Steven Broadwater
West Virginia University College of Law, Rising 2L
May 21, 2008
Capitalism and Corporate Governance in Mexico

Today’s lecture subject presented by Professor cummings was corporate governance in the United States compared to Mexico, examining the vast differences in the requirements both governments impose on publicly traded companies and how these requirements directly affect each country’s economy. The U.S. has the most stringent requirements that companies must adhere to before they can “go public” and be traded on our markets. Our strict requirements are in stark contrast to the Mexican system where the stock market is much smaller (with less than 200 companies) and where, until very recently, business practices promoting public disclosures and business transparency were mere recommendations. A result of this market is that many Mexican companies who want to reap the financial benefits of going public choose to do so on a capital market in the U.S. where they can attract more investors but must adhere to the strict disclosure and insider trading laws.

The strict laws enforced by the SEC in the U.S. are one major reason for the high number of investors willing to trade on our markets; the laws promote transparency and discourage insider trading which in turn boosts investor confidence. This confidence that motivates people to invest in the U.S. markets is one major characteristic missing from the Mexican market where the business culture has long been one of close-knit family businesses being financed mainly through bank loans. It seems to me that in order for Mexico to emerge as a world economic power, it is necessary for the country to implement and enforce laws promoting disclosure and harshly discouraging insider trading in order to significantly boost investor confidence in the market and attract investors from outside the country. A strong market in Mexico would then not only keep money within the country, but also bring money into the country from those foreign investors.

Corporate governance aside, I feel compelled to praise the amazing, wonderful and beautiful city of Guanajuato. The local plazas are alive and vibrant all day long and well into the evening with many local people and University students. The city seems to have achieved the perfect blend of tourism and culture without becoming over-commercialized or sacrificing any of its culture and charm. This is definitely a University town and is surprisingly similar to Morgantown in many ways. We’ve been here for four days now I’m already running into students I’ve met here, both local and others from abroad, on a daily basis. The surrounding countryside is mountainous with many large cliffs and bluffs in the distance that remind me in many ways of the mountains of southern West Virginia near the New River Gorge (except of course that the mountains here are mostly dry desert as opposed to the lush green mountains in WV). Every day, this place never fails to amaze and impress me on so many different levels with it’s splendor and charm; there’s no place I’d rather be.