Md. businesses welcome trade pact

August 14, 1992|By Timothy J. Mullaney and Ted Shelsby | Timothy J. Mullaney and Ted Shelsby,Staff Writers

Kurt Haglund likes Mexico for its lack of office buildings and retail space. Rania Habbaba likes it for its primitive phone system. And Jim Albrecht likes it for the food it produces.

They all welcomed the new free-trade deal announced Wednesday that would merge the United States, Canada and Mexico into a single trading bloc.

"This could be the most powerful economic alliance in the world," said Mr. Albrecht, head of international operations for McCormick & Co. Inc. of Hunt Valley. "This is going to enable us to compete better with Europe and Asia. It's going to be dynamite."

But while Maryland businesses are intensely interested in Mexico, the terms of the trade agreement are only part of the reason.

What might be as important, they say, is that attention paid to the trade deal has prodded business executives to wake up to this large, underdeveloped market sitting right under their noses.

Ms. Habbaba, a marketing manager for Mobile Telesystems Inc. in Gaithersburg, was interested in Mexico even before the deal because Mexico's cranky phone system creates a niche for something you can use in emergencies -- something, say, like Mobile Telesystems' $50,000 satellite "suitcase telephone." The phone won attention during the Persian Gulf war because CNN reporter Peter Arnett used one to file reports from Baghdad.

"The changes will be relatively small, as far as the costs" of doing business in Mexico if the treaty wins congressional approval, said James L. Hughes, executive director of the World Trade Center Institute in Baltimore. "The main thing that's exciting people are the internal changes in Mexico, which are making Mexicans more affluent and better potential customers."

Some Maryland companies, including Mobile Telesystems, hope to sell their products in Mexico through distributors. But Mr. Hughes and others said that for service businesses, which make up a large part of Maryland's economy, the path into Mexico is less direct. They will get extra work because of the opening of the Mexican market, but much of that work will be done in the United States.

"We think our client companies have tremendous opportunities in Mexico," said A. B. Krongard, chief executive officer of Alex. Brown Inc. of Baltimore.

Alex. Brown's investment banking departments specialize in helping selected industries raise capital for things like building or expanding factories. Mr. Krongard said some of them -- such as communications, transportation and environmental services -- will be especially helped by the trade deal.

RTKL Associates Inc., the Baltimore-based architecture firm, said too, will get more business because of indirect benefits of the trade deal.

Mr. Haglund, assistant to RTKL Chairman Harold Adams, said the firm does little design work on factories, which are expected to claim the lion's share of any initial post-treaty building rush in Mexico. But as Mexico becomes more affluent and more of a business center, it will need more of the office buildings and retail centers that RTKL designs, Mr. Haglund said.

In the meantime, the biggest benefit from the deal to RTKL, which already has broad access to the Mexican market, will be lower taxes on the work it already does there, Mr. Haglund said.

"Tariffs are probably the biggest place it will help us," Mr. Haglund said. "There are value-added tariffs [in Mexico] for services that we assume will be reduced. That will help RTKL compete harder with local architects for Mexican jobs, he said.

Mr. Albrecht at McCormick says the agreement sparks a new wave of enthusiasm at his company for the construction of an already-planned $15 million factory in Mexico to boost exports of such products as mayonnaise, spices and tea.

Enrique Hernandez Pons, chairman of Mexican-based Herdez S.A., which has been a joint-venture partner with McCormick for 45 years, said he was excited at the prospect of reaching an additional 360 million North American customers.

"This will give us the opportunity to produce a lot more products and sell them at prices satisfactory to U.S. consumers," he said.

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