Spotlight on South and Spotlight on South and Latin AmericaLatin America

2011 International Business Institute for Community College Faculty

Dr. Manuel ChavezMICHIGAN STATE UNIVERSITYCollege of Communication Arts & Sciences School of JournalismLatin American Studies

Central Questions about Latin America & South America

What are the differences between Latin America and South America?

Has Latin America improved in the last five years?

Is there another leader besides Mexico and Brazil?

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

Is NAFTA-Mexico a good example? Cross-cultural exchange very fluid and positive, resulting in:

Mexico continues to be the largest recipient of FDI, specially from the United States and Canada (strategic sectors of Canada Investments)

American corporations are in most Mexican cities and regions (except for the South)

How well do U.S. corporations do in Mexico?

Auto Industry (GM, Ford, Chrysler)

Electronics & computers (Apple, Dell, Sony, HP)

Appliances (GE, Whirlpool, LG)

Aeronautics (GE, RR, Bombardier, Bell Aviation)

Agro-industries (Kellogg’s, Pilgrims Pride, Monsanto)

So, the business and economic model is working

Canada as Economic leader in Latin America

Strategic alliances with Mexico, Cuba, and the Caribbean. Sectors: Energy Telecommunications Transportation Financial & Insurance

Foreign Relations and Influence of Canada Public Diplomacy

North America (NAFTA) XXI Century Realities

a. NAFTA consolidation and expansion (NA currency)

b. Economic regional free 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 Economic Pattern ofNorth America

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

U.S. vertical integration Canada and Mexico link

to the U.S. market NAFTA US-FTA with Chile,

Panama, Peru, and Colombia

CAFTA (Central America and the DR)

FTAA (is it dead?)

North American Free Trade Agreement –2010 Results

2010 Total Value $917.3 billion Increase in the last 5 years by 31% Trade with Canada equals $524 billion,

increase by 12% in 5y Trade with Mexico equals $393 billion

increase by 61% in 5y Trade with Canada and Mexico

accounts for almost 47% of the total U.S. trade

The U.S. is trade partner #1 for Canada and Mexico. For the U.S. # 1 and # 3.

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

Security and Prosperity Partnership of North America (SPP)…NAFTA and the Post 9/11 effect

Signed in Waco, Texas. March 23, 2005

New initiative to strengthen regional interdependence in NAFTA Countries –the Post 9/11 effect (SPP)

SECURITY

PROSPERITY

Content areas

Traveler security

Cargo security

Bio-protection

Aviation security

Maritime security

Law enforcement cooperation

Intelligence cooperation

Protection, prevention and response

Border facilitation

Science and technology cooperation

Manufactured goods, sectoral & regional competitiveness

Movement of goods

E-commerce and ICT

Financial services

Transportation

Energy

Environment

Food and agriculture

Health

Tota l areas

10

9

Mercosur and how Americas’ trade is difficult

Brazil controls on trade in South America, until Argentina and Chile resisted

Venezuela’s manipulation of oil and nationalistic policies –resisted by Brazil

Argentina’s protectionism and separation of U.S. but in practice...

Competition to attract foreign direct investment….all over the continent

Wide Latin American strong opposition to U.S. subsidies

Production of ethanol

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

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 market economics

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 another: 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 2010:

113.7 million Capital (population):

Mexico City (18,000,000)

Life expectancy at birth: male 74.7 years, female 79.2 years (2010 est.)

Physicians per 1000 people: 1.73

Rural/urban population ratio: 26/74

GDP: 1.05 trillion GDP per capita:

$13,900 (2010)

Mexico’s economic model North American

Transportation sector 3rd generation

“maquiladora” production

Energy production Tourism & retirement

What is the future of Mexico’s socio-economic scenario?

a. Rule of law, accountability and transparency

b. Reduction of social inequality

c. Investment in R&D

d. Heavy investment in human capital infrastructure

Brazil Basic Briefing Population 2010:

167.7 million Capital (population):

Brasilia City (4 million) Life expectancy at birth:

male 68.7 years, female 76.2 years (2010 est.)

Physicians per 1000 people: 1.03

Rural/urban population ratio: 13/87

GDP: 1.8 trillion GDP per capita:

$10,800 (2010)

Brazil Economic Model

Active closeness with Europe

Less dependency from the U.S.

IndustrializationNational economic

developmentGlobal roleEnergy supplier

Brazil’s future scenario focus on socio-economic development

a. Rule of Law

b. Reduction of social inequality

c. Investment in R&D

d. Heavy investment in human capital infrastructure

e. So what?....

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