british motor industry
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of jobs in the region. The key is investing 250 million that the group destined to make their first
units in Europe Infiniti luxury model.
In March, Sunderland had launched production of its all-electric Leaf model, which involved the
investment of 420 million over the creation of 500 jobs at Nissan, and more than 2,000 between
suppliers.
It is a step backwards, because in 2009 Nissan fired a quarter of its 5,000 employees Sunderland.
Good health enjoyed by the high-end car has also benefited Rolls-Royce (BMW Group). In 2012, for
the third consecutive year of record-breaking sales since its creation, 108 years ago, with 3,575 copies
sold. The brand is expanding its factory in West Sussex (southern England).
While in most European markets the sale of new vehicles is stagnant, Britain again showed growth in
August insolent, uninterrupted for a year, with 11% more sales than the same month of
2012.Meanwhile, in Spain fell 18.3%, 10.9% in France, Italy and Germany, 6.56% to 5.5%.
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Toyota will end production in Australia in 2017
Tokyo / Sydney (Australia), February 10 (EFE). - The world's leading engine, Toyota, today
announced that it has decided to end production of vehicles and engines in Australia by the end of
2017, because of the difficulties of the local market and the rise in its currency.
The decision of the Japanese company, which has 3,900 employees in the country, comes after U.S.
General Motors (NYSE: GM -news ) and Ford already announced last year that ceased production in
Australia.
"Several negative factors such as their extremely competitive market and the strong Australian
dollar, coupled with the anticipation of a reduction in the scale of production in Australia, has forced
us to take this painful decision," said company president Akio Toyoda , in a statement.
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Australian Prime Minister, the conservative Tony Abbott, said job creation is superior to layoffs, but
regretted the impact that the closure of Toyota, which marks the end of the automotive industry in
the country.
"Nothing you can say alleviates the impact of this devastation and disappointment today, there will
be better days ahead," said the president.
The closure of the Toyota plant, located in the state of Victoria, may cause the loss of about 30,000
indirect jobs and mean the end of the car industry in Australia.
"Tony Abbott has definitely missed Australia. This is a government that prides itself on its ability to
destroy industries," lamented Senator Kim Carr, the opposition Labor Party.
Carr criticized the Executive for failing to provide Toyota a plan for long-term competitiveness and
encourage investment described as "disastrous" implications of the closure of auto plants in the
country.
Toyota Motor Australia, who had established in the country for more than five decades, will become
a company exclusively selling "without changing the commitment to continue offering great cars and
services to Australians."
The manufacturer also announced it is considering reducing the operations of Toyota Technical
Center Asia Pacific Australia, based product development in the country.
Ford announced in May last year to stop producing cars in Australia from October 2016, which
means the loss of about 1,200 jobs at its assembly plants.
Holden, a subsidiary of generla Motors, announced last December that also stop producing cars in
Australia from 2017, which will affect about 3,000 employees, while Japan's Mitsubishi
(Dusseldorf:MBI.DU - News ) ended its operations in 2008.
Effects of the international financial crisis
The Dossier Crisis IIwas published in August 2010 by the Brazilian Keynesian Association
(AKB). This Dossier is seeks to assess the effects of the international financial crisis, the
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world in general and in Brazil. We publish below some of the items mentioned Dossier (a
complete list of articles can be found on the Association
website: http://www.ppge.ufrgs.br/akb ).
Keynesians times
Luiz Fernando de Paula1and Fernando Ferrari Filho2
The process of financial globalization, in which financial markets are integrated in such a
way as to create a "single" world market of money and credit, before a picture in which
there are no monetary-financial and currency stabilizing rules and the traditional
instruments of macroeconomic policy become increasingly insufficient to contain thefinancial (and currency) collapses worldwide, has resulted in frequent bouts of effective
demand, determined primarily by "financial strength".
Indeed, the financial crisis that emerged in 2007-2008, whose consequences are still being
felt today, is primarily a crisis of financial globalization, understood as a tendency to create
a global financial market and intensifying the flow of capital between countries. This process
goes back to the crisis of the Bretton Woods system and the formation of the Eurodollar
market, which, by the way, ended up contributing to the deregulation of domestic financial
systems - with the end of segmentation between markets - and the liberalization of capital
flows.
As a result of financial deregulation, there was an intensification of competition between
banks and therefore declining margins of financial intermediation, with a trend in response
to the financial conglomeration and an increase in scale of operation, through mergers and
acquisitions . Thus, financial institutions began to explore different markets, including lower
income. In the bond market, have developed mechanisms for securitization, fueled by the
growth of institutional investors, companies and banks that fund themselves "packaging"
income receivable. In short, since the securitization allowed dilution risk in the market,
financial institutions began to increase their leverage, assuming that the mechanisms of
self-regulation of the market would be able to continue to evaluate properly the risks
inherent in financial activities.
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The international financial crisis whose origin is in increasing losses caused by the default of
loans from subprime market subprimeU.S. and that, due to the fact that most of these
mortgages were securitized and distributed to investors in the global market, just becoming
global, leads us to two observations. First, it calls into question the practical benefits of
financial globalization, with deregulated financial markets, including in developedcountries.Secondly, it reminds us, as of the fiscal and monetary measures implemented by
developed countries and, to a lesser extent, by developing countries - such as injection of
liquidity and capital in the financial system by the economic authorities of these countries
and synchronized reduction of the basic interest rate of the major global central banks - to
prevent the recurrence of major depression, both to rethink the role of the State in the
economy, the need to re-regulate the domestic financial systems and restructuring the
system international monetary.
Recently, a paper by economists at the International Monetary Fund Article (Blanchard, O.
et al., " Rethinking macroeconomic policy", February 2010) argues, post-crisis times, a new
agenda for alternative economic policy to" macroeconomic consensus' prevailed until the
economic crisis of 20083. According to this work, the foundations of this consensus were
seriously shaken by the economic crisis. Firstly, the crisis showed the policy makers that
maintaining a stable inflation rate is not sufficient for macroeconomic stability
condition. This is because the behavior of asset prices, credit aggregates and even the
composition of output may create destabilizing forces within the economic system that lead,
in the medium and long term, the occurrence of a financial crisis of majorproportions.Secondly, setting a goal of very low inflation considerably reduces the scope for
reduction in the nominal interest rate when it is necessary to deal with the effects of a
financial crisis. Thus, the cost of lost flexibility of a target of very low inflation outweigh, by
far, the possible credibility gains that can generate. Thirdly, maintaining a "fiscal space" - as
a gross debt / GDP between low and moderate - proved crucial for prompt and decisive
fiscal policy response to the financial crisis. Finally, the limited scope of financial regulation
provided the necessary for banks to create "exotic" operations outside its balance incentives
in order to circumvent the leverage limits set by the Basel Accord, which eventually increase
the financial fragility of the system as a whole4.
Anyway, the very mainstreamor part, questions the foundations of conventional economic
policy and even the very foundations of orthodox economic theory, as blind faith in the
market mechanism, in which the action of rational agents would lead to "great" results ( or
near these) economically-socially. In fact, there are very Keynesian economists have
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questioned such precepts, pointing out that the "neoliberal" model does not guarantee a
robust and financially stable economic growth, and generate growth incompatible with the
improvement in income distribution. To these economists, not only Keynes and his followers
have much to say about the "depression economics", as well as on possible ways to achieve
an "economic prosperity". Anyway, it is clear that we live "Keynesian times", although thecontours of economic policy that ensures the final out of the crisis and, above all, for a post-
crisis world are not very clear in the current economic debate. After all, the signs of global
economic recovery have been contrasted with worrying signs, such as the dollar and the
U.S. economy still fragile financial system and the euro-zone has serious instabilities, mainly
due to the fiscal crisis of so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain), and
the fact that the moderate economic recovery in the world has been accompanied by
hesitant decrease in unemployment.
