In early 1994, Carborundum, a worldwide manufacturer of abrasives and filtration systems, was considering setting up a manufacturing subsidiary in Mexico. Encouraged by the enactment of NAFTA, Carborundum's long-range planning staff was probing further the outlook for the Mexican economy as part of the foreign investment decision-making process. As a member of this staff, you have been assigned to research the future of the Mexican peso. Use the four-step forecasting model presented in chapter 5 as a basis for preparing your report.

Note: most of the statistical information needed for carrying out steps 1 and 2 can be found in Direction of Trade and International Financial Statistics, which are published by the International Monetary Fund. For a more qualitative assessment of the Mexican economy, see Business International Latin America

(published weekly in New York).