned and 22 shortwave AM stations
g) More than 1,400 radio stations, most are privately owned
h) Almost 300 television stations, most organized into two
national networks
D. Financial Services
1. Currency Stability & Exchange Rate Mechanisms
a) Exchange rate-Mexican pesos per US dollar
(a) 12.423 (2011)
(b) 12.636 (2010)
(c) 13.514 (2009)
44. (d) 11.016 (2008)
(e) 10.8 (2007)
b) Inflation continues to cause the devaluation of the peso. This
is good for
Mexican exports but not so good for foreign imports into
Mexico.
2. Interest Rates
a) Commercial bank prime lending rate: 4.92% (2011)
b) Central bank discount rate: 4.5% (2009)
3. Inflation Rate
a) 3.4% (2011) – Inflation is going down
b) 4.2% (2010)
E. Capital Resources
1. Production Capabilities
a) Natural resources: petroleum, silver, copper, gold, lead, zinc,
natural gas,
timber
b) Exports: manufactured goods, oil and oil products, silver,
fruits,
vegetables, coffee, cotton
c) Agricultural products: corn, wheat, soybeans, rice, beans,
cotton, coffee,
fruit, tomatoes; beef, poultry, dairy products; wood products
d) Industries: food and beverages, tobacco, chemicals, iron and
steel,
petroleum, mining, textiles, clothing, motor vehicles, consumer
durables,
tourism
45. Macroeconomics
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Kashmala Khan
October 23, 2012
Page 7
2. Technology
a) Mexico has the third greatest geothermal energy production
in the world
b) Nanotechnology: the clothing industry is currently using
embedded
nanoparticles to create stain-repellent khakis
c) Solar technology: “Green parking lots”
d) Telephones- main lines in use: 19.684 million (2011)
e) Telephones- mobile cellular: 94.565 million (2011)
f) Internet hosts: 15.165 million (2010)
g) Internet users: 31.02 million (2009)
F. Property Ownership
1. Within a zone of 100 kilometers from the border or 50
kilometers from the
coast, a foreigner cannot acquire the direct ownership of land.
a) These areas are known as Restricted or Prohibited Zones
2. The purchase of non-residential property can be achieved
through a Mexican
corporation which, under certain conditions, can be 100%
foreign-owned
a) An agreement is signed that says the corporation is subject to
46. Mexican law
and the owners will not invoke the laws of their parent country
b) The real estate must be registered with the Foreign Affairs
Ministry and be
used for non-residential activities
c) In other words under the above conditions foreigners can
directly acquire
properties for tourist, commercial and industrial use.
G. Workforce
1. Labor force: 49.17 million (2011)
2. Labor force by occupation:
a) Agriculture: 13.7%
b) Industry: 23.4%
c) Services: 62.9%
3. Unemployment rate:
a) 5.2% (2011)
b) 5.4% (2010
4. Underemployment may be as high as 25%
H. What does this mean for the industry you selected wanting to
do business in
this country?
1. Large market for economic growth (many opportunities for
firms)
2. Extensive land transportation will allow firms to easily
transport products and
receive materials
3. High interest rates will make it difficult for many firms to
47. obtain loans
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Kashmala Khan
October 23, 2012
Page 8
4. The variety of industries allows many different firms the
opportunity to seek
business ventures in Mexico
5. The high unemployment (and underemployment) rate means
firms will have
an abundance of labor
6. If there is high underemployment it means that, there is
skilled labor that is
underutilized and can be hired at a reasonable rate.
V. POLITICAL FORCES
A. Balance of Payments
1. Balance of Trade
a) Exports: USD $349.7 billion (2011)
b) Imports: USD $350.8 billion (2011)
2. Current Account
a) USD $8.789 billion (2011)
b) USD $3.094 billion (2010)
3. Capital Account
a) USD $229.88 billion (2011)
48. b) USD $220.12 billion (2010)
4. Reserve Account
a) USD $149.3 billion (2011)
b) USD $120.5 billion (2010)
B. Political Stability
1. Expropriation
a) Not allowed to expropriate property except for a public
purpose and on a
non-discriminatory basis
b) Governed by international law
c) Require rapid fair market value compensation including
accrued interest
2. War/Terrorism
a) Mexican president declared war on the country’s drug cartels
b) The cartels make kidnappings, torture, and beheadings
common
c) Causes corruption of police and government
C. Trade Regulations & Standards
1. Tariffs
a) Pursuant to the terms of the NAFTA, on January 1, 2003,
Mexico
eliminated tariffs on all remaining industrial and most
agricultural
products imported from the United States.
b) On January 1, 2008, Mexico eliminated remaining tariffs and
tariff-rate
quotas on all U.S. agricultural exports.
49. Macroeconomics
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October 23, 2012
Page 9
c) On March 18, 2009, in response to the U.S. cancellation of
the United
States-Mexico Cross Border Trucking Demonstration Project,
Mexico
imposed retaliatory tariffs on 89 types of U.S. goods totaling
about USD
$2.4 billion in exports from 40 U.S. states.
d) Retaliatory tariffs ranged from 5 percent on a few goods,
including hams
and toilet paper, to 25 percent on some cheeses.