In this context, the AKB prepared the dossier Crisis II, whose objective is to evaluate the
effects of the international financial crisis, the world in general and in Brazil as well as
present some alternative policies. In it, some key issues are addressed, such as the
international financial crisis results from a crisis of a liberal economic paradigm? What are
the reasons for the faltering global economic recovery? What is behind the crisis in
Europe? In the case of Brazil, which were the determining factors in overcoming the
crisis? After the scare, economic problems which must be faced and what should be the
solutions to them?
The exhaustion of the growth paradigm of the American economy5
Thomas I. Palley6
The U.S. economy is in recession and the problems related to the high indebtedness of
households raise fears that this recession could be longer and more severe than the
recessions of 1991 and 2000. The Federal Reserveand theTreasuryhave takenunprecedented measures in history to stimulate the economy through reductions in interest
rates, liquidity injections and tax cuts, all of which are fully justified, but they are just a
short-term palliative.
Certainly the United States must be concerned with the cyclical recovery of its economy, but
it is also necessary that we Americans, we worry about the fact that the growth paradigm
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that drove our economy over the past decades is exhausted. This also has implications for
the world economy, given that this has been supported in the United States as a "buyer of
last resort." If the U.S. economy to grow more slowly, it is unclear how other countries have
the ability or the willingness to develop alternative engines of growth.
The recent economic expansion began in November 2001 and is characterized by a long
period of "jobless growth" in economic activity, and, along the greater part of the period of
expansion, employment growth remained close to zero . This led the Federal Reserveto
reduce interest rates despite the recovery in economic activity, keeping them low for an
extended period of time and increase them slowly and gradually thereafter. The actions of
the Federal Reserveprevented a relapse into recession, but also led to the emergence of a
bubble in the housing market. These actions also triggered a search for higher yields by
investors, causing them to ignore the risk, which just manifesting in the form of deflation in
house prices and massive losses in the credit markets.
Why was so weak despite expansion of the tax cuts occurred in 2001 and large increases in
military spending and national security? The answer to this question lies in the overvalued
dollar and trade deficit which drained spending, jobs and investment out of the economy. In
fact, the industry has lost 1.8 million jobs between late 2001 and late 2007. This is an
unprecedented event in American history since the industry had never lost jobs during an
expansion.
The U.S. strong dollar policy has a reasonable responsibility for the trade deficit. This policy
was initiated by the Clinton administration, under the advice of Treasury Secretary Robert
E. Rubin will be continued in the George Bush administration. The effect was to make
imports cheaper and exports more expensive, thus inducing an increase in imports, less
exports and encouraging the transfer of production abroad. This, in turn, led to job cuts in
the industry, reductions in production capacity and domestic investment in manufacturing
production.
Trade policy has also played a significant role in this process by encouraging Americancompanies to move their plants abroad. In conjunction with these trends we highlight the
policies of export-led growth adopted by China and other East Asian countries. These
policies promoted Asian exports and foreign direct investment in such economic, thus
hurting U.S. exports.
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The trade deficit and contempt by the industry are part of a broader paradigm of economic
policy adopted since 1980, which created a new kind of business cycle. Cyclical fluctuations
during the administrations of Ronald Reagan, George HW Bush, Bill Clinton and George
W. Bush have great similarities to each other and are quite different from those observed
before 1980 cycles. The similarities refer to the mismatch between the growth of wageswith respect to productivity growth, large trade deficits, inflation, loss of industrial jobs and
increased property debt.
The post-1980 economic cycles have been based on boomsfinancial and cheap
imports. The boomsprovide financial collateral required to support the increased debt that
finances consumer spending. The increase in debt has also been supported by the reduction
of the criteria for granting credit and the financial innovations that allowed increased access
to credit. Meanwhile, cheap imports have mitigated the effects of wage stagnation.
This pattern contrasts with previous economic cycles which were based, not on the growth
of debt, but the salary increases linked to productivity growth and full employment. The
expenditure, combined with full employment, encouraged investment, which increased
productivity, thus fueling the growth of wages.
The change from the old to the new model of business cycle was the result of profound
political changes associated with the election of Ronald Reagan in 1980. She inaugurated a
period in which business and labor amounted been demoted. This change was rationalized
by economists like Milton Friedman. The old model of economic cycles was based on a
combination of the institutional innovations of the New Deal, which strengthened the
workers, and measures of aggregate demand management idealized by Keynesian
economics. The new model of economic cycle is based on policies that have eroded and
reshaped the institutions of the New Deal, while demand management has been redirected
to the reduction of inflation instead of ensuring full employment. Indeed, the language of
full employment was discarded.
The differences between the models prior to 1980 and subsequent economic cycle can beeasily illustrated by the policy. Prior to 1980, trade deficits were viewed as a serious
problem because they represented a leakage of expenditure in the economy which reduced
employment and output. Since 1980, the trade deficit has been seen as an important aid in
controlling inflation as well as attenuating the effects of wage stagnation.
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workers bargaining power. This will encourage wage increases, which will fuel the spending,
productivity and investment. The attainment of full employment will require coordination
between monetary, fiscal and exchange rate policies to that end.
A change in the balance of power in labor markets will also be required. This will require
reforms and vigorous enforcement of labor laws to end the intimidation of employers over
employees to prevent the latter from joining unions, thus fair bargaining labor
contracts. The minimum wage should be connected with the prevailing average wage in
such a way that the first increase as the economy grows the economy. And unemployment
insurance should be expanded and extended.
The U.S. should also begin to reduce its trade deficit, which drains expenditure abroad and
strongly affect the industry. A new foreign exchange policy should prevent the overvaluation
of the dollar with respect to the currencies of major trading partners of the United
States. Only a clear and enduring commitment to this policy will again convince
businessmen to invest again in American industry.
Finally, developing countries must be persuaded to abandon their policy of export-led
growth and should be focused on developing their domestic markets. In the field of trade
policy, it means for an end to unfair international competition based on undervalued
exchange rates, export subsidies and unfair trade restrictions. This will require a new
international economic architecture that promotes fair and balanced trade - a task that will
require a highly enlightened American leadership.
The international economic crisis in 2010: a review halfway
Fernando J. cardim Oak7
Observing the world economy in June 2010, one can say that there is good and bad news,
and (anyone surprised by this?) Huge uncertainty with respect to mediate future.
The good news refer, of course, the success of macroeconomic policies implemented from
the end of 2008, almost everywhere in the world, had in curbing the more destructive
impacts of the financial crisis 2007-2008 on production and employment. The product fell in
virtually all the world (with the notable exception of all time, China and India and its
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Cochrane, the very old and respectable University of Chicago, walked through sumed for
some time, but now spring up here and there in the public debate.
Unemployment is high because aggregate demand was supported by macroeconomic policy
enough to prevent collapses productive system, but the ambiguity of the governments of
countries like the United States in relation to their own decisions tends to reduce their
effectiveness. Certainly, the most worrying case is the United States. The caution and
duplicitous speech by President Obama and his aides about his economic policies are
certainly more uncertainty than generators incentives to vigorous reaction. At the same
time, for example, defends the extent of the necessary fiscal support for demand (as he did
recently in Congress, Larry Summers, more direct advisor to the President), the President
himself seems to intimidate opposition from conservatives waving the need to cut
unnecessary spending and control the deficit. In his historic inaugural address, President
Franklin Roosevelt stated boldly that "first of all, let me assert my firm belief que the only
thing we have to fear is fear itself." The phrase, and the actions which took her, went deep
in the American public and the audacity of President the American people responded to their
confidence and enthusiasm. The timidity and caution of the current government only
stimulate shyness and hesitation.
With this, the greatest uncertainties of the moment concerns the result of the policies
employed here. In the American case, and to a lesser extent also in Western Europe, the
biggest question is what will happen to these savings, since the exceptional measures tostimulate aggregate demand made in 2009 expire. The probability of renewal of such stimuli
does not seem very likely. Worse still, is that premature concern about public deficits and
the growth of domestic public debt in countries like the United States and Western Europe
could lead to a new economic contraction, with unpredictable impacts. Some countries, such
as Club Med mentioned before, are now being forced into this trail, and these policies only
tend to worsen the situation by introducing, in fact, new uncertainties, with respect now, in
the short and medium term stability politics of the region, and the long-term survival of the
single currency, which disappears if the price of your stay is poverty and unemployment in
the periphery of Europe.
