The article, “A Comparison of the Business Environments of Two Emerging Economies,” by Garcia and Martinez focuses on examining and evaluating the effects of foreign direct investment and free trade liberalization in Latin America with reference to business Mexico and Brazil. In an attempt to achieve the objectives, Garcia and Martinez analyze the business models applied by these countries to attract foreign direct investment thus evaluating the effectiveness of the models by considering the effectiveness of such policies in transforming the economies.
Garcia and Martinez compare the effects of foreign direct investment in Latin America by focusing on the paths employed in achieving economic globalization. The central idea of the authors is that economic development of a country depends on the extent to which the political systems support economic openness and the availability and other support facilities such as availability of financial institutions and existence of trade partners. From this view, economic liberalization is an essential aspect of achieving economic development in a country as opposed to where a nation seeks to achieve economic growth and development by focusing on internal development strategies, but it depends on the availability of supportive institutions.
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Economic globalization should be approached with precautions if a country is to experience full benefits. Countries usually have some sectors where they can enjoy the benefits of comparative advantage in cases where they enact free trade facilities. As a result, the analysis of Brazil and Mexico reveals that the political governance should develop rules and regulations that protect local industries from competition by foreign investors. In situations where the government enacts policies supporting free trade and foreign direct investment without some restrictions, the objectives of foreign investors will not be achieved. For example, Mexico guarantees more than 95% of investors a chance to invest in the country without government approval, and it appears to be the least developed country in Latin America.
Unlawful activities practiced by federal and state may scare investors from a country. For example, corruption takes various forms such as seeking gifts, trade favors, nepotism, and bribery thus becoming posing a serious challenge to potential investors. If it is practiced at the state, federal, and local government, it means that business environment is full of such actions preventing transparency and this exposes potential investors in various forms of risks such as unfair competition. For example, people engage in unlawful corruption activities such as bribery and seeking gifts thus diverting the country’s resources to the hands of the few. Corruption has been common in Latin America appears to be one of the reasons for low levels of foreign direct investment in most Latin American countries such as Mexico.
Martinez and Garcia wrote the article in an informative way. However, they should have included other factors such as level of technology, education, and population in their attempt of understanding the effects of foreign direct investment and free trade in a country. In some cases, a country may be the leading country in foreign investments, but it turns to experience highest poverty levels because of mismatch of education and labor force requirements. Martinez and Garcia should have provided real values of the economic change that has occurred in both countries as a result of introducing free trade policies in the countries. Their analysis states that Mexico is the less developed country in Latin America and they do not provide real values of economic growth measurement.
