Briefing on Briefing on Mexico, Brazil and Mexico, Brazil and

Latin AmericaLatin America

2007 International Business Institute for Community College Faculty

Dr. Manuel ChavezCenter Latin American & Caribbean Studies

School of Journalism

Central Questions about Latin America

Why Latin America has not improved more rapidly after all?

Is Latin America ready for change, especially for regional free trade (FTAA)?

Is the business environment the same across Latin America?

Reality vs Assumptions

Business Realities in Latin America the hard way… Significant differences by country and by region

More than economics, institutional capacity is critical

..and accountability and transparency

..and also, the Rule of Law

National cultures vs Corporate cultures

Is NAFTA-Mexico a good example?…well

North America (NAFTA) XXI Century Realities

a. NAFTA consolidation and expansion (NA currency)

b. Economic regional trade with the Americas

c. Competition focusing on the EU + EE countries

d. 2005 Security and Prosperity Partnership (SPP) of North America

e. NATIONAL SECURITY

The New Political Economy of North America

Post-industrial USA, from manufacturing based to technology-knowledge based.

U.S. vertical integration The roles of Canada

and Mexico NAFTA USFTA with Chile,

Panama, Peru, and Colombia

CAFTA (Central America and the DR)

FTAA

North American Free Trade Agreement –2006 Results

2006 Total Value $868 billion Increase in the last 5 years by 32% Trade with Canada equals $533

billion, increase by 15% Trade with Mexico equals $335

billion increase by 60% Trade with Canada and Mexico

accounts for almost 45% of the total U.S. trade

U.S. corporations seeking to export to EU through Mexico

2005 Security and prosperity agenda (logistics, logistics, and logistics)

Data: U.S. Dept. of Commerce and U.S. Trade

Authority Office

From NAFTA to U.S. Free Trade with Latin American countries

a. FTAA and the Summit of the Americas 1994

b. Expected to take place in the year 2005 but failed…

c. Chiled. CAFTA and DRe. Panama, Peru, Colombiaf. The role of MERCOSUR

(Brazil, Argentina and Venezuela)

Brazil and Mercosur, or how Americas trade is difficult

Brazil control on trade in South America

strong internal fiscal control (conservative members of cabinet)

strong control of currency volatility

strong attraction of foreign direct investment

strong opposition to U.S. subsidies

strong opposition to free trade USA style

Production of ethanol

What variables have a critical role for the U.S. to induce FTAA?

Addition of Eastern European countries to EU

National security in the continent–a premium variable for the U.S.

Political stability in the continent

Sustainable economic growth

But, is the U.S. Congress ready?

What are the regional political variables that collide with U.S. interests?

Venezuela –the expansion of the Chavez model

Cuba -the transition to democracy

The political left expansion: Brazil, Argentina, Bolivia, Ecuador, Peru, Chile, Nicaragua.

Lack of real economic improvement (per capita) due to trade

…and a key variable: the Socio-

economic conditions in Latin America

…and a key variable: the Socio-

economic conditions in Latin America

Yet, the U.S. Dept. of Commerce is seeking to reactivate negotiations by: sparking and sustaining innovation creating solutions in education and workforce

development designing successful global supply chain

strategies fostering small business development and

growth

Mexico Basic Briefing

Population 2005: 105,879,171

Capital (population): Mexico City (18,000,000)

Life expectancy at birth: male 69.73 years, female 74.93 years (2001 est.)

Physicians per 1000 people: 1.73/1,000

Rural/urban population ratio: 26/74

GDP per capita: $10,400 (2005)

Mexico Economic Development based in open economy since1988

GATT Open Economy, export

oriented and Foreign investment

NAFTA Interdependence, Rules of

Origin and National Content Free Trade Agreements (14)

European Union, Central America, Chile, Israel, Japan, S. Korea, and Australia.

Brazil Basic Briefing Population 2005:

175,468,575 Capital (population):

Brasilia (1,600,000) Life expectancy at birth:

male 58.96 years, female 67.73 years (2001 est.)

 Physicians per 1000 people: 1.47

 Rural/urban population ratio: 21/79

GDP per capita: $5,500 (2005 est.)

Brazil Economic development based in central economy

Foreign investment 1998-1999 first country in

the world 2004-2005 third place

after Mexico and China

Crisis of Confidence Crash of Stocks 3% increase in base

rate since October 14 Leading MERCOSUR

What is the future Latin American economic scenario?

a. Speed of second generation reforms

b. From internal producing and consuming market to an international, regional and global economy

c. US is a regional leader in the marketplace and that is not going to change

d. Rule of law, accountability and transparency

e. Paradox of social inequality (human capital investments)

Working force development requires to add International Education and Skills (+)

Working Knowledge in: Language skills –

functional level Culture at the exchange

level Political, economic, and

social systems. National cultures Corporate cultures

abroad