In this scenario, the best approach seems to be the emerging countries, code name for
China, especially, and for those of us who run after, a good distance from the leader. It is
possible to discuss China's ability to maintain its strong growth, especially if it appears
necessary to replace the emphasis on exports by appeal to the domestic market, but the
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previously focused on asset quality, systemic risk has much more to do with the fact of how
the assets are financed. If both institutions have the same type of assets, but one of them
is related to long-term debt and other resources originating from the overnight money
markets. This makes a substantial difference to the potential systemic risk. Thus, regulation
rules can make a slight distinction as the same assets are financed. The lack of distinctionmakes banks have an incentive to finance low-cost assets. This incentive is stronger when
the curve of the expected return of an asset has an upward slope in situations boom. This
fact explains why there was a collective confidence in short-term assets in institutional fund
to the extent the markets crashof 2007.
Does the maturity mismatch of assets is an unavoidable issue of the private banking
system? After all, is not the banking system borrowing short term and lending long-
term? Not necessarily! There are many exceptions to make a general analysis and this is
also a problem of degree of scale. Small businesses complain that, given the errors of
guarantees for bank loans, they do not realize they have borrowed long-term funding of
banks. Moreover, it is said that this situation is often observed among credit holders who
are more prone to "getting divorced" than to leave their seats. The reality is that the
reduction of demand deposits is not instantaneous as it seems. The rate of decline in
domestic deposits of the private sector in relation to total liabilities was a measure of
growth of liquidity risk of funds between banks. Indeed, "the mismatch of maturities of
banks worsened by financing Wholesales" (Ibid., p. 38-39).
Subsequently, Persaud (an author of the report from Geneva) expanded the analysis to an
article, aiming to show how this approach would work10.
According to the author, redistribute risk, rather than trying to eliminate it, is the key to
strengthening banks worldwide. Thus, Persaud (2009) argues that imposing higher capital
requirements is not a panacea for the problems that caused this crisis. This strategy, by
itself, very little reinforces the financial system because it does not take into account
differences between the institutions and the types of risk. Moreover, for the author, raising
capital requirements does not help equality between risk taking and risk capacity. For him,
the center of modern regulation is the mistaken view that risk is a measurable property of
the asset, ie, risk is not unique. There are, for example, credit risk, liquidity risk and market
risk and, moreover, different segments of the financial system have distinct coverage
capacity. Thus, risk is very much related with which agent is keeping active and what kind
of asset. Common in the U.S. Congress - - The notion is that instruments are "safe" to be
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promoted and risky instruments to be disregarded.Alternatively, capital requirements should
be sensitive to the natural capacity of institutions regarding coverage and the types of risk
that it maintains. Ie, is considered the liquidity risk. Banks traditionally borrow from
depositors who can withdraw your funds from overnight. However, banks have limited
ability to hold assets that can not be sold quickly without a high discount rate. Therefore, itmakes sense to require extra to set aside any assets that carry liquidity risk capital. This
risk is safer to be held by pension funds and insurance companies, as they have funding
from both retirees of premiums as claims, which generally does not "evaporate" overnight.
Moreover, banks may have effectively hedged positions against credit risk by diversifying its
borrowings and use of all information they have about potential borrowers. Pension funds
are less able to offset credit risks. His long-term funding does not help, because the longer
the maturation period of the investment, the greater the period so there is a default.
The way to secure the financial system is to create mechanisms for different degrees of risk
that an institution be directed to a situation of coverage capacity. The modern "regulation"
did the opposite. By requiring banks to leave aside more capital for credit risk than non-
banking institutions, regulators began to unintentionally encourage banks to change their
credit risks for those seeking an extra income, but they had limited ability to cover this type
of risk.By failing to require banks to make available additional capital to cover the mismatch
of maturity of the investment, they encouraged banks to accept liquidity risk that could not
compensate. Moreover, bearing the valuations of assets "marked to market" (in whichinstitutions do maintain the values at their current prices) and the solvency requirements of
short-term, regulators discouraged issuers and pension funds to take liquidity risk which
until then were appropriate for them.
Why was this done? The objective of financial regulation would not pursue and eliminate
risk. Neither the goal would be to accumulate and protect capital, to "leave us alone with
the giant banks." Rather, it would be necessary to differentiate unless the institutions by
which they are called and more by which they are funded
This seems to be a reasonable proposal laMinsky, but the analysis of Minsky on financial
fragility and bank suggests that it may contain a greater obstacle. As Minsky (1977, p. 8-9
and 17)11:. "Financial institutions, business expectations, borrow and streamline financial
instruments In doing so, their obligations must be considered safer or more convenient for
the owners of wealth than its assets Usually, this signals that your assets. Long-term bonds
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are higher than several margins and security provisions of the financial organizations [...] A
banker manipulates the resources of the population in accordance with their own
resources. The inverse relationship of assets / book value ratio book value / asset shows
how the bank's resources are being invested along with the resources of the general
population and how the bankers operationalize their business. The ratio book value / assetsis analogous to the margin requirement imposed on transactions in the stock
market [...] Commercial banks and other financial institutions are embedded in speculative
finance: the maturity of their debts are less than the maturity of its assets.They need to
continually attract deposits and sell bonds to be able to secure the withdrawal of
resources. Being your debts [ of banks and financial institutions ] short term, it means they
are vulnerable to operational development of the financial market. Moreover, even if the
assets of the banks long-term obligations are greater than their assets are more short-term
than the amount of capital and those belonging to units that are funding the bank financial
assets.Thus, the higher the weight of banks and financial intermediaries in the economy,
the greater the weight of speculative finance in the financing of firms and consumers. Not
only banks engage in speculative financing, but they induce hedge funds to others. "
Therefore, from the point of view minskiano the proposed Persaud (2009) that relates the
capital requirements of the degree of maturity mismatch of assets aims to induce banks to
adopt a hedge financing for its assets. However, this will reduce bank profitability as the
difference between the liquidity of their assets and debts. As Minsky argued, the equation of
profit can be P / B = {P / A} {A / B}, where P is profits, B is the contracted value of theshares of owners and A is the asset portfolio of the bank. Otherwise, ROE = POA that is
leverage. The limitation of leverage, in turn, would limit the ability of banks to finance its
assets with greater liquidity requirements. This reduction in liquidity would reduce the ROA
(return on assets) of banks. In a competitive environment, even with a strict limitation of
activities allowed, this would lead banks to seek higher leverage to preserve the ROE
(return on equity).
The proposal also has implications for decisions regarding preferences concerning targeted
banking systems and financial holding company or to universal banking structures of the
European type. According to the proposals contained in the Report of Geneva, the financial
institutions would be taxed and would be limited to maintain and negotiate financial assets
offering them natural advantages of adequate funding to its assets. This means that there
would be a segmentation of the system, with a variety of activity types and financial
institutions determined by the natural position of funding and encouraged by preferential
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taxation on assets. Presumably, this would exclude the formation of financial holding
companies, unless they were created impenetrable Chinese barriers to separate units,
determined by their "natural" resources funding.
This proposal links to the Report from Geneva to mark asset values to sources of funding
and evaluating capital ratios according to the degree of natural hedge provided by natural
funding. However, this does not seem to provide an adequate understanding of how banks
and other financial institutions create value and make a profit. As mentioned earlier, the
point of view of Minsky, banks make profits from the difference between the liquidity of its
debts and assets, and not by the content or the maturity of such assets. The essential point
is how banks manage liquidity for its debts. Here, it is important the idea of Minsky on
safety margins, insured assets with high liquidity to ensure that they always meet its
obligations. Again, the level of assets is not as important as the market in which these
assets can be sold to provide liquidity. The markets have learned from the crises of Bear
Stearns and Lehman Borthers and and know that even short-term assets and risk-free may
be illiquid.
