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U.S. MANUFACTURERS INVESTMENT ABROAD INCREASES 8 PERCENT; UNCERTAINTY ON NAFTA SLOWS INVESTMENT IN MEXICO, ERNST & YOUNG SURVEY SHOWS

 NEW YORK, Nov. 15 /PRNewswire/ -- American manufacturers significantly increased their investments abroad in 1992 with 709 projects announced by U.S. public companies, up from 659 in 1991, an eight percent increase, according to Ernst & Young. However, Mexico, a frequent U.S. investment site in 1991, experienced a significant decline in such investment in 1992, which can be partially attributed to the uncertainty over NAFTA.
 The most popular single investment target was the United Kingdom (U.K.), replacing Canada, which moved to second place from the top spot the previous year. The top six countries attracting investment, which include France, Germany, China, and Japan, received over half of all U.S. investments abroad. Europe remained the most popular region for U.S. investment for the second year. Overall, 355 companies invested in 58 countries.
 This marks the second year the international professional services firm of Ernst & Young has released U.S. Manufacturing Investment Abroad. The findings in this annual study are based on monitoring announcements of publicly held manufacturing companies. Industry sectors, types of investment, and location sites are also analyzed.
 Uncertainty on NAFTA Slows Investment in Mexico
 Mexico, which had the fifth highest number of U.S. investments in 1991 with 56, dropped to seventh place in 1992 with 32 investments, a 43 percent decline, the highest of any nation. "The significant decline of U.S. investment in Mexico might suggest that either U.S. companies are waiting until the vote on the North American Free Trade Agreement (NAFTA) or they are reluctant to announce their Mexican investment activities because of the political sensitivity," said Scott Hill, a partner with Ernst & Young. "Investment activity in Mexico may have been particularly high in 1991 since there were significant changes in Mexico's foreign investment laws, including providing for majority foreign ownership for the first time in many years. This could have spurred acquisition investment and new plant construction in 1991 as companies moved to take advantage of the changes."
 Canada, the other country directly affected by NAFTA, saw U.S. investment grow 2 percent, from 84 projects in 1991 to 86 projects in 1992. Eighty-six percent of U.S. investment in Canada was in the form of acquisitions, with 6 percent each for joint ventures and new plants, and the remaining 2 percent for plant expansions. "The size and proximity of Canada's market, as well as its cultural similarity and language affinity, are reasons for its continued popularity among U.S. manufacturers," Mr. Hill said. Together, Canada and Mexico attracted 17 percent of U.S. investment in 1992, down from 21 percent in the previous year, placing North America behind Europe and Asia for such U.S. foreign investment.
 New Markets Attract Investment
 China and Czechoslovakia showed significant increases in the amount of U.S. investment they attracted. China moved up from thirteenth place to fifth, and Czechoslovakia moved up to eighth place from the twenty-fifth position.
 "U.S. companies are exploring new markets which were previously closed to or unattractive to them," said G. Steven Burrill, Co-Director of Ernst & Young's Manufacturing/High Technology Industry Services. "They are more aggressively going into countries newly opened to Western business such as China, Czechoslovakia, and Romania, and are looking for opportunities in less industrialized areas such as Brazil, Venezuela, India, and Singapore. Even Africa and the Middle East showed significant increases in investment activity."
 Europe Remains the Number One Region
 The study found that, once again, Europe was selected for more than half (53 percent) of all announced U.S. manufacturing investment projects abroad, with 376 investment projects. Over half of these European projects went to three countries: the U.K. (107 projects), France (53), and Germany (51). Seventy-three percent of investments went to the top 10 countries.
 "U.S. companies are using the United Kingdom as a foothold to enter the European market, taking advantage of low labor costs and common language," Mr. Burrill said. "There was also great currency fluctuation as the pound lost against the dollar, making U.S. investment there more attractive."
 Czechoslovakia, which did not formally split until January 1, 1993, led the Eastern bloc countries with 20 projects, followed by Poland and Russia with 15 each. The former Soviet Union was in seventh position in 1991 with 20 investments, 15 of which were made in Russia. "U.S. companies are continuing to realize the importance of a global economy and are looking for opportunities to expand their reach," Mr. Burrill noted. "Whether it is developing new marketplaces or entering already established but growing markets, U.S. companies are determined to secure their fair share."
 Joint Ventures Preferred in Asia
 Asian nations were chosen for 22 percent of the projects, up slightly from 20 percent in the previous year. China ranked fifth with 39 investments, of which 74 percent were joint ventures. Japan ranked sixth with 38 projects, of which 82 percent were joint ventures. "U.S. companies prefer the joint venture approach in Asia because of the wide East-West cultural and economic differences and the relatively high cost of investing in that region," Mr. Burrill said.
 Chemical and Food Companies are Investment Leaders
 Seventy percent of the projects are being initiated by companies in five industry sectors. Chemical and pharmaceutical companies accounted for 22 percent (153) of the total projects, remaining in the number one spot and showing an 8 percent increase. Food and beverage companies represented 15 percent of the investments (103), a 45 percent increase over the previous year. Electronics and electrical companies slipped to third position, with 13 percent (91), a 9 percent drop from 1991. Industrial machinery (including computers) moved up from fifth place into fourth with 90 projects, a 50 percent increase from 1991. Transportation equipment decreased from 67 projects to 61. "Highly competitive sectors such as chemicals and food remain the most active," Mr. Burrill said. "The tremendous growth in industrial machinery reflects the increased activity in computer and peripherals manufacturing."
 According to the study, acquisitions of existing businesses were the most popular growth option for the second year, accounting for 45 percent (322) of the projects. Joint ventures followed at 27 percent (190), down from 36 percent in 1991. One hundred thirteen new plants (16 percent, up from 10 percent) and 84 plant expansions (12 percent, up from 10 percent) were announced.
 Companies in Five States Dominate Investment Activity
 Companies headquartered in New York, Illinois, California, Pennsylvania, and Connecticut accounted for more than half of the projects. Connecticut replaces Ohio in the top five from the previous year. New Jersey's 55 percent growth rate was the highest among all states. California slipped from number two to number three due to a 21 percent decrease.
 Ernst & Young is the leading international professional services firm, with 64,000 people in more than 600 cities in over 100 countries, including 20,000 people in 100 U.S. cities.
 -0- 11/15/93
 /CONTACT: Marc Eiger of Ernst & Young, 212-773-6129/


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