[Excerpt] Soviet Report, 'Mexico: Economic Situation and Prospects of Development of Economic Ties with the Soviet Union'

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Conclusions and recommendations

1. As is evidenced from what is described above, the economic situation of Mexico has been relatively stable in recent years. The state sector in the economy and other measures of the policy of state capitalism (the broad financing and granting of credits to the national economy through the budget and the resources of state banks, the system of tax exemptions, and other privileges offered to industrial enterprises, etc.) turn out to be a great stimulating effect on the entire course of economic development.

2. The ruling circles of Mexico are placing [their] main reliance on the development of a number of key sectors of the national economy - the oil industry, electrical power, ferrous metallurgy, the chemical industry (especially petroleum chemistry and the chemistry of synthetic materials), the reconstruction of rail transport, and road construction.

Complex economic development in economically poorly-developed regions is being practiced increasingly broadly. Such development ordinarily includes hydraulic engineering (hydroelectric power plants, dams, and irrigation systems), road construction, and a complex of recreational and social welfare measures. The economic development program in the region of Rio Balsas is significant in this regard.

3. The economic development of Mexico is being accompanied by an increase of the penetration of foreign capital into the country, primarily American capital, an aggravation of the competitive struggle of the imperialist countries for spheres to apply force in this country.

This struggle takes place most keenly between the US, the FRG, France, Italy, Britain, and Japan in the area of the supply of industrial equipment and granting "technical assistance" in the creation of new industrial enterprises in the aforementioned key sectors of the Mexican economy. It ought to be taken into consideration that right now up to 20-25% of all the imports of industrial equipment are intended for the state sector and is being done under the control of the so-called Committee for the Imports [handwritten insertion: for] the State Sector created several years ago.

Foreign companies make broad use of direct investments in mixed companies with the participation of domestic [natsional'nyy] capital (giving "technical assistance in the process), intermediate [srednesrochnye] company and bank credits (with an annual percentage rate of 5-6%), and finally the compensation form of trade to "push" industrial equipment to the Mexican market.

The compensation form of trade is being used increasingly broadly by Mexico itself to solve difficulties in the sale of the main export products, primarily cotton.

4. The enormous difficulties which Mexico encounters in foreign trade as a consequence of its one-sided dependence on the US market cause business and the ruling circles of the country to speak increasingly often in favor of expanding economic ties with other countries, including the countries of the socialist camp. Some practical steps are also being undertaken to develop these ties, with Czechoslovakia in particular.

5. Based on the above it would also be advisable for the Soviet Union to exhibit greater initiative in expanding economic ties with Mexico through the following typical channels:

a) invite groups of Mexican petroleum and energy specialists for familiarization with the Soviet Union's achievements in appropriate sectors; offer Mexico a supply of equipment for state oil and electrical power enterprises.

b) possibly it would be worthwhile to offer Mexico the construction of a metallurgical plant with a capacity of 300-500,000 tons of steel per year.

c) the supplies of equipment and the furnishing of technical assistance in its use would obviously require the granting of appropriate credits.

In the process it ought to be taken into consideration that Mexico is accepting credits paid with future deliveries of its main export goods - cotton, coffee, sugar, tropical fruits, and several types of mineral raw materials - increasingly eagerly.

d) it would also be advisable to enter into contact with the Chamber of the Manufacturing Industry of Mexico, which joins together a significant part of middle-sized and small Mexican industrialists, who are experiencing great economic pressure from foreign capital. The goal of such contact could, for example, be the identification of the opportunities for the supplies of Soviet machines and equipment for enterprises of the Mexican manufacturing industry.