Moreover, some of the liquidity of the debts of financial institutions can be established
through the way the risks are covered, ie, through the efficiency of its hedging strategy,
more than if the coverage is natural. In short, it is important to note how the banks cover
their risks and how regulation can be seen as an imposition of coverage12.The capital
requirement is a very inefficient method to impose coverage to banks. In fact, they tend todo just the opposite. The regulation should encourage banks to implement appropriate
coverage in the best possible way. This generates an increase in ROA and reduces
incentives to increase leverage.
Greek debt: default or restructuring?
Luiz Carlos Bresser-Pereira13
After Greece, what? Hungary? Or prospects of low growth for Europe? Or disappointment
with the U.S. recovery? Or even Greece? International financial markets are always nervous
and shaky - at times sad, euphoric in others, but always in the midst of a dialectic of
rationality and irrationality. We economists albeit with a more "scientific" air, commit the
same sins. Therefore, politicians and businessmen - actors in the real economy -
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bewildered, know not what they do. Invest or not to invest? Continue with expansionary
fiscal policy, or it's time to take care of the high public debt of each state and eventually
high external debt of each country? And ask: was the crisis in the form of W starting?
With the problem of Greece was indeed a threat of the crisis return with force. The delay of
Germany contributed to the problem. However, after the European Central Bank (ECB) and
the country did what was expected of them, guaranteed the debt of Greece and, more
broadly, the debt of other euro countries, and although it would not be resolved, the crisis
abated. Everyone knows that, structurally, the problem of Greece is not solved, because
even if faithfully fulfill its fiscal adjustment program and its GDP fell about 3% to 4% over
the next two years, at the end of those two years, public debt to GDP ratio will still be
150%.
Faced with such a framework, around the question of a possible Greek exit from the euro,
but this is very unlikely.The advantage of having a currency that would begin its history has
devalued against the euro does not outweigh the risks of staying outside the protection of
the euro system. There is, however, the possibility of restructuring the public debt within
the euro. It's the best thing that Greece would have to do since your situation is insolvency,
because even if the interest rate on its bonds again and reasonable levels to stabilize at this
level, it will not be able to meet its financial commitments and re- grow.
But a reader might ask: are you then proposing a "cap"? I'm not, my friend, suggesting that
Greece make a "restructuring" discount. Which is the same as a default and something very
different. Same thing for the lender because the result is the same: get only part of their
credit. It's very different, because the default expression exists a pejorative tone that
suggests an irresponsible borrower. The restructuring has a milder connotation because
allocating fault between the debtor and creditors, and especially because after all, or the
vast majority understand that it was the only rational solution to the problem given the
insolvency of the Greek State.
When a sovereign debt crisis is resolved by a "cap" it is generally poorly resolved because itmeans that there was insolvent, or that financial markets did not accept the diagnosis of
insolvency of the debtor country, and judge that he acted in bad faith. When we have a
restructuring, although it is unilateral or nearly unilateral principle, the problem is solved
much better because, after all, what it does is penalize a loss of creditors who reasonably
efficient financial markets should have already anticipated the pricing of loans to discount.
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The sovereign debt crisis plaguing most countries of Europe just affecting
European demand for new cars. It is estimated a decline of 7.5% in demand
for new units, reaching the current level of 9.4 million vehicles *, since the
growth of individual income is lower than the increase in prices of cars.
Currently, a worker on average require sixteen months of work to get a new
car average. In the mid-'80s, only nine months of work were required.
The low demand has led European automakers to implement tough cuts in
their structures in order to protect some of their profits. Thus, factories began
to be closed and the index of layoffs reached new heights. The North
American Ford, after announcing a loss of 1.2 billion euros, closed three
plants in Europe (in Belgiumand "UK"), thereby affecting about six thousand
workers.
The Opel , the European arm of the U.S. also " General Motors", is close to
announcing the closure of one of its plants in Germany, Bochum , and, if it
occurs, will be the first time an automotive factory is closed in the country
from "World War II".
To prevent further losses, Opeland " PSA Peugeot Citroen of
France"announced the beginning of a partnership aimed at joint activities inresearch and development, saving about 1.5 billion euros for each
automaker. In this year, the PSA was forced to close one of its factories in
France, cutting about eight thousand jobs.
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According to the specialist automotive University of Duisburg-Essen, the
GermanFerdinand Dudenhffer , the sector will face three to five years of low
sales in Europe.
Although the European market is declining, the Volkswagenwas no
significant loss in profits due to its success in sales in foreign markets. In the
European market, the automaker fell by 19% in the third quarter, however,
increased its sales abroad eventually balance the equation.
For the expert, the fact that one third of the sales of Volkswagenis destined
for the Chinese market makes the automaker less vulnerable to crisis,
compared to the others.
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Collapse in sales in the U.S. auto industry indicates deepening recession
By Jerry White
13 November 2008
Utilice versin to print this | Email | Communicate with
Originally published in English on November 5, 2008
Sales of new cars in the U.S. plunged in October to the extent that consumers - hit byrising unemployment, decreased wages and decreased credit - decreased buying cars
and trucks. Sales fell 31.9% in a year, as evident that the economy entered a deep and
long recession, threatening the jobs of millions of workers sign.
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Sales fell more than a million for the second consecutive month, reaching its lowest
level since January 1991, according to Autodata Corp..According to current estimates,
automakers will sell only 10:56 million cars and trucks in 2008 - big drop compared
to 16 million in 2007 - the lowest number since 1983, when the U.S. economystruggled out of the start of the crisis 1980s.
According to the analyst said GM sales, Michael DiGiovanni, last month was the
worst, with a view to the adjustment of statistics on population growth in the U.S.
since World War II. "This is clearly a severe recession," he said.
General Motors - which is looking for a bailout from the government to avoid
bankruptcy and accelerate a merger with the third American automaker Chrysler -
suffered a 45% drop in sales. Chrysler sales fell around 35% and Ford 30%. The
slump has also hit the Japanese car producers, which are best sellers. Toyota suffered
a 23% drop in sales.Meanwhile, sales of Honda plummeted 28%.
Moreover, the reduction in production and the other 10,000 autoworkers
unemployment in the last two weeks have also contributed to the fall in production of
American factories. The Institute for Supply Management (ISM) reported that its
index of manufacturing activity fell the most of the past 26 years in
October. Meanwhile, the Commerce Department reported that industrial orders fell
2.5% between August and September, far more than the 0.7% forecast by analysts.
As a result of falling demand from steel producers - key supplier for all producers -
production in 17 of the 29 largest domestic steel is stopped."We deal with a situation
that may develop another Great Depression if we do not proceed properly," said
Daniel DiMicco, CEO of Charlotte, steel producer in North Carolina, the Wall Street
Journal.
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The Detroit News reported that the auto industry executives expect the market gets
even weaker and walk slowly to the stoppage. The Ford economist Emily Morris,
said: "While we say that the third quarter was no basis for the economy, we can not
ignore that it was the worst for industrial sales."
With workers facing the growth of economic insecurity, consumer confidence fell in
October to the lowest level since 1967, when the Conference Board - a group of
statistics NY - began his research. After years of affordable loans, the disappearance
of credit nailed workers.GM's financial arm, GMAC, will offer loan only to trusted
clients. In many locations in the USA, only a third or less of the clients will receive
loans, according to the spokesperson of the company.
Certainly, one or more of the "Big Three" Detroit automakers will not survive this
crisis. Last week, the agency "rating" Moody's downgraded the points of GM and
Chysler for the second time in just three months, as well as the financial arm of GM,
citing "the progress and severity of erosion in the automotive sector in the U.S." and
suggesting that companies will have financial difficulty around the year 2009.
