(FORTUNE Magazine) – IF YOU DOUBT that there's a new climate for foreign businesses in Latin America, consider this tale. Michael Jordan, chairman of PepsiCo's international snack and beverage businesses, called on Mexican President Carlos Salinas de Gortari last September hoping to win approval of PepsiCo's plan to buy Mexico's largest cookie maker, Gamesa. In years past, as Jordan well knew, it would have taken 18 months or so of persistent wooing to close a deal like that, and likely as not permission would have been refused. Along the way, some politicians might have suggested that a donation would speed things up. The Salinas administration works differently. The President was already briefed and sold on Jordan's $300 million deal. He just wanted to know how he could help. Jordan said he would like to list the new company on the stock exchange by the next Monday, five days later. Salinas said the purchase would be approved the next day. It was. Says Jordan: ''Amazing.'' Amazing, but not surprising. Throughout Latin America and especially in Mexico, American businesses are finding opportunity and welcome. GE Chairman Jack Welch describes a recent dinner in Mexico City with local heads of half a dozen FORTUNE 500 companies as ''one of the most upbeat meetings of Americans you'll ever have.'' While many U.S. executives chase tenuous joint ventures in Eastern Europe, others are learning the value of the vast market in their backyard. Brazil alone has about double the gross domestic product of Eastern Europe. As Peter Drucker has pointed out, Latin America is easier to turn around than the former Soviet bloc countries. It can feed itself and has a business infrastructure, rickety as it may be. U.S. trade with the region is already 14 times greater than with Eastern Europe. Said Drucker: ''Latin America holds the key to the U.S. trade deficit.'' The severe miseries of the 1980s, Latin America's lost decade, shocked it into abandoning the statism, populism, and protectionism that have crippled its economies since colonial times. One after another in the past three years, newly elected governments, with much risk and pain, have thrust their businessmen into the free market, cutting tariffs, welcoming foreign capital, unloading hopelessly unprofitable state corporations. Debt is becoming manageable, and incomes are growing. And the U.S. still has the inside track. European investors are largely occupied with Eastern Europe, and the Japanese remain focused mainly on developed countries. PRESIDENT BUSH catalyzed all this reform energy last June with his Enterprise for the Americas Initiative, proposing a free-trade zone stretching from Point Barrow, Alaska, to Tierra del Fuego, at the southernmost tip of the continent. Latin Americans have fixed their hopes for economic salvation on the Bush idea. It has scope. It would create a trading bloc bigger in GNP than any potential European or Pacific group. But for now the U.S. is concentrating on a North American treaty expanding the one signed with Canada three years ago. Linked by a free-trade agreement, Canada, Mexico, and the U.S. would form a formidable trading bloc, with a bigger population than the European Community (360 million, vs. 326 million) and a larger real GNP ($5.9 trillion, vs. $4.4 trillion). Negotiators are awaiting a green light from Congress, expected late this spring, to put the talks on a so-called fast track. That would have the effect of shielding the treaty from lobbying, because Congress can simply vote yea or nay on a fast-track treaty without offering amendments. Only when a treaty with Mexico and Canada has been signed -- which the Bush Administration expects by the end of 1992 -- will U.S. negotiators take on the other Latin American republics. Meantime, opportunities beckon -- although the payoff may be elusive and slow to come. The economic turmoil in some countries demands cool nerves. In most cases it's wise to join up with a strong local partner who can open the doors to Latin America's still clubby business world. And there are risks both physical and economic. Brazil's chaotic attempts to control inflation are forcing some American companies there to put plans on hold. Even Mexico and Chile, the most fiscally disciplined of the republics, have brought inflation barely below 30%. In any of the countries, slow or disappointing progress could turn the poor against free markets and back to a populist, anti-Yanqui leader. Nonetheless, the rewards often outweigh the risks. Latin American consumers want to fill up on almost anything the U.S. offers, from soft drinks to software. American phone companies have a special opportunity as governments sell off unprofitable and inefficient phone monopolies. Latin America also desperately needs new transportation systems, mining and manufacturing equipment, and capital goods of all kinds. U.S. investment banks are following their clients south, and looking for new ones as well. Says Violy de Harper, head of worldwide mergers and acquisitions for J.P. Morgan: ''Our clients love Mexico and Chile.'' Here's how the major countries stack up in terms of opportunity. -- MEXICO: The U.S.'s neighbor easily stands out above the other republics, thanks