Martha ROLDÁN - FLACSO / CONICET Buenos aires
The prescription is as simplistic as the diagnosis. Just reverse the above trends : a shift to less State intervention and domestic consumption that favors savings and investment. Deregulation, austerity, and work rationalization would also result in the same effect. Free market forces will ensure productive investment and efficiency as open, unprecedented competition force firms to modernize and integrate their operations into ever encompassing production systems. Since 1991 - with the signing of the Treaty Or Asuncion that creates Mercosur, (the Common Market of the South comprising Argentina, Brazil, Paraguay and Uruguay, and possibly Chile very soon) globalization is also represented as regionalization, a trend that is projected to benefit all country members irrespective of the pre-existing structural asymmetries between Brazil and the rest of the group. On the contrary, the latter would be equally involved in world economic restructuring in which investments, and export oriented production would be part of compatible and harmonious processes 2.
After the "Lost Decade" of the 80s, the experience of most countries in Latin America shows that a record of GNP growth is not necessarily associated with new stable regimes of accumulation. On the contrary, the application of measures associated with the Washington Consensus may be related to Indus trial growth and exports, but it is also accompanied by economic polarisation and new social exclusions, the disarticulation of domestic regional economies, and balance of trade/payments deficits, although these ill effects vary according to country and regulatory framework. Argentina is a good example of a country where becoming an emerging market is not synonymous with simultaneously developing a sound productive structure 3.
Given the background above, I will suggest that the evolution of the Argentine automotive industry is a good testing ground for some of the tenets of the 'globalization of production' thesis. In effect, investment, production and export growth indicators for the 19911996 period are positive for Argentinean manufacturing.(Section 4) However, the evolution of this industry runs counter to 'globalization' postulates. In effect this 'successful' industrial performance is not linked to the full opening of the economy and deregulation. On the contrary, both the opening of the economy and deregulation are very selective in Argentina. In the case of the automotive industry in particular, its very evolution past and present has been shaped by specific regulatory frameworks that aim to attract direct foreign investment, and which are instrumental to sectorial growth.
From this perspective, what is new about the contemporary construction of the automotive industry in Argentina ? Under what conditions is direct foreign investment in the car/autopart industry returning to the country and what are their socio-economic implications ?
These opening questions lead us to additional themes. How do different processes of accumulation and their regulatory frameworks shape automotive market/demand and profitability ? What is industry's (car makers') own contribution to this complex dynamics ? What are the implications of these processes in terms of homogeneity and/or hierarchization of sectorial growth ? Last, but not least, how do these changes affect the daily lives of men and women workers involved ?
I suggest that these related issues lead to a basic underlying challenge : how to study the evolution of the automotive industry in a peripheral economy taking into consideration national and international dimensions, and the agency displayed by different actors : the State, car and autopart manufacturers, unions and men and women workers. These are still unresolved questions and could be an agenda for future research.
The purpose of this paper is to take one first step in that direction. To this end, it will : 1) focus on different 'contextual niches' and the incentives they offer to attract foreign investments, and 2) compare different sectorial responses and their 'hierarchy' implications with regards to the autopart industry growth, in particular. The period covered runs through different phases in the transition from a model of growth based on ISIET to the contemporary one based on New Public Policies (NPP) of selective opening and deregulation of the economy and creation of a regional market via Mercosur.
We assume, from the outset, that the evolution of the automotive industry and its implications can be usefully read from a perspective of an intersection between the economic model being implemented and the international strategies of automotive makers and their local subsidiaries in constant and conflictive interaction and feedback. In other words, we agree with Sourrouille (1980), in that the automotive demand and its profitability constitute the crucial element to explain the behavior of TCs in this sector (when, where and how much to invest). But this demand is not created by spontaneous generation. As such it is the product of concrete processes of accumulation and national regulatory frameworks now turning regional ; processes that give support, sustain and reproduce the economic model being implemented. I will argue that car makers themselves make a crucial contribution to that same effect. (Sections 3 and 4)
This complex set of practices and social relations - which I call a 'contextual niche' - offers incentives and sociopolitical conditions for industrialization ; it forges its market/demand. Of course, the resolution of this demand is not automatic incentives offered to attract productive investments do not guarantee that the latter will ever come true... Automotive firms are also mobilized according to international and regional strategies that may, or may not coincide with the 'politics of seduction' of a given national State. (In a lighter mood I wonder whether one can think about the interlinking of 'seduction processes' between central and peripheral regions ?. As depicted by Coriat and Taddei, in Made in France, 1995, this love affair is far from resolved even within the context of the European Community. Not much of a chance for a Latin lover role to be displayed on a more global scale).
To carry out this preliminary exploratory exercise. the paper is organized as follows : Sections 2 and 3 focus on the historical precedents of the contemporary phase, the ISIET boom of the 60s and early 70s, and the stagnation and crisis in the 80s. Section 4 refers to the new boom of the '90s (19911994) and presents some information for 19951996. Section 5 elaborates some conclusions from the previous discussion and suggests lines for future research.
'Easy' ISI was then followed by the substitution of industrial inputs, capital goods and durable consumer goods for the domestic market. As Kosacoff, et. al. (1993), elaborate in detail, during the ISIET years industrial activities were the motor of the growth of the economy. the provider of employment and the basis of capital accumulation. Focusing on two pillars, the petroquemical and the metal mechanic sectors, (comprising the automotive industry), direct foreign investment modified the structure of the industrial sector as a whole, the relative importance of subsectors, the technological frontiers of the country, and the social as well as the intra firm divisions of labor 6.