The decades long collapse of the U.S. automotive industry is one of the greatest
examples of the decline of American capitalism. In the '70s, American car
manufacturers controlled more than 80% of the U.S. market, with GM selling little
more than half the cars. In 2008, producers of Asian and European cars control 51%
of U.S. sales.
Given the downturn in the stock market, the executives of these companies conducted
a relentless attack on jobs and conduction of life of workers, which continues
today. GM, which employed 350,000 unionized workers in 1970, now has less than
70,000 workers (blue-collar). Entire cities such as Detroit, Flint and Dayton, Ohio,
have been devastated by plant closures and mass layoffs.
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The merger between GM and Chrysler would result in the closure of dozens of
factories and the elimination of 50,000 workers in the two companies. Tens of
thousands lose their jobs at suppliers and related businesses. Face of these attacks, the
labor union, the United Auto workes (UAW), has collaborated with the bosses againstthe workers openly.
The slowdown has spread throughout the economy. On Tuesday, suppliers of timber
and building material of Louisiana-Pacific reported the biggest losses ever seen in the
third quarter. The Nashville-based company in the state of Tennessee, has closed its
sawmill, reduced production and cut hundreds of jobs.
For the fourth quarter, the company anticipates that most of its factories to be closed
longer than open. Its chief executive, Richard Frost, said: "The decline in activity in
the housing market, both in new construction, remodel and repair, caused a drop in
demand for our products, with levels very challenging prices. The business fell further
in September and remain largely paralyzed as a result of the banking and financial
"market crisis.
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Automotive Industry: The Revolution
of the recession?
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Worldwide, automakers recorded sharp falls in sales and reduce the pace of
production.According to a survey by Deutsche Bank, the crisis may, however,
bring progress to the sector.
Car of the future: changes ahead
The automobile as we know it today is a hundred years and probably still remain in the
streets around the world also for another hundred years. The demand for cars will even
grow in the near future and automakers will certainly return to produce as before the
current crisis.
However, it is possible that the production of mats future cars leaving different from today:
maybe not in appearance, but in the interior. These are some of the predictions of a study by
Deutsche Bank.
"The auto industry is going through a time of transition. For the first time in its century-long
history, the real chances that besides the classic combustion engine, new forms of traction
are developed arises. Rely on an increasing electrification of vehicle traffic in the coming
years and decades. And companies who develop the right products from now on will have
good opportunities to get out of the crisis strengthened, "says Eric Heymann, who
conducted the study for the research department of Deutsche Bank.
Search ecological solutions
http://www.dw.de/ind%C3%BAstria-automobil%C3%ADstica-da-recess%C3%A3o-%C3%A0-revolu%C3%A7%C3%A3o/a-4036535 -
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Racing car Mercedes Benz 1900
However, the classic combustion engine should still remain for many years as the primary
mechanism for operating a car, just as Karl Benz and Gottlieb Daimler invented, every manfor himself, for over 120 years.
Although more modern engines today continue releasing carbon dioxide through the
exhaust, even though the emissions have decreased and have to decline further because the
EU wants it and why European automakers have not fulfilled their obligations voluntarily.
Now, engineers are really trying to develop models with emission levels of pollutants as low
as ever.The problem, however, is that due to the crisis, the price of gasoline is considerably
low. In the future, drivers will surely still miss current prices. Oil is and will remain a scarce
issue.
As soon as the economic crisis is overcome, its price will probably rise again and with it the
price of petrol and diesel. This will accelerate the search for alternatives to engines
developed by Benz and Daimler.
Consumer Insight
Economist Eric Heymann has recently observed a similar reaction in the market: "In recent
years we have seen a considerable increase in sales of fuel-efficient vehicles believe that the
consumer has learned that the current phase, with lower gasoline prices will be transitory
For.. I think it is unquestionable the fact that oil prices will rise again, as soon as the
situation reheat and pass the crisis we are witnessing at the moment.'s medium and long
term, fuel consumption will continue to be an increasingly important criterion for the
consumer's decision when purchasing a car, "says the expert.
http://www.dw.de/ind%C3%BAstria-automobil%C3%ADstica-da-recess%C3%A3o-%C3%A0-revolu%C3%A7%C3%A3o/a-4036535 -
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Consumers, at the time, prefer a Smart from Daimler, a Fiat 500, one of the Twingo Renault
or Volkswagen Fox. Vehicles that spend a lot of fuel shall be set aside in dealerships.
Hybrid technologies
Current vehicles: still compatible with the crisis and the environment?
After all, the German auto industry is even better than its reputation, according to the study
found. The delay of the auto companies as environmental protection parameters, especially
particulate filters and hybrid engines, is only real at first glance, according to Heymann.
For him, the significance of hybrid technology is being overestimated. In this context, it is
often ignored that automakers like Daimler, Volkswagen, BMW and others remain ahead in
the search field of alternative statements.
And these alternative forms of locomotion are precisely the technologies of the future to be
used by man when the last drop of oil is exhausted. At the time, automakers try to develop
electric point of making them viable for the consumer's pocket vehicles.
Today, according to the study by Deutsche Bank, a battery costs are simply too high:
thousand euros per kilowatt-hour, which quickly leads to spending 10 thousand euros or
more. There are other problems to be solved, such as weight, scope, duration and charge
cycles. This process requires time, Heymann recalls.
"This can not be done overnight. Structural change in the sector will be slow. In ten or 15
years, most vehicles must possess classic combustion engines.'ll Be a smooth transition with
the vehicle type or microhbridos mild hybrid, which will be embedded in certain
components of an electric motor. This is a growing trend in the coming years. The big
problem of the alternative statements, the current point of view, are the higher costs that the
combustion engine, but the trend toward greater electrification is clear, "says the expert.
http://www.dw.de/ind%C3%BAstria-automobil%C3%ADstica-da-recess%C3%A3o-%C3%A0-revolu%C3%A7%C3%A3o/a-4036535 -
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Biofuels: unresolved issues
Electric Smart, presented in 2008
For biofuels, such as ethanol and biodiesel, Heymann notes that there are still some open
issues. Although they have a great potential, it is necessary to focus above all on second-
generation biofuels, primarily generated from organic waste. This is due to the limits of the
areas of cultivation and also the much publicized competition between "the dish on the table
and the gas tank."
To Heymann, vehicles powered by natural gas will become increasingly important, unlike
those powered by hydrogen, which, in spite of the prototypes in operation, are still
something for the future.
Anyway, according to Heymann, the auto industry is beginning a period of
transition. Insolvencies, mergers and acquisitions will revolve the sector in coming years: a
taste of what's to come can already be felt in the recent reports of cooperation between
Daimler and BMW, for example. For German automakers, however, the prospects do not
look so bad.
German and Japanese
"In our opinion, the German automakers are in a comfortable position, just as the Japanese
competitors. They developed the most efficient time technologies not only the electric motor
sector but also alternative fuels. And take advantage when compared to many other
competitors, especially when they turn their eyes to the U.S.. Given this, we expect that the
German and Japanese automakers can establish trends in the production and development
of new forms of traction, "said Heymann.
http://www.dw.de/ind%C3%BAstria-automobil%C3%ADstica-da-recess%C3%A3o-%C3%A0-revolu%C3%A7%C3%A3o/a-4036535 -
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Just as steam locomotives are part of museum, one day the combustion engine developed by
Benz and Daimler will have the same fate. Merit in the global motorization process is,
however, undeniable. It will certainly have a place of honor in technology museums around
the world.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Automotive Industry: The Revolution of the
recession?Share on facebookShare on twitterShare on emailShare on printMore Sharing
Services0
Worldwide, automakers recorded sharp falls in sales and reduce the pace of production.According to a survey by
Deutsche Bank, the crisis may, however, bring progress to the sector.
