No doubt Mexico's reputation has been tarnished by reportsabout drug-related violence, and increasing economic risks mayprompt multinationals to think twice about moving in, but thecountry retains a relatively business-friendly environment comparedto other emerging markets.

In December 2008, Coface dropped its country-risk assessment onMexico by one notch, to A4 from A3. The assessment, which evaluatesthe macroeconomic and political outlook for a country, is stillabove average for emerging market countries.

“Mexico is one of the few emerging-market countries which was abit overrated before the financial crisis,” says Yves Zlotowski,chief economist at Coface, a credit-insurance subsidiary of Natixisthat provides a variety of services enabling companies to managetheir global business risks.

The downgrade reflected the country's increasing political andeconomic risks, as violence continued unabated, the downturn in theU.S. depressed remittance payments sent by Mexican immigrants, andcompanies in Mexico lost market share to lower-cost Chinese rivals.In March 2009, Coface put Mexico's rating on negative watch, whichit removed in 2010.

The impact of the escalating violence appears to have had a morepsychological than practical effect on multinationals operating businesses inMexico. In a July report, Standard & Poor's said equipmentmanufacturers continue to expand their operations in Mexico, drawnby low wages and the fact there are no tariffs on vehicle partsimported to the U.S. The ratings agency acknowledges that theincreasing violence is a risk for companies, but so far not onethat outweighs the benefits.

“We haven't seen any evidence of disruptions in this or anyother important industries within the country,” the S&P reportsays.

Mexico's current country-risk assessment from Coface puts it atthe same level as up-and-coming Colombia, which was upgraded to A4from B in 2007. Zlotowski notes that the country assessment isseparate from Mexico's business-environment assessment, whichremains a relatively strong A4—the same as Brazil's andColombia's.

“In terms of financial transparency, it's a rather good country.But the macroeconomic and political environment is a bit morefragile than we had thought,” Zlotowski says.

Mexico also tends to be more open to foreign investment thanmany emerging markets. Its derivatives exchange, for example,allows for remote memberships, so non-Mexican broker-dealers canbecome members without incorporating in the country, potentiallyfacilitating corporate clients' hedging opportunities.

In addition, Daniel Perkins, a member of Accenture's treasurymanagement practice, points out that unlike most developingcountries Mexico has permitted foreign banks to join its clearingsystem. “So multinational firms can use those banks to collectlocal payments,” Perkins says.

See more stories hereabout countries where multinationals have spottedopportunities.