2. Non-tariff Trade Barriers
a) Minimum estimated prices, also referred to as a “reference
price”, no
longer affect goods other than used cars
b) Certain sensitive products must obtain an import license for
which the
difficulty varies according to the nature of the product.
c) Commercial samples of controlled products shipped by
courier are also
subject to these regulations.
d) In the case of liquid, gas or powdered products, as of June
2008, they are
50. no longer eligible to be shipped by courier, even in small
quantities.
D. Laws Regarding Trade/Commerce
1. Intellectual Property Protection
a) Mexico was listed on the Watch List in the 2011 Special 301
report.
b) The report noted Mexico’s improved enforcement efforts, but
noted that
overall piracy and counterfeiting rates remain high.
c) Cooperation among enforcement issues has continued to
improve, but
coordination at the sub-federal level remains weak.
d) Concerns also remained over enforcement procedures and the
inconsistent
issuance of deterrent penalties.
e) The United States welcomed Mexico’s passage of legislation
in 2009 that
would provide the Mexican Attorney General’s office and
certain Mexican
enforcement officials with ex officio authority to prosecute
intellectual
property rights (IPR) infringement.
2. Antitrust
a) Mexican President Felipe Calderon, seeking to strengthen
competition
among companies, proposed bigger fines and jail time for
antitrust
violations. The country needs more competition to promote
51. investment
b) Calderon proposed fines of as much as 10 percent of revenue
and possible
jail time for colluding on prices. He also proposed fines of as
much as 8
percent of revenue for "relative monopoly practices," or
restrictions such
as exclusivity agreements that keep new competitors from
entering an
industry.
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Kashmala Khan
October 23, 2012
Page 10
c) About 30 percent of consumer spending goes to markets with
a lack of
competition, causing Mexicans to spend 40 percent more than
they would
with better enforcement of antitrust rules
3. Transparency
a) The Transparency and Access to Public Government
Information Act, the
country's first freedom of information act, went into effect in
June 2003
with the aim of increasing government accountability.
b) Mexico's 31 states have passed similar freedom of
52. information legislation
that mirrors the federal law and meets international standards in
this field.
c) Five years after its passage, transparency in public
administration at the
federal level has noticeably improved, but access to information
at the
state and local level has been slow.
4. Dispute Settlement
a) Chapter Eleven of NAFTA contains provisions designed to
protect cross-
border investors and facilitate the settlement of investment
disputes.
b) Investors may initiate arbitration against the NAFTA Party
under the
Arbitration Rules of the United Nations Commission on
International
Trade Law ("UNCITRAL Rules") or the Arbitration (Additional
Facility)
Rules of the International Centre for Settlement of Investment
Disputes
("ICSID Additional Facility Rules").
5. Investment Climate
a) In 2010, U.S. investors accounted for 27.6 percent of all FDI
in Mexico,
benefiting 23,360 companies.
b) U.S. FDI was largely concentrated in the manufacturing (46
percent) and
commercial (19 percent) sectors.
53. c) Despite Mexico's relatively open economy, a number of key
sectors in
Mexico continue to be characterized by a high degree of market
concentration.
d) For example, telecommunications, electricity, television
broadcasting,
petroleum, beer, cement, and tortillas feature one or two or
several
dominant companies (some private, others public) with enough
market
power to restrict competition.
E. Government Procurement
1. The Mexican government uses several “electronic
government” Internet sites
to increase the transparency of government processes and to
provide
guidelines for the conduct of government officials.
2. In March 2011, the Mexican Senate approved President
Calderon’s Federal
Anti-Corruption in Government Contracting initiative, which
would impose
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October 23, 2012
Page 11
54. penalties against national or foreign individual and legal
entities for irregular
conduct (including bribes) during their direct or indirect
participation in
federal government procurement.
F. Corruption
1. Corruption is pervasive in almost all levels of Mexican
government and
society.
2. In 2008, Calderon launched "Operacion Limpieza,"
investigating and
imprisoning alleged corrupt government officials in
enforcement agencies.
3. In 2010, the Mexican Congress considered legislation to
prevent the use of
money from organized crime groups in elections. The bill has
not yet passed,
but Congress will most likely take the law up again in 2011.
G. Foreign Exchange Controls
1. No controls on transfer of U.S. dollar
2. Profits can be sent or brought back freely
H. What does this mean for the industry you selected wanting to
do business in
this country?
1. U.S. and Mexico have strong trade ties so it will be easier to
start and continue
doing business in Mexico than compared to other countries
2. Drug wars may limit the scope to which firms can do
business in Mexico
55. 3. Few tariff restrictions allow firms to conduct business on a
larger international
scale meaning more potential customers and potential profits
4. Corruption may hurt firms you participate in unfavorable
business endeavors
or firms who pose as tough competition
5. Lack of competition in some sectors could provide a great
opportunity to
firms
VI. OPPORTUNITIES/THREATS – For U.S. firms in this
industry doing business
with this country
A. Opportunities
1. Trade between U.S. and Mexico totals almost USD $850
million per day
2. National infrastructure plan offers key projects in power, oil
and gas, airports,
water supply and water treatment
3. Many market sectors that show much promise including
agribusiness, auto
parts and services, telecommunications equipment and much
more
4. Shared culture makes it easier to market and sell products
and services
B. Threats
1. Devaluation of peso
2. High interest rates makes it difficult to get loans
3. Drug cartels cause violence and insecurity in areas
56. (especially near border)