's automobile as we know it today is a hundred years and probably still remain in the streets around the world also for
another hundred years. The demand for cars will even grow in the near future and automakers will certainly return to
produce as before the current crisis.However, it is possible that the production of mats future cars leaving differentfrom today: maybe not in appearance, but in the interior. These are some of the predictions of a study by Deutsche
Bank. "The automobile industry is going through a time of transition. For the first time in its century-long history, the
real chances that besides the classic combustion engine are developed new surge forms of traction. rely on an
increasing electrification of the vehicle traffic in the coming years and decades. And companies who develop the right
products from now on will have good opportunities to get out of the crisis strengthened, "says Eric Heymann, who
conducted the study for the research department at Deutsche Bank.ECOLOGICAL SOLUTIONS SEARCH However,
the classic combustion engine should still remain for many years as the primary mechanism for operating a car, just
as Karl Benz and Gottlieb Daimler invented, each By itself, there are more than 120 years. Although more modern
engines today continue releasing carbon dioxide through the exhaust, even though the emissions have decreased
and have to decline further because the EU wants it and why European automakers have not fulfilled their obligations
voluntarily. Now, engineers are really trying to develop models with emission levels of pollutants as low as ever. The
problem, however, is that due to the crisis, the price of gasoline is considerably low. In the future, drivers will surely
still miss current prices. Oil is and will remain a scarce issue. As soon as the economic crisis is overcome, its price
will probably rise again and with it the price of petrol and diesel. This will accelerate the search for alternatives to
engines developed by Benz and Daimler. CONSUMER INSIGHT economist Eric Heymann has recently observed a
similar reaction in the market:. "In recent years we have seen a considerable increase in sales of fuel-efficient
-
8/13/2019 British Motor Industry
31/64
vehicles that consumers believe has learned that the current phase, with lower gasoline prices, will be temporary.
Yeah I think it is unquestionable the fact that oil prices will rise again, as soon as the situation reheat and pass the
crisis we are witnessing right now. A medium and long term, fuel consumption will continue to be an ever more
important to the consumer's decision when purchasing a car criteria, "says the expert.Consumers, at the time, prefer
a Smart from Daimler, a Fiat 500, one of the Twingo Renault or Volkswagen Fox. Vehicles that spend a lot of fuel
shall be set aside in dealerships.HYBRID TECHNOLOGY After all, the German auto industry is even better than its
reputation second point the study. The delay of the auto companies as environmental protection parameters,
especially particulate filters and hybrid engines, is only real at first glance, according to Heymann. For him, the
significance of hybrid technology is being overestimated. In this context, it is often ignored that automakers like
Daimler, Volkswagen, BMW and others remain ahead in the search field of alternative statements. And these
alternative forms of locomotion are precisely the technologies of the future to be used by man when the last drop of
oil is exhausted. At the time, automakers try to develop electric vehicles about to make them viable for the
consumer's pocket. Nowadays, according to the study by Deutsche Bank, simply the high cost of a battery are too:
thousand euros per kilowatt-hour, which quickly leads to spending 10 thousand euros or more. There are other
problems to be solved, such as weight, scope, duration and charge cycles. This process requires time, Heymann
recalls. "This can not be done overnight. Structural change in the sector will be slow. In ten or 15 years, most vehicles
must possess classic combustion engines.'ll Be a smooth transition with the vehicle type or microhbridos mild hybrid,
which will be embedded in certain components of an electric motor. This will be a growing trend in the coming years.
The big problem of the alternative statements, the current point of view, are the higher costs that the combustion
engine, but the trend toward greater electrification is clear, "says the expert. BIOFUELS: Unresolved
Issues Regarding biofuels, such as ethanol and biodiesel, Heymann notes that there are still some open
issues. Although they have a great potential, it is necessary to focus above all on second-generation biofuels,
primarily generated from organic waste. This is due to the limits of the areas of cultivation and also the much
publicized competition between "the dish on the table and the gas tank."To Heymann, vehicles powered by natural
gas will become increasingly important, unlike those powered by hydrogen, that despite the prototypes in operation,
are still something for the future. Anyway, according to Heymann, the auto industry is beginning a period of
transition. Insolvencies, mergers and acquisitions will revolve the sector in coming years: a taste of what's to come
can already be felt in the recent reports of cooperation between Daimler and BMW, for example. For German
automakers, however, the prospects do not look so bad. GERMAN AND JAPANESE "In our opinion, the German
automakers are in a comfortable position, just as the Japanese competitors. they developed on time more efficient
technologies not only in electric motors, but also of alternative fuels industry. And take advantage when compared to
many other competitors, especially when they turn their eyes to the U.S.. Given this, we expect that the German and
Japanese automakers can establish trends in production and development of new forms of traction, "said
Heymann.Just as steam locomotives are part of museum, one day the combustion engine developed by Benz and
Daimler will have the same fate. Merit in the global motorization process is, however, undeniable. It will certainly have
a place of honor in the museums of technology worldwide (Deutsche Welle, 4/16/09)
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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The automotive industry in Mexico. History, current situation
and perspectives 1
Vicencio Arturo Miranda *
*
Professor of the Universidad Iberoamericana in Mexico City. Email:arturo.vicenciomiranda@ gm.com
Abstract
In Mexico and other manufacturing nations, the automotive industry is considered an
economic strategic pillar under the different benefits that entails the generation of large-
scale jobs, tax revenues derived from the business operations of the industry, staff training,the development of local suppliers and related technological modernization. Although Mexico
traditionally has remained within the group of leading countries in global vehicle production
has been shifted gradually by the incursion of emerging nations to fill the number eleven
position since 2004, coupled with the local market marketing vehicle fails to rebound as
expected to do so with the coming of the new century.
The issue addressed in this paper based on a historical review of how it was giving shaping
this industry to arrive at a definition of the current situation, in which they intend to provide
a strategic profile of the direction to follow to ensure competitiveness in the international
market.
Keywords:automotive, strategy and competitiveness.
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Introduction
The potential of the Mexican automotive industry is such that represents the country's
second most important economic sector, and that means the key element of modernization
and globalization strategies thereof. This industry is in a unique geographical area, is
located next to the largest consumer market in the world: the United States, in an
environment of commercial deregulation, skilled labor, transfer of proven technology and
considerable production infrastructure.
However, despite its importance, this industry is going through a period of crisis in which
the country is not responding in a timely manner to globalization that has arisen in recent
years to organizations lack an effective strategy and have failed to take advantage of
various opportunities that may encourage the growth of the same, from being a major area
of investment attraction to an observer of the global economic phenomenon. In a study
commissioned by the Economic Commission for Latin America and the Caribbean (ECLAC)
called "Foreign investment in Latin America and the Caribbean, Report 2003" is concluded,
inter alia, that despite the nearly 50 billion dollars foreign direct investment (FDI) in the
automotive sector throughout the region, signs of exhaustion in which he had been a
successful strategy for attracting FDI to Latin America, especially in Mexico and Brazil,
which are detected by the change of strategy regain the attraction becomes imminent.
This paper addresses this issue in four parts: the first one a historical review of how the
auto industry has evolved in Mexico, which traces its origins to the second quarter of the
last century, including the different automotive decrees which have been made industrial
development policy of the sector; developments in the second part becomes an analysis of
the growth of the automotive sector and the third includes a description of the economic
importance and current status in terms of infrastructure on two fronts: the terminal industry
and auto parts, and finally, a strategic profile on proposing to base the growth of this
industry, based on the current outlook in order to counteract the gradual loss of
competitiveness on the international level is set.
For the preparation of this work was checked different research addressing the issue from
different perspectives (Moreno Brid, 1996, Muller et al.1998; Brown, 1998; Vieyra
Medrano, 1999 and 2000; Jurez Nez, 2000 and Alvarez, 2002) . Information was
reviewed was concentrated by the Mexican Association of the Automotive Industry (AMIA)
and the National Autoparts Industry (INA), whose statistics are reported as strategic
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analysis, also the main observations from the first, second here include and Third
International Congress of the Automotive Industry in Mexico (CIIAM), held in 2003, 2004
and 2005 respectively.