greatly to Salinas. Since becoming President in 1988 he has cut the budget deficit from 16% of GDP to 6% and continued to push tariffs down; they now average 10%, vs. 16.4% in 1982. Foreigners can invest up to $100 million without even asking permission, and for sums over $100 million approval is automatic after 45 days if the government doesn't say no. The new freedom to invest excludes mining and petroleum, which the Mexican constitution reserves for the government. Salinas, who earned a Ph.D. at Harvard in 1978, governs with an extraordinary group of like-minded young technocrats who also have advanced degrees from the likes of MIT and Yale. They have reputations for honesty and political talent, as well as a solid grasp of economics. The government is determined to yank Mexico from the Third World straight into the first -- and is sometimes succeeding. For example, the newly privatized airlines, Mexicana and Aeromexico, delight and surprise travelers with their on-time service. Long-established companies, a category that includes most of the FORTUNE 500, have seen their business grow rapidly since 1987, when Mexico began to recover from the debt crisis. IBM de Mexico has increased revenues by 20% to 30% each year, to $730 million in 1990, almost equally divided between sales in Mexico and exports. General Motors de Mexico has tripled sales to $2.1 billion a year. Says Volkswagen Chairman Carl Hahn: ''Mexico is on the point of becoming one of the world's leading auto manufacturers.'' VW plans to spend $300 million to increase production from 200,000 to 300,000 vehicles a year. Ford of Mexico was one of the few operations in Ford's North American division to make a profit last year. Two big Mexican plants, one in Hermosillo that manufactures the subcompact Tracer and Escort and another in Chihuahua that makes engines, have earned the company's highest quality ratings. Ford invested $300 million in expanding the Hermosillo plant last year and is spending $700 million more refitting the Chihuahua plant to make a new multivalve engine. Ford of Mexico's revenues hit $1.1 billion last year. Half the output now supplies the U.S. market, but, says President Nicholas Scheele, ''this country has a huge internal market that is desperate after years of repressed demand.'' Few of Mexico's 86 million people can afford a car today; even semiskilled workers earn only $1.75 an hour. But as pay rises, more Mexicans will be driving. Most Mexicans don't have phones, and those who do curse the crossed lines and the calls that don't go through. Southwestern Bell recently teamed with Mexico's powerful Grupo Carso and Telecom, France's public phone monopoly, to buy 20.4% of Telmex, the despised national phone company. The holding includes a majority of the voting shares (Southwestern Bell got 5% of the total). AT&T sold $130 million of fiber-optic equipment to Telmex. Motorola won the cellular license for a region covering northern Mexico. -- CHILE: Under the tough-minded technocrats who run its economy, the country looks strong. Exports and imports are booming, GDP grew by 10% in 1989 and 2% last year, and debt swaps through the sale of Chilean companies paid off $10 billion in foreign commercial bank debt. Only inflation looks bad: 28% last year. Just about everything in Chile is for sale except the profitable, government-owned copper company, Codelco. Chile is the world's biggest copper producer, and prices have climbed sharply after a slump in the mid-1980s. The government has sold the phone company, the national airline, and the electric utilities. Even the social security system is privately managed. A record $1.1 billion in foreign investment poured in last year. The internationally financed La Escondida, which will be the world's third-largest copper mine, started production in December, four months ahead of schedule. Chiquita Brands bought a large fruit and vegetable exporter, and Eastman Kodak just opened a plant to make office furniture for sale in the U.S. -- BRAZIL: The democratically elected President, Fernando Collor de Mello, hasn't moved far or fast enough to reduce inflation, the deficit, and the size of government -- sometimes because congress and the supreme court stood in his way. Inflation rages at 20% per month. Brazil is suffering a punishing recession and has missed nearly $10 billion in interest payments on its debt. U.S. companies such as Champion International, a paper manufacturer, are holding back on planned investments. GM of Brazil is cutting production from 17,000 to 9,000 vehicles a month. Yet Brazil continues to command attention. Its market is nearly twice the size of Mexico's; its trade surplus of $12.6 billion was the world's third biggest in 1989. Collor is cutting tariffs in stages from 100% or more at the start of his term in 1990 to a maximum of 40% on some imports -- and zero for many -- by 1994. Import restrictions on chemicals and computer equipment are being liberalized. Laws in the works will give U.S. pharmaceutical companies the patent protection they have been demanding. The country plans to start selling off public entities this month with auctions of two steelmakers, a fertilizer company, and a transportation firm.