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Kashmala Khan
October 23, 2012
Page 12
4. The economy thrives on the success of the U.S. economy, so
if the economy
in the U.S. is down than so is the economy in Mexico
VII. CONCLUSION
A. The reliance of Mexico’s economy on that of the U.S.
provides many
opportunities for firms
B. Firms have access to many factors of production needed to be
successful
C. The large population of unskilled workers combined with
lower minimum wages
means Mexico can produce goods/services at a lower
opportunity cost-
comparative advantage
D. The shared culture of the U.S. and Mexico allows firms to
more easily market and
sell their products
57. Name 1
Name
ECN 2025.102947
T/Th 10:00 – 11:20 AM
I. Summary:
II. Introduction:
A. Will use social process triangle as a model to identify and
explain the different cultural, political, and
economic forces in the country of Vietnam as they relate to the
sugar industry
III. Cultural Forces:
A. Population:
1. 91,519,289 as of July 2012
2. 89,000,000 (UN, 2011)
3. 82,689,518 as of July 2008
B. Growth Rate:
1. Population:
a. 1.054% est. 2012
2. Birth Rate
a. 16.83 per 1000 people
58. 3. Mortality rate
a. 5.95 per 1000 people
C. Literacy:
1. Total population: 94%
a. Male: 96.1%
b. Female: 92%
D. Education:
1. Skill Level:
Name 2
a. The proportion of labor force with higher education is still
low compared to other East
Asian countries
b. 22 percent of firms have a shortage of workers with adequate
skills and education.
2. Educational Expenditures:
a. 5.3% of GDP (2008)
3. School Life Expectancy:
a. Total: 10 years
59. b. Male: 11 years
c. Female: 10 Years
4. Higher Education:
a. Beyond the reach of the majority
b. The overall state of the physical and social sciences is poor
due to a lack of funding
E. Social Structure:
1. Organized into classes and castes
a. Majority is poor
2. Symbols of Social Stratification
a. motorcycle
b. mobile phone
c. refrigerators
d. televisions
e. video players
f. gold jewelry
g. imported luxury goods:clothing, liquor
3. Gender roles and status
a. Women
60. Name 3
i. perform most of the essential tasks for running the household
ii. dominate the business of petty trading
iii. often secretaries or waitresses, occupying lower level
service positions
b. Men
i. perform the majority of public activities, such as business,
political office or
administration, and occupations that require extended periods
away from home
ii. control the most prestigious religious roles
iii. physically demanding activities like plowing and raking are
mostly performed
by men.
F. Family Roles
1. Family
a. Life revolves around the family
b. Consists of extended family as well as nuclear
c. Father is head of family
61. d. Authority within the household is exercised by the eldest
male although his wife will
often have an important say in family matters.
e. Residence in most homes is organized around the male line
i. Sons stay in the parent's home, and after marriage their brides
move in with
them
ii. The eldest son will usually remain in the home, while
younger sons might leave
to set up their own household a few years after marriage
f. Women of all generations tend to such matters as cooking,
cleaning, and caring for
children, though these responsibilities tend to fall on the
younger wives
2. Inheritance
Name 4
a. General custom is for the eldest son to inherit the parental
home and the largest portion
of the family property, particularly land
b. Younger sons will often inherit some land or other items,
62. such as gold
c. In rare cases daughters receive small items
d. Many parents like all of their children to receive something
in order to prevent discord
G. Value System
1. Based on Confucianism
2. The concept of face is very important
3. Collectivism
a. The individual is seen as second to the group
4. Hierarchy
a. Age and status important
b. The oldest person in a group is greeted or served first
5. Etiquette
a. Polite behavior is highly valued
b. important for the young to show respect to elders
c. People of different genders, especially if they are not married
or related, should not
have physical contact
d. In general woman are expected to maintain greater decorum
than men by avoiding
63. alcohol and tobacco, speaking quietly, and dressing modestly
H. Customs
1. Food consumption is a vital part of ritual celebrations
a.held feasts after the conduct of rites dedicated to village
guardian spirits
b. Feasts held after weddings and funerals remain large and
have increased in size
c. popular feast items are pork, chicken, and vegetable dishes
served with rice
Name 5
d. Feasts are socially important because they provide a context
through which people
maintain good social relations
2. The most important ritual event in Vietnamese society is the
celebration of the Lunar New
Year
3. The first and fifteenth of every month in the twelve month
lunar year are also important
occasions for rites to ancestors, spirits, and Buddhist deities.
4. the fifteenth of the third lunar month when family members
64. clean ancestral graves
5. The vast majority of Vietnamese hold that a person's soul
lives on after death
6. All rituals associated with death have a tremendous moral
significance in Vietnamese society
I. Industry
1.There is a large population of workers from which to hire,
although they are not very skilled.
This would mean training may be necessary, however since
Vietnam is still mainly agricultural,
most of the population may have agricultural knowledge.