1. Development of the automotive industry in Mexico: definition and
transformation of its regulatory policy
The development of the automotive industry in Mexico is the result of a series of events and
changes that include the one hand the move towards globalization of the sector at the
international level as well as the alignment of industrial policy at the national level; aspects
have allowed him to maintain a process of constant evolution.
The automotive industry in Mexico has always been a cornerstone of the country's industrial
development and, therefore, from its origin has specific development programs over the
years to have been framed within what is known as "Automotive Decrees" ,which are
issued by the federal government and are intended to regulate the production and sales,
this includes limitations on the number of terminals companies, restrictions on the
participation of foreign investment in auto parts companies and certain prohibitions such as:
i) import of vehicles, ii) the importation of parts that were produced locally and iii) the
production of auto parts companies in terminals, in addition to local content quotas on
automobiles (Brown, 1998).
However, sometimes these decrees have not proven to be very consistent because they are
often a reflection of the industrial policy of each of the various governments that have been
released (Moreno Brid, 1996).
It is in the sixties, following the policy of import substitution model across different sectors
of the country when the first automotive decree is issued, it sought to strengthen the
automotive industry focused on the domestic market. By the mid eighties, the government
opened the border mainly for the purchase of auto parts, a situation that is reaching its
peak as a result of the Free Trade Agreement (NAFTA), which gradually from 1994 were
reduced tariff rates of some parts and components similarly has decreased the minimum
local content requirement for manufacturers of industrial terminal located in the country up
to the full liberalization of the sector in 2004, not only the auto parts but also the finished
vehicle, and with it ended the policy of protectionism towards the automotive industry. Here
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we analyze in detail how it has been the strategic development of this industry over six
phases clearly identified.
First stage: Birth of the industry and start-up (1925-1960)
The history of the automotive industry in Mexico in 1925 with the installation of assembly
lines of Ford, whose development in the United States increased significantly, and then in
1935 comes that eventually would become the largest vehicle manufacturer in the world:
General Motors, while in 1938 started operations Automex later became Chrysler. They all
turned their operational activity in the assembly of vehicles for the local market demand
previously met by imports.
There were several reasons that American manufacturers moved initially and later to
Europeans and Asians to move its manufacturing facility to Mexico, Dombois
(1990) 2handles the following:
1) Reduction of production costs. Given that the costs of importing games CKD (Completely
Knocked Down) used for assembly were lower than those paid on the importation of
vehicles.
2) Low transportation costs.
3) Low wages. Mainly in the labor used in assembly tasks.
4) Expectations of a feasible market to monopolize.
The main feature in all auto plants was that they worked with a low level of productivity, the
result of minimal investment and lack of infrastructure. It is only after World War II when
the government directs its efforts towards industrialization of the country, and by 1950
Mexico takes a turn in its economic structure until then dependent on agriculture and
acquires a full approach to industrial development. This situation will be further
strengthened as much to the automotive sector.
Second phase: growth based on import substitution (1962-1976)
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As noted above, in Mexico vehicles manufactured from 1925 to 1962 is when the first
automotive decree, with which begins on firmer ground automotive development in our
country is issued, the prevailing situation at that time was characterized by plants only
assembly in which less than 20% of the components were of domestic origin, while sales is
mainly covered with imported vehicles.
The first decree sector oriented towards satisfying the domestic market and in it the
following aspects are included:
vehicle imports were limited.
imports of major assemblies complete as engines and transmissions are limited.
Set a minimum 60% local content for vehicles manufactured in the country.
Limited to 40% foreign equity investment in auto manufacturing plants.
Established a price control in order to contain the utilities and encourage increased
productivity.
Among the most important movements mentioned by the terminal industry organizations
that were given at that time under the existing regulatory scheme, we have the following:
In 1964 Volkswagen, which a decade ago was engaged in the marketing of imported
vehicles, started its assembly operations in the State of Mexico and three years later moved
its production to the state of Puebla
Ford makes an expansion of its production in 1964 and installed two new plants in the
State of Mexico, while General Motors inaugurates engine and smelting complex in Toluca in
1965, principally to provide 6-cylinder engines and parts smelter located in the Mexico City
plant
Following the same path, opens a Chrysler engine plant in Toluca in 1964 and in 1968
opened its assembly plant
Finally, Nissan Mexicana was constituted since 1961 and marketed vehicles in Mexico
since 1959, started operations at the plant in the Industrial City of the Valley of Cuernavaca
(CIVAC), in the state of Morelos fabricating the Datsun Bluebird Sedan.
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As expected before the protectionism of the domestic market, the auto industry grew
significantly and 96.781 vehicles were produced in 1965 was passed in 1970 to 250,000
units. Having achieved the goal of local content was reflected considerably in the activation
of the auto parts industry and this phenomenon spread to other sectors of the economy.
Already by the early seventies only seven vehicle manufacturers remained at home with
plants located near Mexico City, the vast majority had a technological infrastructure that
became outdated production each year.However, just as it is true that the production had a
considerable increase so is the quality levels were not very satisfactory and production costs
were above those given in other nations, but given the prevailing closing borders The lack of
international competitiveness was not a factor of concern for the leaders of that era.
Third phase: facing the international competitiveness through trade protection and
export promotion (1977-1989) Approach
With the issuance of the second automotive decree 1972, the government implemented new
regulatory policies aimed at improving the functioning of markets, of which highlighted the
following:
- The percentage of domestic content for vehicles intended for the export market was
reduced
- Manufacturers of terminal industry were forced to export an equivalent of 30% of the
value of imports
However, although in theory the model is acoplaba to new market needs, in reality and to
the obsolete infrastructure production very little progress had and by 1975 exports from the
automotive industry were below 16% what mattered the sector, so that the trade balance of
the year entered into crisis situation characteristic of the different industrial sectors given
the prevailing macroeconomic phenomenon.
The change in government strategy model of import substitution towards the concept of
export promotion, Brown (1998) attributes this to two main factors: Firstly Mexico as a
producer, he was struggling to cope with the effects of oil crisis and the subsequent and
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growing deficit in the balance of payments. Furthermore, the peso devaluation in 1976 and
the recession that severely affected the automotive industry.
The crisis in the balance of payments, largely for the lack of competitiveness of various
industries run by the government, was the evidence that the industry in general should
increase their levels of productivity, and the automotive sector was the first not only to
understand but to implement it as part of a restructuring model (Moreno Brid, 1996).
Given the high expectations that the discovery of oil deposits brought to the country and
hence the expected benefit to the economy of the domestic market and to taking advantage
of the competitiveness that lived in the international automotive market, the government
published a new decree in 1977, whose main objective was to transform Mexico into a
highly competitive exporting country which opened the sector to foreign investments.
This decree established a strict control on the trade balance of the manufacturers of the
terminal industry, which measured their level of imports including the one that was
transferred to them by their direct suppliers. This decree included at least 50% of the
trading of the shipping lines had to come from the export of locally produced parts, while as
another measure of protection to the domestic industry of auto, not allowed to have foreign
capital most share of investments.
Given the need to increase competitiveness to meet international markets, technological
infrastructure sector had to modernize, a situation that was adapted in parallel to the
structural adjustments that U.S. companies made in their country in order to address the
increasingly smaller, more efficient and economical Japanese cars, which by the end of the
seventies began to penetrate the U.S. market, manufactured in plants that were installed
throughout its territory. In response, U.S. companies began to increase their investment in
the northern part of Mexico to where considerable amounts of millions of dollars converted
at production came; example of this was the launch of assembly plants and engines that
General Motors installed in the complex of Ramos Arizpe, Coahuila in 1981, which at the
time represented the largest investment of this corporation throughout Latin America. TheChrysler engine plant in Ramos Arizpe Also in 1981, the Ford engine plant in Chihuahua
(1983) and the assembly in Hermosillo, Sonora (1986) in conjunction with Mazda dedicated
to the export market, same as at the time represented the assembly plant with the highest
level of technology in Mexico.