Robert Gay, a senior economist at Morgan Stanley, says that most investors ''want the dust to settle, which could happen shortly,'' before making their commitment. One company isn't waiting: Alcoa is pushing ahead with plans to mine bauxite in the Amazon region. -- ARGENTINA: As in Brazil, most investors are waiting until it puts together all the pieces of reform. Inflation is above 10% a month, and even the laudable sales of Aerolineas Argentinas and the national phone company, Entel, to private investors were marred by suspensions, suspicions, and accusations. But the sales are going through, reducing the country's debt by $7 billion through swaps. Last year Argentina leased 28 exploratory oil concessions to foreign and domestic companies for $250 million plus future royalties. Rafael Fermoselle, the U.S. commercial attache in Buenos Aires, predicts American investment in the newly deregulated oil industry could amount to $10 billion or more in five years. -- COLOMBIA: The horrendous drug and terrorist violence obscures Colombia's ( relative success in managing its economy. Real GNP has grown steadily for a decade at about 3.5% a year, and inflation has stayed below 30%, a rarity in the neighborhood. Colombia is the only major Latin American country that didn't have to reschedule its debt. It's a fairly good place for a foreigner to do business. Oil companies, notably Shell, have continued to pour money into Colombia, even though their pipelines get blown up from time to time. GM and Kodak have small-scale operations. The new government of President Cesar Gaviria has drafted regulations to free up the economy more to foreigners by cutting tariffs and the red tape that impedes business. Miguel Gutierrez, who has just expanded the investment branch of the Bank of Bogota to capture some of the capital flow expected, says Colombia needs plants and machinery -- and all manner of consumer goods. But nervous Yanqui businessmen, who have to screw up their courage these days just to fly from Toledo to Tampa, may want to deal with Colombia at arm's length. -- VENEZUELA: The country's 59 billion barrels of oil reserves -- greater than any outside the Middle East -- help it overcome a lot of poor government and a fairly high level of corruption. When Carlos Andres Perez returned as President two years ago, he shook up his compatriots with an austerity program that set off street rioting in Caracas -- and a recession. While the reforms haven't been thoroughgoing, Perez has prescribed some of the standard medicine. The state is selling off its airline, Viasa, and 30% of the national phone company. Alcoa has just won a bid against strong foreign competition for the right to build a $1.2 billion aluminum smelter. The state-owned petrochemical company, Pequiven, wants foreign partners for joint ventures to help raise Venezuela's oil output from two million to 3.5 million barrels a day by 1995. Maarten van den Bergh, who coordinates Royal Dutch/Shell's Western Hemisphere operations, pronounces himself ''enthusiastic'' about the potential for a liquid natural gas complex Shell is investigating with Exxon and Venezuela. Speaking of Latin America in general, van den Bergh says Shell has ''significantly increased'' its presence in the past five years and plans to continue investing. Free-trade agreements covering the whole hemisphere would light up prospects. But as they wait for Washington and Mexico to conclude a deal, the Latins are working on eliminating the notorious barriers they put up between themselves. Five Andean republics have agreed to form their own free market this year, and the Presidents of Mexico and four Central American republics met in January to discuss a common market. Argentina and Brazil have agreed to eliminate all tariffs between them by 1995. Argentina's exports to Brazil have doubled in the past two years. Assuming Congress doesn't torpedo the fast-track proposal, the negotiators will start shuttling between Mexico, Washington, and Ottawa in late spring. The AFL-CIO opposes the treaty for fear that low Mexican wages will put Americans out of work. A letter from 37 Congressmen to President Bush raising a series of nontrade objections showed how a coalition against the treaty is building. Environmentalists object to lax pollution and safety controls in Mexico; rights activists make charges of continued human rights violations; and liberals object to the authoritarian rule of Salinas's Institutional Revolutionary Party. Nontariff barriers to trade on both sides could be hot to handle: U.S. bans on Mexican poultry and avocados for health reasons seem specious to the Mexicans, and Mexican bans or limits on foreign participation in certain businesses like oil and securities frustrate Americans. But President Bush is riding high and the economy is due to pick up, so chances are that Congress won't stand in the way. The overriding consideration should be the potentially enormous gains in trade, investments, jobs, and political stability. Says Nick Scheele, head of Ford in Mexico: ''If Congress can't see the stakes here, God help us.''

CHART: NOT AVAILABLE CREDIT: SOURCE: SALOMON BROTHERS CAPTION: MEXICO TOPS THE LIST OF BEST BETS FOR BUSINESS IN LATIN AMERICA Inflation remains scary, but other indicators show that conditions for investing are improving.