IV. Economic Forces
A. GDP
1. GDP figures
a. $303.8 billion USD (2011)
b. $286.9 billion USD (2010)
c. $268.7 billion USD (2009)
2. Official exchange rate
a. $122.7 billion USD (2011)
3. Real growth rate
65. b. Targeting in the 5% range in 2012
a. 4 % in the first quarter of 2012
b. 5.9% (2011)
Name 6
c. 6.8% (2010)
d. 5.3% (2009)
4. Per capita
a. $3,400 USD (2011)
b. $3,300 USD (2010)
c. $3,100 USD (2009)
5. Composition by sector
a. Agriculture: 22%
b. Industry: 40.3%
c. Services: 37.7%
6. Investment
a. 34.6% (2011)
7. Taxes and other revenue
66. a. 26.7% (2011)
8. Public debt
a. 57.3% (2011)
b. 57.1% (2010)
9. Military expenditures
a. 2.5% (2005)
10. State owned enterprises produce around 40% of GDP
B. Selling US Goods and Services
1. Different methods for establishing a business exist
a. Agent or Distributor
b. Establish an Office
c. Franchise
Name 7
d. Direct Marketing
e. Joint Ventures/Licensing
f. Selling to the Government
g. Electronic Commerce
67. 2. Pricing
a. Vietnamese consumers expect to pay a premium for a foreign
label or brand, in
practice, the actual number of consumers who are willing to pay
the higher price is
limited.
b. One important pricing cycle to note is linked to the Christmas
Holiday and the Lunar
New Year “Tet” celebration
3. Selling Factors/Techniques
a. Rely on marketing, branding and a reputation for quality,
safety and reliability.
b. Awareness of brands comes from word of mouth, the Internet,
market promotions and
advertising.
c. Geography is a key factor in segmenting
d. Foreign companies in Vietnam utilize trade fairs, product
seminars, product
demonstrations, and point-of-sales materials, as well as print
and broadcast advertising
e. Successful brands typically must adapt to local tastes,
particularly consumer goods
68. f. Detailed product information in the Vietnamese language
should be provided to agents
and distributors, and companies to establish websites in
Vietnamese
h. Hands-on involvement is required to achieve commercial
success in Vietnam
4. Trade Promotions and Advertising
a. More than 1,000 domestic ad companies, of which about 700
are operating in Ho Chi
Minh City
Name 8
b. Many foreign brand managers make heavy investments in
television advertising
campaigns.
i. Over 90 percent of Vietnam’s urban population own
televisions.
c. There are over 400 newspapers and other publications in
Vietnam
d. Outdoor advertising ranges from billboards and signboards to
public transport,
building walls, bus stations, and wash and service stations,
69. e. Radio advertising is not yet widely used for product
promotion, but radio ad volume is
growing.
C. Distribution systems
1. Physical infrastructure
a. Airports
i. 44 total
ii. 37 with paved runways
1. 9 with over 3,047 m
2. 6 between 2,438 to 3,047 m
3. 13 between 1,524 to 2,437 m
4. 9 between 914 to 1,523 m
iii. 7 without paved runways
1. 1 between 1,524 to 2,437 m
2. 3 between 914 to 1,523 m
3. 3 with less than 914 m
b. Heliports: 1
c. Pipelines
i. 28 km for condensate
70. ii. 10 km for condensate/gas
Name 9
iii. 216 km for gas
iv. 206 km for refined products
d. Railways
i. 2,632 km
e. Roadways
i. Total: 180,549 km
ii. Paved: 133,899 km
iii. Unpaved: 46,650 km
f. Waterways
i. 17,702 km
ii. 5,000 km navigable up 1.8m draft
iii. 6 major ports
2. Telecommunication system
a. Much effort is being made to modernize the
Telecommunication system
71. b. Government controls all broadcast media
c. 9 television channels, law limits access to satellite TV, but
many able to access through
home satellite equipment
d. 6 radio stations
D. Financial Services
1. Currency stability & Exchange Rate Mechanisms
a. Exchange Rates (Dong per US dollar)
i. 20,509.75 (2011)
ii. 18,612.92 (2010)
iii. 17,799.6 (2009)
iv. 16,548.3 (2008)
Name 10
v. 16,119 (2007)
2. Interest Rates
a. 16.95% as of 31 December 2011
b. 13.135% as of 31 December 2010
3. Inflation
72. a. has fallen for the ninth consecutive month — from a peak of
23 percent in August 2011
to 8.3 percent in May 2012.
b. 18.7% (2011)
c. 10% (2010)
E. Capital Resources
1. Production capabilities
a. Growing industrial climate
2. Technology
a. Industrialization of industries
b. Computers
c. Factories
F. Property Ownership
1. Government does not recognize private land ownership
G. Workforce
1. 46.48 million (2011)
2. By occupation
i. Agriculture: 48%
73. ii. Industry: 22.4%
iii. Services: 29.6%
3. Unemployment Rate
Name 11
i. 2.3% (2011)
ii. 2.9% (2010)
H. Industry
1. There is high inflation
2. Low unemployment rate
3. Most people work in agriculture
4. Does not have a very good infrastructure
V Political Forces
A. Balance of payments
1. Balance of trade
a. Exports
i. $95.32 billion USD in 2011
ii. $72.19 billion USD in 2010
74. b. Imports
i. $97.83 billion USD in 2011
ii. $77.34 billion USD in 2010
2. Current Account
a. -$1.896 billion USD in 2011
b. -$4.287 billion USD in 2010
3. Vietnam is currently the 45th largest export market for U.S.
goods.
