In an unprecedented step in its economic relations with the rest of the world, the Soviet Union is negotiating its first investment in production outside its own borders - part-interest in a Mexican government-owned tractor factory.
The Soviets already participate with firms of other countries in "mixed" trading companies. But if this deal goes through it will be the first capital investment in production, said Sergei Gornostaev, representative of the firm Traktoroexport in the Soviet commercial office in Mexico City.The Soviets already produce and export their own tractors and other farm machinery, and Gornostaev said it's hoped this investment will open up further export possibilities.
This potential major change in economic approach is another step in carrying out Soviet leader Mikhail Gorbachev's reform policy of peres-troika, said Gennadi Zima, a trade expert in the Mexico City commercial office.
Traktoroexport is one of four entities negotiating the joint purchase of the tractor division of the Mexican state company Siderurgica Nacional, or SIDENA.
The other participants are the British farm equipment producer Massey Ferguson; the National Peasant Federation, Mexico's largest peasant organization; and the French financial company Louis Dreyfuss.
The Mexican government, pursuing its own reform policy of opening its economy and privatizing non-priority state companies, is putting
SIDENA's four divisions on the block separately, tractors first, said Arturo Tovar, adviser to Mexico's finance minister.
Tovar said the group interested in the tractor division has made an offer to Mexico's Banca Serfin. The offer eventually must be approved by the Finance Ministry and a multi-ministry commission that oversees such sales.
Federico Balli Gonzalez, of BancaSerfin, who is coordinating the sale, said the offer is attractive, and he expects an initial agreement this month. Audits and other follow-up procedures would probably take another three months.
Balli declined to say how much the companies have offered but said the tractor division's book value adjusted for liabilities is about $8.69 million.
The plant is not large; the technology involved is not the latest; the investment would not be great in dollar terms. But the deal is important to the Soviets because it would be the first of its kind, said Balli.
He said payment would probably be some combination of cash, discounted Mexican debt paper and capitalization of some $2.6 million in debt that SIDENA owes the Soviets.
Details of each party's participation in the joint venture were the subject of talks last weekend in Paris and this week in Moscow, he said.
Traktoroexport and Massey Ferguson already supply technology to SIDENA's tractor plant in Ciudad Sahagun, Hidalgo. The peasant federation represents the major users of the factory's tractors.
And the French company is an international grain marketer that has acted as an intermediary in Soviet grain deals, Balli explained. He said he thinks the Soviets wanted to involve the French company not only to share the risk but to have an partner with a better understanding of how business is done in the capitalist world.
The Soviets are fairly nervous because this is their first experiment as capitalists, Balli said.
Asked why they have not made such investments in the past, Zima said simply, "This was not the previous policy of our country."
He said conditions are still not right for such investments in the United States, because the United States does not accord the Soviet Union most-favored nation status or allow it to receive Export-Import Bank credits. But the Soviet Union already has the necessary agreements with most Latin American countries.
This new direction in Soviet economic relations raises numerous questions, not the least of which is how the United States will react.
"It's something we were also very curious about - how this would be viewed by the Department of State in Washington," said Balli. But he said he hasn't heard any comments from the Americans about the Soviet move into what they may consider their business turf. Between 60 percent and 70 percent of Mexico's foreign commerce is with the United States.
Just last month, the Heritage Foundation, a conservative Washington-based think tank with close ties to the Reagan administration, published a report voicing concern at growing ties between the Soviet Union and Mexico.
"Moscow's ties with Mexico have become closer than those with any other nation in the Americas except Cuba," it said.
But Mexican experts say Heritage need not worry.
"The relations are good, friendly, cordial but not deep," said Gerardo Estrada, an adviser to the Mexican Foreign Ministry.
Neither country is a priority for the other, but each uses the other to gain leverage in its dealings with the United States, said Humberto Garza, a Soviet-Mexican specialist at the Co-legio de Mexico research institute.
The Soviets had talked in 1987 of an imminent visit by Gorbachev to Mexico and other Latin American countries - the first such visit by a Soviet leader.
But Mexican and Soviet diplomatic sources say the visit has been placed on the back burner at least for the rest of the year, possibly longer.
Gornostaev said it is too early to talk about whether the investment would increase the Soviet presence in Mexico, because the sale hasn't been completed.
Balli said he does not doubt that some U.S. conservatives will see the Soviet investment as a threat, but others will recognize that it's just business. "I think sometimes intelligent people see things that aren't there," he said.
Balli said he does not think the Soviets had any specific plan to make a capital investment in Mexico. But when Mexico's government decided to sell the tractor plant, it had to decide whether to put up some capital or risk having future owners discontinue the Soviet tractor models being built there.
Since the early 1970s, the plant has produced the SIDENA 310-M, a 31horsepower tractor using Soviet technology and mostly Soviet parts. The tractor is a slight modification of a model that was already being built by Traktoroexport, said Genaro Trujillo Alvarez, SIDENA's manager of original equipment sales. The agreement to build the Mexican version apparently grew out of a 1973 visit to Moscow by then-Mexican President Luis Echeverria, he said.
The minitractor is designed to meet the terrain and budget needs of Mexican peasants who farm small plots. Its sales have been disappointing, said Trujillo, not because of any problem with the tractor but because in the beginning, SIDENA did not understand its market. Most Mexican peasants like bigger machines, even if the smaller ones are sufficient.