When President Salinas traveled to Europe in late January 1990 to advertise Mexico as an attractive investment location, he returned disheartened. European corporate and political leaders, mesmerized by the economic potential of central and eastern Europe emerging from communist rule, showed little interest in Latin America (Cameron and Tomlin 2000: 1–2). Yet in 1999 the EU concluded its first inter-regional FTA with Mexico. Three years later, EU Trade Commissioner Pascal Lamy (2002) referred to Mexico as a beautiful bride between two lovers, whom the EU “would like to tempt … back closer to the centre of the bed, and invite … not to sleep right on one edge of the mattress!”

What had made Mexico so attractive? The country had just emerged from a severe financial crisis that cast doubt on its growth potential over the next years. In European capitals, most government attention was focused on future EU enlargement. Many observers expected the negotiation of the Free Trade Area of the Americas, spanning from the Arctic to Tierra del Fuego, rather than a comprehensive trade and investment deal between Mexico and the then fifteen EU member states.

NAFTA's entry into force, however, fundamentally changed the parameters for foreign direct investment in Mexico. The rapid depreciation of the Mexican peso depressed domestic demand and reduced imports, but made Mexico more attractive as an export platform. Yet to the detriment of outsiders NAFTA ensured that only US and Canadian firms could fully benefit from these developments.