OBJECTIVES. The purposes of the study were to assess the potential impact of the North American Free Trade Agreement (NAFTA) on medical care in Mexico and to identify internal measures Mexico could take to increase the benefits and minimize the risks of free trade. METHODS. The dual nature of the health sector is examined; the Mexican, Canadian, and US health care systems are compared; and modes and consequences of international exchange of health services are analyzed. RESULTS. Four issues require immediate attention: accreditation of health care facilities, licensing and certification of professionals, technology assessment, and financial equity. CONCLUSIONS. NAFTA offers opportunities for positive developments in Mexico, provided risks can be anticipated and preventive measures can be taken to avoid negative impacts on the health system. Medical services, like other elements of the Mexican economy, must be modernized to respond to the demands of global competition. The Mexican National Academy of Medicine has recommended to the Mexican government (1) internal strengthening of the Mexican health care system to improve its ability to respond to the new conditions created by NAFTA and (2) a gradual process to facilitate equitable and mutually beneficial interactions among the three countries.