Economic reforms lure L.A. firms south of the border.

Economic reforms lure L.A. firms south of the border

Quietly, more Los Angeles companies are sinking roots into Mexico.

They want a piece of the action, and somewhat warily they are taking advantage of Mexico's ongoing program to reform its economy, begun in 1982.

Meanwhile, their competitors waste time trying to decipher the raucous, hype-encrusted debate over the U.S.-Mexico "free-trade" proposal, which may never materialize. Ultimately, the U.S. Senate could shoot down any treaty presidents George Bush and Carlos Salinas might sign to end tariffs and unleash cross-border investment.

Despite that uncertainty, Mexico's clear turn away from protectionist policies already has opened doors for Los Angeles County-based companies like sprinkler maker Rain Bird Manufacturing Corp. and foundry operator Builders Brass Works Corp.

And other firms that have never tested the Mexican market are wondering if they could make a buck, provided they can dodge what remains of that government's legendary red tape, sporadic corruption and shoddy infrastructure.

"Everybody's sniffing around down there," said Nick Criss, a Southern California real estate executive who scouts land in Mexico. "Banks, stock brokerages, environmental companies - they're all looking."

Some are expecting the free-trade treaty to succeed, eventually unifying 360 million consumers in Mexico, the United States and Canada. No longer would the U.S. slap quotas on textile and steel imports; and Mexico would accept all U.S. cars and food.

But many dealmakers realize the protectionist dam has already broken.

"Free trade is going to be implemented piecemeal, whether or not we get a final agreement," said Criss, echoing the propaganda of Mexican and U.S. government officials. Criss, vice president of Burnham de Mexico S.A., is hunting down 20 sites for a major Japanese manufacturer to relocate its suppliers: Goods will likely need more than 50 percent North American content to pass duty-free across the U.S.-Mexico and U.S.-Canada borders.

"When Honeywell opened a purchasing office in Mexico City about two years ago, they sent a signal to the Mexican government," said Alejandro Cabezut, a Mexican banking official based in Los Angeles who advised a Honeywell air-conditioning equipment division in Gardena.

The signal: "We're here for the long haul and want to be partners with Mexico in developing local suppliers to substitute for Far Eastern suppliers," said Cabezut, who offers consulting and trust services to Los Angeles clients.

Using a trust arrangement, Americans may now own land in the attractive "forbidden zone" - within 100 kilometers of the border and 50 kilometers of the ocean.

Cabezut, manager of foreign investment for Mexican government-owned Banca Serfin S.N.C., said his downtown L.A. office is currently helping about 100 companies research opportunities in Mexico. Their inquiries go beyond the 25-year-old maquiladora arrangement, whereby U.S. manufacturers send parts to Mexico for assembly in maquiladora plants and only pay duties on the Mexican labor-value added when imported back into the U.S.

"There's an enormous amount of activity coming out of the Los Angeles area," said Sean Doyle, a CB Commercial Real Estate broker in San Diego. Doyle booked Torrance-based Electronic Ballast Technology into a 50,000-square-foot maquiladora in time to begin operations this August.

Cabezut said entrepreneurs are questioning a new regulation that allows up to 50 percent of surplus maquiladora production to be sold into the Mexican market. Previously the ceiling was 20 percent.

In 1990, a record $4.4 billion of foreign investment entered Mexico. Admittedly much of that may have been Mexican flight capital re-entering the homeland for many reasons, such as inflation having fallen from a grueling 175 percent a year to about 20 percent. (Mexican and U.S. officials don't tally the numbers and precise origins of U.S. companies south of the border.)

Still there is much wariness. Many Mexican government moves are simply changes in regulations, ordered by Salinas and his predecessors, not laws of the Mexican Congress, which are more difficult to reverse.

"Companies are afraid that if Salinas goes, the regulations will be changed," warned Ralph Biedermann, a Texas-based consultant who established a maquiladora in Matamoros, Mexico, to make solar collectors for Amoco's Solorex division.

Biedermann this month gave advice to some 100 business representatives - including some from Santa Monica-based software developer Retix, L.A.-based Advanced Sleep Products and about 10 other local companies - who gathered at San Diego's Hotel del Coronado to learn the skinny from invited trade experts and Mexican consuls.

"It's very gratifying seeing Mexican officials traveling the rubber-chicken circuit," Biedermann teased the Mexicans at the event, put on by the Institute for International Research. "They're making presentations about Mexican trade opportunities; it's so different today from years ago ..."

Although concern over the B-word (bribing) was only briefly mentioned at the conference, other misgivings oozed.

"When (former president) Lopez Portillo nationalized the banks one morning (in 1982, just before leaving office), after he had an argument with his wife, how are we supposed to judge the future?" snapped one conferee.

One magnet of uneasiness is Mexico's lack of American-style protection for patents, trademarks and copyrights. That has scared off many Los Angeles high-tech and computer companies from joint manufacturing or marketing agreements.

"They figure, |If we take intellectual property to our Mexican partners, and they steal it, we're screwed,'" explained Biedermann.

Yet, the Mexican Congress is now contemplating a law to safeguard intellectual property. "They are discussing this in Congress. We are not waiting for the FTA (Free Trade Agreement)," said Mexican Consul Arturo Balderas, based in San Francisco.

A congressional vote could come as soon as July 15, said Martin Torres, a Mexican government spokesman in Los Angeles.

PHOTO : Workers at a maquiladora in Mexico: |Free trade is going to be implemented piecemental, whether or not we get a final agreement,' says one Southern California real estate executive