4. The stock of U.S. foreign direct investment (FDI) in Vietnam
was $623 million in 2010 (latest
data available), up from $525 million in 2009.
B. Political Stability
1. Expropriation
a. No recent instances of expropriation reported
Name 12
2. War/Terrorism
a. Large measure of stability since the late 1970s
C. Trade regulation & standards
75. 1. Tariffs
a. Vietnam significantly reduced its tariff rates
b. The vast majority of U.S. exports now face tariffs of 15
percent or less
c. High tariffs on selected products remain
i. The Ministry of Finance raised ten tariff lines up to their
WTO ceiling rates
1. Shelled walnuts from 20 percent to 30 percent
2. Tomato ketchup and other tomato sauces from 30 percent to
35 percent
3. Tobacco from 30 percent to 50 percent
4. Cast iron from 32 percent to 36 percent
2. Non-tariff trade barriers
a. Vietnam has eliminated many quantitative restrictions on
imports and other non-tariff
measures, such as quotas, bans, permits, prior authorization
requirements, licensing
requirements, or other restrictions having the same effect
D. Laws regarding trade/commerce
1. Intellectual property protection
a. Has made progress, but enforcement efforts have not kept
76. pace with rising levels of
IPR infringement and piracy in the country
b. Piracy rates for software are estimated to be 82%.
2. Antitrust
a. Government owns the majority of businesses
3. Transparency
Name 13
a. The evolving nature of regulatory regimes and commercial
law in Vietnam, combined
with overlapping jurisdiction among Government ministries,
often result in a lack of
transparency, uniformity and consistency in Government
policies and decisions on
commercial projects.
b. Corruption and administrative red tape within the
Government has led to a lack of
transparency and has been a vast challenge for Governmental
consistency and
productivity.
c. Vietnam has improved its process for making and publicizing
77. laws, particularly with
major national laws and regulations
4. Dispute settlement
a. Hierarchy of Vietnamese courts includes: (1) Supreme Court;
(2) Provincial Courts;
and (3) District Courts.
b. Parallel to the court systems is the People’s Procuracy, which
is responsible for
supervising the operation of judicial authorities. The People’s
Procuracy can protest a
judgment or ask for a review of a case
c. Has a system of independent arbitration centers
5. Investment climate
a. Investors often find poorly developed infrastructure, high
start-up costs, arcane land
acquisition and transfer regulations and procedures, and a
shortage of skilled personnel.
b. Financial markets remain weak and poorly regulated
c. The banking sector is underdeveloped
d. The Vietnamese stock market includes two stock exchanges:
Ho Chi Minh City Stock
78. Exchange (HOSE) and Hanoi Stock Exchange (HNX)
E. Government procurement
Name 14
1. Vietnam's 2006 Law on Procurement provides for greater
transparency in procurement
procedures
2. Decentralization of procurement decision making to the
ministries, agencies, and local
authorities; appeal processes; and enforcement provisions.
F. Corruption
1. Corruption and administrative red tape within the
Government have led to a lack of
transparency and has been a vast challenge for Governmental
consistency and productivity.
2. Corrupt officials illegally sell land-use rights or seize it for
personal uses
G. Foreign exchange controls
1. Foreign exchange regulations of Vietnam require all
transactions within the country and
between Vietnam residents
79. 2. The laws also prescribe the number and type of transactions
which the FIE can conduct in
foreign currencies. Frequently conducted transactions include
payment for purchases of goods
and services from individuals and organizations outside
Vietnam.
H. Industry
1. Relatively peaceful; good business environment
2. Slowly eliminating tariffs
3. No ownership of land
VI. Opportunities/ Threats
1. Advertising remains heavily regulated by the Vietnamese
Government
2. The overriding factor in pricing for the Vietnam market is
the low level of per capita income.
