Mexican trade policy is among the most open in the world, with Free Trade Agreements with the U.S., Canada, the EU, and many other countries. Since the 1994 devaluation of the peso Mexican governments have improved the countryís macroeconomic fundamentals. Inflation and public sector deficits are both under control. As of September 2004, Moodyís, Standard & Poors, and Fitch Ratings had all issued investment-grade ratings for Mexicoís sovereign debt.

Mexico is an active and constructive participant in World Trade Organization (WTO) matters, including in the launching of the Doha trade round. Mexico hosted the WTO Ministerial Meeting in Cancun September 2003. The Mexican Government and many businesses support a Free Trade Area of the Americas.

Trade disputes between the U.S. and Mexico are generally settled in WTO or North American Free Trade Agreement (NAFTA) panels or through negotiations between the two countries. The most significant areas of friction involve agricultural products including sugar, high fructose corn syrup, apples, and rice.

Agriculture accounted for 4% of GDP in 2005, yet agricultural employment accounted for over 16% of total employment. However, there are signs that Mexican farmers have already begun to transition away from agriculture to off-farm employment.

Poor availability of credit continues to plague agriculture. Agricultural loans were hard hit by the 1994 peso crisis and many private banks view agricultural lending, particularly to smaller producers, as too risky. Several government entities provide public credit to the rural sector, including a development bank--Financiera Rural--dedicated to the sector.

In an effort to raise rural productivity and living standards, Article 27 of the Mexican Constitution was amended in 1992 to allow for the transfer of communal land to the farmers cultivating it. They then could rent or sell the land, opening the way for larger farms and economies of scale. Actual sales of communal land have been few and limited primarily to suburban areas where land values are high. One reason for the lack of sales may be insufficient community support, as some in the community have a vested interest in maintaining the communal land system.

Mexico subsidizes agricultural production through the PROCAMPO program. Since the early 1990s, the availability of program payments has shifted from primarily grains and legumes to all commodities, provided a farmer was producing during a certain base period. Total program funding is $1.3 billion, and 2004 payments were $85 per hectare for producers with more than five hectares and $100 per hectare for producers with 1-5 hectares.

According to Mexico's Ministry of Economy, foreign direct investment (FDI) in Mexico for 2003 was $10.38 billion, down 29% from the year before. The U.S. was once again the largest foreign investor in Mexico, with $5.75 billion in investments, or 55% of total FDI. The most recent numbers released by Mexico show FDI for January thru June 2004 at $9.57 billion. Although the amount was nearly equal to all of 2003, the total was inflated by an investment of over $4.0 billion by the Spanish bank BBVA.

Mexicoís state-owned oil company, Pemex, holds a constitutionally established monopoly for the exploration, production, transportation, and marketing of the nationís oil. Since 1995, private investment in natural gas transportation, distribution, and storage has been permitted, but Pemex remains in sole control of natural gas exploration and production. Despite substantial reserves, Mexico is a net natural gas importer.

Mexicoís ports have experienced a boom in investment and traffic following a 1993 law that privatized the port system. Mexicoís ports moved nearly 1.7 million containers in 2003. A number of international airlines serve Mexico, with direct or connecting flights from most major cities in the United States, Canada, Europe, Japan, and Latin America. Most Mexican regional capitals and resorts have direct air services to Mexico City or the United States. In 2005, the Government of Mexico agreed to sell Mexicana, one of the two main national airlines, to a private investor. Airports are semi-privatized with the government still the majority shareholder, but with each regional airport group maintaining operational autonomy.

The telecommunications sector is dominated by Telmex, the former state-owned monopoly. Several international companies compete in the sector with limited success. Mexicoís telecommunications regulator has failed to enforce dominant carrier regulations, with regulation largely provided through a series of private agreements among the three largest carriers. This has negative implications for U.S. investors in the sector, although there are no reported barriers to exports of U.S. telecommunications goods and services. The teledensity rate in Mexico (around 16%) is among the lowest in Latin America. Cellular penetration is much higher with over 33 million cellular customers in 2004. However, 31 million of these customers use pre-paid cards, and many use their phones to receive calls only. Mexicoís satellite service sector was opened to competition, including limited foreign direct investment, in 2001.