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Making a comparison of how they were accelerating exports for 1977 is that they have
reached the equivalent of $ 181 million (of which 83.7% were autoparts) amount. For that
year automotive exports accounted for only 4.3% of the country's total and 10.9% of the
manufacturing sector. The proportion of auto exports kept a considerably greater share until
1987, when somehow activated largely vehicle exports for 1989 of 3,900 million dollarswere collected by way of exports , auto parts accounted for only 57% of the total
(see Figure 1 ).
The transfer of technology played a major role in this process of industrial restructuring
reflected in the implementation of different production plants where the equipment,
machinery and new working condition contrasted greatly with old plants located mainly
sixties near the City of Mexico (Moreno Brid, 1996). Another significant difference that
characterized the new plants was that the vast majority of the workers were young, most
qualified and best trained to perform a wide range of tasks that made up the workforce of
existing plants.Promotions and special assignments began to be based on individual
performance and skills of workers, rather than just taking into account the age of the same
in business, and while the salaries and benefits were not equal to those of the other plants-
were still above the average of what was paid in the manufacturing sector.
Such restructuring could not immediately comply with the central objective: reversing the
deficit of the trade balance in the sector, a situation that continued to persist during the five
years following the signing of the decree, mainly due to the appreciation of the peso against
the dollar, the increased domestic demand and pressure from other countries to have more
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situation led to more than 15% of the vehicles sold in Mexico between 1991 and 1992 were
imported, a figure that has reached a level of 20% in 1993.
The companies received tax concessions by the equivalent to 30% of their investments,
while he strengthened equally to the auto parts industry to be set to at least the vehicles
produced in national territory had to include at least 36% of its components manufactured
locally, allowing exceptions in export vehicles (Moreno Brid, 1996).
Fifth stage: The FTA and the gradual liberalization of the automotive industry
Even if it is true that before NAFTA the U.S. auto market was open to imports from Mexico,
with very low tariff rates: 2.5% on average in cars and 3% in auto-, is the entry into force
of that treaty the first day of January 1994 when the sector begins to have a process
completely out of protectionism that had characterized to suit the consumer needs of an
expanding market major transformation; agreements on the automotive sector played a
very important role during the negotiations of the comprehensive agreement, under which it
accounted for both Mexico and the United States and Canada's largest in terms of economic
exchange sector. As quoted Moreno Brid (1996) with data from the Commerce Department
of the United States in 1993: in 1992 65% of U.S. exports of vehicles and parts went to
Mexico (6.8 billion) and Canada (23.7 billion dollars).
Among the most important issues that the treaty brought, are the following:
The tariff rates on imports were halved
The price of imported cars and light trucks fell from 20 to 10%, agreeing completely
eliminated from the year 2004
16% of fractions auto reduction suffered the same rates immediately, 54% in the period
of the first five years later, being exempt from taxes in full at the end of ten years
Specifically, the tariff rate on auto parts increased from 14% in 1993 to 10% in 1994 and
3% in 1998
was reduced from 1.75 to 0.8 the compensation factor in the trade balance, which
manufacturing companies located in Mexico could accelerate the pace of imports
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The range of local content for vehicles produced in Mexico is defined under the following
scheme: 34 - 36% in 1993, 29% in 1998 and 0% in 2004
Undoubtedly with NAFTA automotive sector has been one of the most active, Gross (GDP) in
Mexico Specific Domestic Product rose by an average 8.8% between 1998 and 1999. The
gradual deregulation of the sector from 1994 to take the total from 2004 has created
business opportunities for foreign companies and this is forcing auto manufacturers installed
in the country to improve the quality and reduce production costs of their products in order
to maintain and / or increase their business after 2003 for which they must meet the
requirements of export markets.
It can be said that the terminal industry initially and auto then went from assembly process
and low production integration to a phase of greater integration and technological
developments. Along with this process of industrialization of the sector a number of changes
were triggered from the geographical reconfiguration of production to the adoption of new
technologies that impacted the productive organization of work and the entire system of
suppliers that supply this industry (Vieyra Medrano, 1999 and 2000).
In an investigation ordered by the Ministry of Economic Development of Ontario in Canada,
in order to compare the factors of competitiveness of the automotive industry between this
country and Mexico, concluded as follows: 4
The return on investment is higher in Mexico than in Canada and the United States.
In the case of the terminal industry the two main reasons to invest in Mexico are: low cost
of labor and expectations of growth in domestic demand for automobiles.
In the case of auto parts, the main reason to invest in Mexico is the high cost of
transportation involving supply the assembly plants with products from abroad.
While the overall labor productivity is lower in Mex ico than in Canada because of the level
of technology involved, taking stock of capital invested, the Mexican labor is as productive
as the Canadian.
In certain cases, the high level of productivity in the Mexican labor is attributed to a more
flexible workforce that of Canada.
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NAFTA has been important to simplify the investment process, but has not been a factor
for increased investment.
The free trade agreement with the European Economic Community (EEC), which became
effective from the first of July 2000, will have a significant impact on investment in the
automobile sector in the long term.
Mexico has a competitive disadvantage in the production of certain raw materials,
particularly steel plates, plastic resins and generally parts that require high technology.
In Mexico, increased industrial expansion potential sites is hampered by lack of water
supply and inadequate infrastructure with respect to transportation facilities and systems.
In the case of the terminal industry, we believe that investment will grow over the long
term.
In the case of the auto parts industry, investments are directly related to the investment
decisions of the terminal industry, given the high number of parts that are imported to the
country and the preference of the assembly companies to use manufactured locally parties,
generally thought that investments in this area will grow considerably.
In the case of the terminal industry, it is estimated that investments will grow
considerably in the long run, while in the short term excess current installed capacity largelydetermines investments in new production facilities.
Sixth stage: A modern approach to strengthening the competitiveness and
development of the domestic market
In December 2003, the administration of President Fox issued the "Decree to support the
competitiveness of the automotive industry and the terminal impetus to the development of
the domestic car market", in which the federal government being aware of the opening and
entry into force of deregulation applicable in this industry contracted by Mexico in the
international context, which include those contained in the free trade agreement with the
EEC, in addition to those discussed framed within NAFTA, recognizes the need to create new
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mechanisms conducive to increasing the competitiveness of the automotive industry,
seeking among other things, strengthening the domestic market.
This order provides:
Continue to stimulate the flow of investment for construction and / or expansion of
production facilities in Mexico.
Reduced costs of imports through tariff reduction.
Authorization of registration of new production companies in the country terminal industry
(as long as its fixed asset investment is at least $ 100 million) and considering the
manufacture of 50,000 vehicles a year at least, with a deadline for fulfillment of three years
from the start of operations.
Benefits to the importation of certain vehicles with zero tariff rate, reaching volumes of up
to the equivalent of 10% of the production of the previous year.
Authorization to companies to import larger quantities of vehicles, as long as there are
concrete commitments to increase investment to expand its production facilities in Mexico,
continue training and developing local suppliers to develop and transfer technology to
providers first and second level.
The answer to this industrial policy for the sector has not been slow to materialize mainly in
the terminal industry, which is proven with the launch of the new Toyota plant in the
northwest of the country, investments in Nissan Aguascalientes plant , Volkswagen plant in
Puebla and ads expansion and investment General Motors (including the construction of a
test track in the state of Michoacn), Daimler Chrysler and Ford plants located in northern
Mexico.
In July 2004 took place the second CIIAM under the theme of "Competitiveness" unlike
"Trade liberalization of 2004," the first congress in 2003. The findings of this secondcongress agree on the need to strengthen the domestic market, increasing participation in
the global market and increased productivity and competitive environment.
Two. Analysis of the development of the sector
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The growth of the Mexican automotive industry was made without a preset order of
development, ie, they did not know the right way to stratify each of the elements involved
in the production chain of the automotive industry.Allowing manufacturers appear
everywhere common auto parts for all automakers, which in most cases lack of expertise
given the diversity of products still on the market and gives rise to low productivity, causedinter alia by as complicated relations of exchange between suppliers and assemblers.