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. NAFTA consolidation and expansion (NA currency) b. Economic regional trade with the Americas c. Competition focusing on the EU + EE countries d 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. Chile d. CAFTA and DR e. Panama, Peru, Colombia f. 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? AAddition of Eastern European countries to EU NNational security in the continent–a premium variable for the U.S. PPolitical stability in the continent SSustainable economic growth BBut, is the U.S. Congress ready?

What are the regional political variables that collide with U.S. interests? VVenezuela –the expansion of the Chavez model CCuba -the transition to democracy TThe political left expansion: Brazil, Argentina, Bolivia, Ecuador, Peru, Chile, Nicaragua. LLack of real economic improvement (per capita) due to trade

…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 years, female 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 years, female 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  first country in the world  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