Mexico’s Moment?

Brazil flag face paintThe Globalist, 3/13/2013

One thing I didn’t expect to hear on my visit to Mexico was a lot about Brazil. Mexico sees Brazil, as the other large economy in Latin America, as a bit of a rival fighting for its place in the sun. This not-so-generous sentiment has intensified in Mexico as the world’s attention is making a turn toward to Brazil in the run-up to the FIFA World Cup (in 2014) and the Rio de Janeiro Olympics (in 2016).

The dilemma for Mexicans is simply this: It is hard enough for them even in the best of times to get anybody looking at Mexico City. But it is harder still at this juncture when the entire world, or so it seems, wants to go to Rio.

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G20 extends free trade vow despite split

Reuters, 6/20/2012

Mexican President Calderon

World leaders extended by one year their vow not to put up new trade barriers at the Group of 20 summit on Tuesday in a last-minute deal that exposed deep rifts over protectionism.

Mexican President Felipe Calderon said it was hard won and struck only at the very end of two-day talks in the Pacific resort of Los Cabos.

Ahead of the summit, Japan and the European Union had sent strong warnings that free trade was under threat as some countries respond to slowing growth by trying to protect their domestic industries.

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Brazil, Mexico and trade – Two ways to make a car

The following article examines the current dispute between Mexico and Brazil over trade in cars. It explains how the Brazilian government gives priority to supplying the country’s domestic market, whereas Mexico sees its car industry as a component of the global supply chain. Due to its high local content, Brazil’s carmaking industry is considered to be more integrated and thus complains that Mexico does not respect the current requirement for 30% local content. But Brazil’s protectionist measures come at high costs for the country. For instance, Brazil’s manufacturing share of GDP fell from 17.2% in 2000 to 14.6% in 2011, and its locked in a series of protectionist trade agreements with Argentina through Mercosur.

The Economist, 3/10/2012

Officials from Brazil and Mexico are arguing over the future of a 2002 agreement that allows free trade in cars between them. For a decade it worked as it was meant to, and to Brazil’s advantage, by encouraging carmakers in Mexico to specialise in larger models and those in Brazil to make smaller ones. But last year Mexican exports under the accord grew by 40% to $2 billion, while Brazil exported cars worth just $372m. Brazil has cried foul. This apparently petty dispute says much about how Latin America’s two biggest economies think about trade and industry.

By throwing open its market under the North American Free-Trade Agreement (NAFTA) with the United States and Canada and a host of other bilateral trade accords, Mexico has become a base from which carmakers export to both halves of the Americas, and worldwide. Volkswagen, for example, makes all its Beetles and Jettas there. Although Nissan produces some vehicles at a Renault plant in Brazil, most of those it sells in Latin America come from two plants in Mexico. In all, 2.1m of the 2.6m vehicles produced in Mexico last year were exported.

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Editorial: Trade and Hard Times

Editorial, New York Times, 5/25/2009

Trade liberalization in trucking one of the casualties of the global financial crisis
Trade liberalization in trucking one of the casualties of the global financial crisis

Foreign trade has been a potent force for good over more than half a century. It propelled Japan’s emergence from the ashes of World War II and helped it become an industrial powerhouse. It is the cornerstone of development strategies from China to Brazil. It is what links countries all over the world in a network of production that underpins global prosperity.

Today, trade is collapsing, one more casualty of the global financial crisis. That is especially bad news for countries that are dependent on trade for economic growth, including many developing nations that had nothing to do with the financial mess. Mexico — linked tightly to the United States market through Nafta — saw exports collapse almost 29 percent while the Mexican economy contracted 21.5 percent at an annual rate, more than three times the rate of decline in the United States.

Protectionism also remains a serious danger. With voters insisting that politicians protect their own, many countries have already imposed new restrictions on imports. So far they have been relatively modest. But as unemployment continues to rise, the temptation — and the pressure — will grow.

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Truckers run into political sand

Financial Times, 4/1/2009

slow-trucks1Imagine you have a Mexican factory with ambitious plans to export merchandise to the US. The investments have been made, the workers have been hired and, before long, a steady stream of trucks will be pulling out of your factory gates headed across the border, right?

Wrong. Nafta, the trade agreement binding Canada, the US and Mexico, may have come into force 15 years ago but a typical road-freight journey involves at least three trucks: one from the factory in Mexico to a depot near the border; a second to haul the goods to another depot on the US side; and a third to deliver the products to their final destination. The process is the same from the US to Mexico.

By this measure, at least, Nafta has fallen far short of bringing about the seamless flow of goods across an increasingly invisible border that the pact’s creators envisaged.

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Calderón fears US special interests

Financial Times, 3/30/2009

truck2Felipe Calderón has warned that the US is falling short of the pledges on open trade made during the first meeting of the G20 in Washington last year.

The administration of President Obama is suffering very, very strong pressure from sectors affected by the US economic recession, and that is preventing it from acting correctly,” Mr Calderón said.

The centre-right president, who arrived in London on Sunday as part of a state visit and to take part in this week’s G20 meeting of leading and emerging nations, said that the recent US decision to scrap a pilot programme allowing Mexican trucks on to US highways was a worrying sign of protectionism.

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Canada and NAFTA: No mariachis, please

The Economist, 2/12/2009

nafta_logo3FOR the past 15 years Canada and Mexico have been joined with the United States in the three-way North American Free-Trade Agreement. But both still set much more store by their bilateral relationship with their superpower neighbour. This has led to sometimes farcical rivalry. To the joy of Canadian officials, Barack Obama is making his first, albeit brief, foreign visit as American president to Ottawa on February 19th. But Mexican officials whisper that their president, Felipe Calderón, got in first with a lunch with Mr Obama days before his inauguration.

More seriously, a growing number of Canadians, including politicians, trade negotiators and former ambassadors, have called for their government to turn its back on NAFTA and put all its efforts into improving bilateral ties with Washington.

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