3. Financial markets remain weak and poorly regulated
4. Competition from State Owned Enterprises
5. High inflation
6. Communist government strictly regulates everything
Name 15
80. VII. Conclusion
1. Vietnam has many benefits
2. It also has drawbacks
3. Overall, the sugar industry should do well
Krystie Oliver
ECN 2025-110239
Term Paper References
References
Dyson, J. (n.d.). Philippines garment exporters seeking SAVE
act. Retrieved October 4, 2013, from http://www.just-
style.com/analysis/philippines-garment-exporters-seeking-save-
act_id117307.aspx
Industry stats: Philippines vs United States. (n.d.). In Industry
stats: Philippines vs United States. Retrieved October 4, 2013,
from http://www.nationmaster.com/compare/Philippines/United-
States/Industry
Larano, C. (n.d.). Energy Chief worries about electricity amid
Philippine growth. Retrieved October 4, 2013, from
http://blogs.wsj.com/searealtime/2013/09/09/energy-chief-
worries-about-electricity-amid-philippine-growth/
Overview of Philippines textile industry. (n.d.). Retrieved
October 4, 2013, from http://www.bharattextile.com/textile-
statistics/ph.php
Philippines Economy Profile 2013. (n.d.). Retrieved October 4,
2013, from
http://www.indexmundi.com/philippines/economy_profile.html
The phillipines. (n.d.). Retrieved October 4, 2013, from
http://www.ustr.gov/sites/default/files/2013%20NTE%20Philipp
ines%20Final.pdf
Phillipines. (n.d.). Retrieved October 4, 2013, from
81. http://www.state.gov/p/eap/ci/rp/
Phillipines. (n.d.). Retrieved October 4, 2013, from
https://www.cia.gov/news-information/press-releases-
statements/press-release-archive-2006/statement-on-cia-
website-enhancement.html
Reveilhac, P. (n.d.). Electricity and the cost of doing business
in the Philippines. Retrieved October 4, 2013, from
http://eeas.europa.eu/delegations/philippines/documents/page_c
ontent/electricityanddoingbusiness.pdf
Textiles, Apparel & Sporting Goods. (n.d.). Retrieved October
4, 2013, from http://export.gov/industry/apparel/index.asp
Thomasson, S. C. (Ed.). (n.d.). The philippines: Textile and
apparel industry on the mend. Retrieved October 4, 2013, from
http://www.textileworldasia.com/Articles/2013/March/Jan_Feb_
March_issue/Country_Profile_The_Philippines.html
PRINCIPLES OF ECONOMICS I
ECN 2025
SOCIAL PROCESS TRIANGLE OUTLINE
I. SUMMARY
II. INTRODUCTION – Discuss the use of the Social Process
Triangle as your model
III. CULTURAL FORCES
A. Population
B. Growth rate
C. Literacy
D. Education
1. Skill level
E. Social structure
F. Family roles
82. G. Basis for value system
H. Customs
I. What does this mean for firms in your industry wanting to do
business in this country?
IV. ECONOMIC FORCES
A. GDP
B. Marketing – Sales, Promotion, Advertising, etc.
C. Distribution systems
1. Physical infrastructure
2. Telecommunication systems
D. Financial services
1. Currency stability & Exchange Rate Mechanisms
2. Interest rates
3. Inflation
E. Capital resources
1. Production capabilities
2. Technology
F. Property ownership
G. Workforce
H. What does this mean for firms in your industry wanting to do
business in this country?
V. POLITICAL FORCES
A. Balance of payments
1. Balance of trade
a) Export
b) Import
2. Current Account
3. Capital Account
83. 4. Reserve Account
B. Political stability
1. Expropriation
2. War/Terrorism
C. Trade regulations & standards
1. Tariffs
2. Non-tariff trade barriers
D. Laws regarding trade/commerce
1. Intellectual Property Protection
2. Antitrust
3. Transparency
4. Dispute settlement
5. Investment climate
E. Government procurement
F. Corruption
G. Foreign exchange controls
H. What does this mean for firms in your industry wanting to do
business in this country?
VI. OPPORTUNITIES/THREATS – For U.S firms in your
industry doing business with or in this country
VI. CONCLUSION
RESEARCH PAPER
ATHENA MIKLOS, PROFESSOR
Governments develop and support economic systems that they
believe will give their society a
84. competitive advantage and worldwide recognition as a viable
global force. Every country's social system is
comprised of three components: cultural forces, economic
forces, and political forces. These dynamic
forces are in constant motion and prove to be a challenge to
firms entering foreign markets.
Today, a firm's competitive environment is not confined to its
national borders. Firms try to achieve
greater market share and gain competitive advantage by selling
in global markets. In order to be
successful, firms must fully understand the countries with which
they do business. To do this, firms develop
strategy based on an analysis of the environment in the foreign
country.
To help you understand this very contemporary economic
concept and apply it to global advantage,
you are required to submit a research paper that examines the
cultural, economic, and political forces in a
country of your choice. You are not permitted to use a country
where English is the primary language
spoken. India is the only exception to this. After examining
these forces, you must identify the challenges
or opportunities that firms face when trying to do business in
these countries and make recommendations
to firms entering these markets.
You may work in teams or individually to research then submit
a term paper. Teams or individuals
must select a country to research by the end of the 3rd week of
classes. A list of at least 10 references will
be submitted by the end of the 6th week of classes and an
outline by the end of the 10th week of classes.
Your final paper is due by the end of the 13th week of classes.
Check course schedule to confirm firm due
85. dates. For each component not submitted, 10 points will be
subtracted from the final term paper
before it is graded. Therefore, it is possible for a team or
individual to lose up to 30 points on the term
paper before it is submitted.
Each team or individual will submit a typewritten term paper.
Make sure you have two copies of
the paper, one to turn in and one for your own files. You may
put a copy on your hard drive but make sure
you also have it on a flash or floppy drive in addition to your
hard copies. The term paper must consist of
no more than 20 typewritten pages, 15 pages for an individual,
and will include a title page, a running head,
a header, a summary, and a list of at least 10 references. I will
go over specific details in class and give
you handouts that will help.
Use the format presented in the Publication Manual of the
American Psychological Association
(APA). Copies of this are available at the Campus Bookstore
and are also available in the La Plata
Campus Library. It is not necessary to purchase a copy. I will
go over general APA information in class.
