AbstractEnactment of a free trade agreement between Mexico and the United States will probably increase trade between the two countries. Direct foreign investment and capital market transactions will play a critical role in financing the ever‐growing mutual economic interdependence of the two countries. The sustained growth of the Mexican economy is a critical factor in a successful long‐term trading relationship. To a certain extent, Mexico's economic health is dependent on U.S. investment in Mexico and in Mexican companies. This article examines certain investing and financing considerations regarding U.S. investment in Mexico. The intent of this study is to make individuals, on both sides of the border, aware of the financial environment in which they are operating. This, in turn, should enhance the opportunities for successful cross‐border business activities. © 1993 John Wiley&Son