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Sunday, February 5, 2012

Brazil versus Mexico

Brazil gets all the press. After all, It is the "B" in brics.
Mexico... Well you have the drug cartels and the doings of Carlos Slim.

But something else is going on quietly. Mexican automakers are gaining productivity and market share. To the point that Brazil is scared. So concerned that insiders believe that Dilma Rousseff (Brazil's president) may be close to revert a free trade agreement (only for cars) between the countries and it could even impose a possible tariff to Mexican cars imported into Brazil.
Why the rush? A FT article indicates that last year Brazilian imports of Mexican cars grew 40% to reaching a deficit on USD 1.6 billion.

Yes, Mexico and China are able to export large numbers of cars to Brazil. At the same time Brazilian cars are not enjoying the same bonanza abroad.
The reason for this drop in competitiveness? There is never only 1 reason but the chart below surely explains a lot.

The BRL has appreciated against the dollar while the MXN has depreciated. Things made in Brazil are more (a lot more) expensive than those made in Mexico...

Furthermore... look at the euro... same picture

If you are Ford or VW where would you put your next plant: Brazil or Mexico?

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