You must, however, examine the manual for specifics.
FOLLOW THE FORMAT VERY CAREFULLY. A
TOTAL OF TEN (10) POINTS WILL BE SUBTRACTED FOR
NOT USING THE APA FORMAT. The
specific due date appears on the Tentative Schedule of
Assignments attached to this syllabus.
The final typewritten paper should include a running head,
headers, and headings as indicated in
the outline that will be given to you at a later time. See the
APA manual for information regarding running
heads, headers, and headings. Additional specifications will be
86. discussed in class. PAY ATTENTION AND
ATTEND CLASS ON THAT DAY!!!!!!!!!!!
You must reference approved magazines and newspapers. The
Wall Street Journal, the
Economist, the U.S. News & World Report and the New York
Times are highly recommended references.
Make sure that your references are diverse. I will approve
them. You may not use Wikipedia or
encyclopedias. Your best bet is to use periodicals and journals.
No books are permitted unless I
specifically approve them. Information in books are too old.
Remember, business is a dynamic filed and
not static. It is ever changing and your research must reflect
that.
Those working in teams will have the opportunity to evaluate
each other’s team performance.
While the term paper will receive one grade, your individual
grade will be a combination of the term paper
grade and your team's evaluation of your achievements and
participation. The paper grade will represent
80% of your grade and your team evaluation will represent 20%
of your grade. A copy of how your peers
will grade you is attached to your syllabus. Do not use this
form. I will make copies of forms for you to use
at the end of the semester. Team member evaluations are kept
confidential. Also, you may fire team
members no later than the last day of mid-semester week. This
should give an unemployed member time
to either do an individual term paper or find another team. In
addition, you may choose to be on a team in
any section I teach. Therefore, your individual course section is
irrelevant.
If you choose to do an individual paper you are responsible for
87. a 10 minute classroom presentation
of your findings and conclusions. You will then respond to a
five minute question/answer period. For
individuals choosing this option, 20% of the grade will be based
on the presentation and 80% of the grade
will be based on the written component. Take this presentation
seriously. Your papers will be corrected
and returned before your presentations. Therefore, you must
make changes to your presentation based on
my comments. Dress appropriately. You must use 3x5 note
cards. DO NOT READ YOUR PAPER TO
THE AUDIENCE. This will result in a failing grade. Make
sure you have at least two visuals to stress
important points. A copy of how you will be graded during the
presentation is attached to this document.
Read it very carefully. It is the basis for your grade.
Finally, while this is not a grammar class, I will be looking at
your grammar and mechanics. I
usually go over some of this during a class period at the
beginning of the semester. I am especially
concerned that students cannot make the distinction between
singular and plural. We will go over this in
class. If you do not make the distinction in your final paper, I
will subtract 1 point for each error. For
example, the United States is a country and is singular. If you
refer to it, you may not say “they decided to
evoke Special 301 status.” Instead you should say, “It decided
to evoke Special 301 status.”
I. SUMMARYII. INTRODUCTION – Discuss the use of the
Social Process Triangle as your modelIII. CULTURAL
FORCESA. PopulationB. Growth rateC. LiteracyD. Education1.
88. Skill levelE. Social structureF. Family rolesG. Basis for value
systemH. CustomsI. What does this mean for firms in your
industry wanting to do business in this country?IV. ECONOMIC
FORCESA. GDPB. Marketing – Sales, Promotion, Advertising,
etc.C. Distribution systems1. Physical infrastructure2.
Telecommunication systemsD. Financial services1. Currency
stability & Exchange Rate Mechanisms2. Interest rates3.
InflationE. Capital resources1. Production capabilities2.
TechnologyF. Property ownershipG. WorkforceH. What does
this mean for firms in your industry wanting to do business in
this country?V. POLITICAL FORCESA. Balance of payments1.
Balance of tradea) Exportb) Import2. Current Account3. Capital
Account4. Reserve AccountB. Political stability1.
Expropriation2. War/TerrorismC. Trade regulations &
standards1. Tariffs2. Non-tariff trade barriersD. Laws regarding
trade/commerce1. Intellectual Property Protection2. Antitrust3.
Transparency4. Dispute settlement5. Investment climateE.
Government procurementF. CorruptionG. Foreign exchange
controlsH. What does this mean for firms in your industry
wanting to do business in this country?VI.
OPPORTUNITIES/THREATS – For U.S firms in your industry
doing business with or in this countryVI. CONCLUSION
MACROECONOMICS TERM PAPER
TERM PAPER SPECIFICS
Governments develop and support economic systems that they
believe will give their society a
competitive advantage and worldwide recognition as a viable
global force. Every country's social system
89. is comprised of three components:
These dynamic forces are in constant motion and prove to be a
challenge to firms entering foreign
markets.
Today, a firm's competitive environment is not confined to its
national borders. Firms try to achieve
greater market share and gain competitive advantage by selling
in global markets. In order to be
successful, firms must fully understand the countries with which
they do business. To do this, firms
develop strategy based on an analysis of the environment in the
foreign country.
