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Over the last decade, Mexico's economy has been undergoing a series of exciting changes. In 1983, Mexico was still a highly inward-oriented economy with a government that was outspoken in its criticism of multinational cooperations. Today, Mexico ranks among the most outwardly-oriented developing economies of the world (Nunez 7). The present administration, under the leadership of President Salinas, has implemented significant changes aimed at liberalizing Mexico's policy towards foreign direct investment (FDI). The changes in Mexico's policy have been largely in response to the 1982 debt crisis and deteriorating economic conditions. This study deals with the way in which macro-economic conditions, political and economic stability', and policy incentives influence FDI flows to Mexico. Specifically, the model examines the effect of Salinas' policy initiatives on FDI in Mexico.



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