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Companies Shun Mexico as Violence Spirals
email this pageprint this pageemail usWall Street Journal
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December 17, 2010

A woman is held back by police as she reacts while seeing a relative dead lying on the ground after he and another man were killed by gunmen in the northern border city of Ciudad Juarez, Mexico. (Associated Press)
Mexico City Growing numbers of companies are deciding to limit their investments in Mexico because of spiraling drug-related violence in one of the world's most important emerging markets.

The latest is Swedish appliance maker Electrolux AB, which said Thursday it had chosen Memphis, Tenn., over locations in Mexico for a $190 million appliance factory that will employ 1,200 people.

The decision involved a host of factors, including proximity to component suppliers, distribution centers and another Electrolux plant in Springfield, Tenn. But Mexico's deteriorating security also played a role, the company said.

Mexico continues to lure foreign investment with its low wages, location next to the U.S. and the advantages of the North American Free Trade Agreement.

One of the U.S.'s largest trade partners, Mexico attracted $14 billion in foreign direct investment in the year's first nine months, up 20% from a year ago, according to government figures. And some of Mexico's biggest investors, including Wal-Mart Stores Inc., are maintaining their investment plans.

But fights between rival drug cartels have claimed more than 31,000 lives in the past four years, including more than 11,000 this year. Other crimes like robbery, extortion and kidnapping also have climbed. For some companies, particularly those that don't yet have operations south of the border, the violence has become daunting.

"We won't put a factory in Mexico until some of this violence gets addressed," said Ron DeFeo, chief executive of Terex Corp., a Westport, Conn., maker of construction cranes and other heavy equipment. "We just can't put our people at risk."

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