To help you understand this dynamic economic environment and
apply it to secure a global advantage,
you are required to submit a research paper that examines the
cultural, economic, and political forces in a
country of your choice based on an industry you selected in
prior courses. You are not permitted to use a
country where English is the primary language spoken. India is
the only exception to this. After
examining these forces, you must identify the challenges or
opportunities that firms face when trying to do
business in these countries and make recommendations to
industry firms entering these markets.
You must select a country to research. The due date is
identified in the course schedule. On the due
90. date you will submit a Topic Statement telling me which
country you have selected, why you chose it, and
what you expect to learn from the project. You should also
identify your industry. Hopefully you believe it
will be successful in that country. For example, you would not
select the beer industry and try to enter the
market in Saudi Arabia. Also, if you select a developing
country, like Kenya, your industry should be
agriculture or heavy equipment.
A list of at least 10 references will be submitted as well as an
outline as designated by the due dates. I
will provide you with seven (7) required references and a
generic outline. You will fill in the outline
specifics. Your final paper’s due date is designated in the
course schedule. Be sure to check the course
schedule to confirm firm due dates. For each component not
submitted, 10 points will be subtracted
from the final term paper before it is graded. Therefore, it is
possible for you to lose up to 30 points on
the term paper before it is submitted.
You will submit your typed term paper through a BlackBoard
drop box. Make sure you have at least one
hard copy of your paper. Keep it for your personal files. You
should put a copy on your hard drive but
make sure you also have it on a flash drive or, CD in addition to
your hard copy. The term paper must
consist of no more than 15 typewritten pages and will include a
title page, a running head, a header, a
summary, and a list of at least 10 references. Page one is your
cover page. Page 2 and possibly 3 is
your summary. Page 15 is your reference page. That takes up 3
91. and probably 4 of your pages.
Remember, you cannot write a summary until your entire paper
is written.
Use the format presented in the Publication Manual of the
American Psychological Association (APA).
Copies of this are available at the Campus Bookstore and are
also available in the La Plata Campus
Library. It is not necessary to purchase a copy. I will try to
guide you through this process. You must,
however, examine the manual for specifics. FOLLOW THE
FORMAT VERY CAREFULLY. A TOTAL
OF TEN (10) POINTS WILL BE SUBTRACTED FOR NOT
USING THE APA FORMAT. The specific
due date appears on the Tentative Course Schedule as part of
this syllabus.
Thus, this project will consist of the following components:
at (Use
NoodleTools)
You must reference approved magazines and newspapers. The
Wall Street Journal, the Economist, the
New York Times, the New York Post, the Washington Times,
the Washington Post, Bloomberg News,
Britebart.com and the U.S. News & World Report are
considerations. You are required to use the
USTR's National Trade Estimate for 2013. Make sure that your
references are diverse. This will keep
you from a skewed perspective of what is happening. You may
92. not use Wikipedia, blogs, or
encyclopedias. Your best bet is to use periodicals and journals.
No books are permitted unless I
specifically approve them. Information, in books, is too old.
Remember, business is a dynamic field and
not static. It is ever changing and your research must reflect
that. In addition to the USTR’s National
Trade Estimate for 2013, I am providing you with the following
required references:
1. USTR’s National Trade Estimate for 2013 -
http://www.ustr.gov/about-us/press-
office/reports-and-publications/2013/NTE-FTB
2. Country Commercial Guide -
http://www.buyusainfo.net/adsearch.cfm?search_type=int&load
nav=no
3. State Department (select the Fact Sheet and if available the
Library of Congress Country
Study) - http://www.state.gov/misc/list/
4. CIA World Fact Book -
https://www.cia.gov/library/publications/the-world-factbook/
5. Un Data: A World of Information - http://data.un.org/
6. Kiss, Bow, or Shake Hands – This book is on reserve at the
library
7. Gale Group -
http://infotrac.galegroup.com/itweb/la32265?id=la32265 (this
is available at the
CSM library. When you get there click proceed and the click on
the “Gale Group Reference
Library.” Click on Nation and the World. Click on Countries
and Their Cultures. In the
93. search bar to your right, type in your country’s name and find
the publication that discusses
your country’s culture only. Everything else is too old to use.
8. kwintessential.com -
http://www.kwintessential.co.uk/resources/country-profiles.html
I provided you with the links above for these sites. Use only
two of the following three links: Kiss, Bow,
or Shake Hands; The Gale Group, and kwintessential. If you
need some help, let me know.
Finally, while this is not a grammar class, I will be looking at
your grammar and mechanics. I am
especially concerned that students cannot make the distinction
between singular and plural. If you do not
http://www.ustr.gov/about-us/press-office/reports-and-
publications/2013/NTE-FTB
http://www.ustr.gov/about-us/press-office/reports-and-
publications/2013/NTE-FTB
http://www.buyusainfo.net/adsearch.cfm?search_type=int&load
nav=no
http://www.state.gov/misc/list/
https://www.cia.gov/library/publications/the-world-factbook/
http://data.un.org/
http://infotrac.galegroup.com/itweb/la32265?id=la32265
http://www.kwintessential.co.uk/resources/country-profiles.html
make the distinction in your final paper, I will subtract 1 point
for each error. For example, the United
States is a country and is singular. If you refer to it, you may
not say “they decided to evoke Special 301
status.” Instead you should say, “It decided to evoke Special