Saturday, March 10, 2012

Brazil, Mexico and trade

Two ways to make a car

A dispute over trade in cars exposes contrasting attitudes to globalisation in Latin America’s biggest economies

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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