ABSTRACT
For each country, the generally accepted values, goals, strategies, and laws and regulations are influenced by international economic and political conditions. The decision to link into the international economic system, whether via trade, capital flows, or foreign investment, may open a country up to the fluctuations of international markets, markets over which a host country government has little control. At the same time, increased international linkages may lead to loss of national economic and political control. The North America Free Trade Agreement (NAFTA) came into effect in 1994, bringing Mexico into this special relationship. Prior to NAFTA, Mexico had severe restrictions on foreign investment in its financial sector. NAFTA permits US and Canadian banks to operate in Mexico. With NAFTA, many businesses will be able to locate anywhere within North America and serve the entire North American market, and so NAFTA will likely intensify the competition among governments to attract new investment.
