Spotlight on South and Latin America 2011 International Business Institute for Community College Faculty Dr. Manuel Chavez MICHIGAN STATE UNIVERSITY College of Communication Arts & Sciences School of Journalism Latin 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 Security and Prosperity Partnership (SPP) of North America e. NATIONAL SECURITY

The New Economic Pattern of North 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)

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? 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 market economics 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

…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: 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  3 rd 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: 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.  Industrialization  National economic development  Global role  Energy 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