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Briefing on Mexico, Brazil and Latin America 2007 International Business Institute for Community College Faculty Dr. Manuel Chavez Center 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. b. c. d. e. NAFTA consolidation and expansion (NA currency) Economic regional trade with the Americas Competition focusing on the EU + EE countries 2005 Security and Prosperity Partnership (SPP) of North America NATIONAL SECURITY The New Political Economy of North America Post-industrial USA, from manufacturing based to technologyknowledge 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. b. c. d. e. f. FTAA and the Summit of the Americas 1994 Expected to take place in the year 2005 but failed… Chile CAFTA and DR Panama, Peru, Colombia 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 Socioeconomic conditions in Latin America …and a key variable: the Socioeconomic 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. b. c. d. e. Speed of second generation reforms From internal producing and consuming market to an international, regional and global economy US is a regional leader in the marketplace and that is not going to change Rule of law, accountability and transparency 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