In general terms, the above economic policy continued during the military dictatorship of 19661973 7. However industrial growth started declining in the 70s and successive Peronist governments during 19731975 tried to reverse this trend through a policy of export promotion that sought to increase foreign earnings, expand the internal market (via income redistribution in favor of the wage earning population) and by promoting the global competitiveness of industry 8. Yet this experience was not successful. After a period of economic disorder in mid 75, it ended in 1976 with the beginning of a new military dictatorship.
The social intervention of the State in the area of labor market regulation 9
The dynamics of accumulation during the ISIET phase was supported by specific State intervention concerned with labour market regulation that also comprised different degrees of State coercion during the period.
As Cortes and Marshall (1991) show, the social intervention of the State in the area of labor market regulation was not homogeneous during the ISIET stage. The collective provision of goods and services continued, even if public health started to deteriorate. Labour legislation suffered and collective agreement negotiations only took place during short periods. Social security, however, was extended to counteract unions' strength. During the 195573 period together with the abandonment of income redistribution policies, a major attempt was made to reshape the role trade unions had had in determining wages and work conditions during the first and second Peronist terms (19461955, the phase of suigeneris 'Fordist' social agreements). Yet unions were able to resist the reduction of the share of wages in the national income because, due to the nature of accumulation at that stage, their strength had not yet been weakened by diminished labour demand.
During the Peronist interregnum of 19731975 the above measures were again reversed. A Social Pact, including the confederation of industries and trade unions, with the mediation of the State, set an agreement about wages and prices to fight inflation. Although it failed, collective negotiations by branch of industry remained the basic foundation of wage determination.
The features of the industry, the categories of vehicles to be manufactured, and a schedule for quick and increasing national integration (i.e. autopart production) that reduced import quotas along a period of 5 years, were formed 10.
No new firms would be allowed in during the following years and the legislation on foreign investments gave foreign companies preferential treatment vis-à-vis domestic firms, and guarantee of juridical equality and free repatriation of capitals within the limits established by the contract of 'radicación' only, among other benefits.
The 1959 norms were later amplified and/or modified by successive legislation in 1961, 1965, 1967 and 1971, according to demands for quicker and wider national integration and control of origin of autoparts. These modifications responded to the evolving relation of forces between automotive TCs and national autopart makers that supported the series of civilian and military governments of the ISIET phase 11.
It should be stressed that although the Regime demanded higher national integration, autopart firms did not exert influence on the car industry itself. The latter continued to set prices, and features of the final product and, as Sourrouille argues, they were recognized as de facto oligopolies, whose presence could not possibly be altered by the entry of new manufacturers, for instance the Japanese firms, the second world producer at the beginning of the seventies. The above holds true even during the Peronist period of 1973-75 when legislation on foreign investments was substantially changed 12.
The Regime of 1959 received quick manufacturers' response to the change in investment regulations. By the end of that year - in line with trends of internationalization of production of that period (Chesnais, 1996) - 23 firms pledging to produce approximately 165.000 vehicles in one year had been approved 13. This meant the acceptance of some firms who would be producing less than 1000 cars per year. However, first rank firms such as GM, Ford, Chrysler, Renault in association with IKA, Fiat and Mercedes Bent, among others, were also approved.
Industrial analysts have pointed out two main factors to explain firms' response. On the one hand, unsatisfied demand (Sourrouille, 1980 ; Katz and Kosacoff, 1989 ; Kosacoff, Todesca and Vispo, 1991). Cars were almost 20 years old in the mid 50s, and by the end of this decade, a vast buyers' market was ready to absorb manufacturers` supply. On the second hand, a highly profitable captive market had been created. According to Sourrouille (1980, p.l02), "since the end of the '50s and through the '70s, the relation between industry and consumers was typical of a market with excess demand, that operated isolated from all foreign competition".
In terms of intrafirm relations, available evidence suggests that local subsidiaries had a high degree of autonomy vis-à-vis parent companies and other regional subsidiaries. Automotive firms had wide freedom to choose their own level of activity in the country and to determine the price of their production. TCs invested little in Argentina, at the beginning of the ISIET stage, and later resorted to local resources. Negative interest rates in local financial markets were main sources of financing and accumulation, together with high mark ups. To the extent that the market was becoming exhausted, and growth rates declined, investment went down and only installed capacity was kept. Thus investments were lower than initially authorized (100 million vis-à-vis 140), and prices were established without consideration to the market, to 'wait and see'. (Sourrouille, 1980, p. 111).
Employment generated by the automotive sector as a whole is also important. According to the Industrial Census of 1964, analysed by Schvarzer (1995), employment in manufacturing plants (called 'main assembler' in Spanish), autopart firms, pneumatic, motor, tractors and repair shops comprised 140.000 people, almost 11 % of total industrial employment in the country. The regime's promotion had meant the creation of some 60.000 new jobs. In main assembler alone, there were 33.493 workers employed in 1964 (Table I). It should also be borne in mind that average wages within this industry were 50% higher than in the rest of industry, and that the strata of mechanics and maintenance workers was composed of highskilled personnel.
Throughout this period, the Argentine automotive industry continued to focus on the internal market. Local subsidiaries did not show any interest in exporting vehicles produced in Argentina. Only in 1973, when the third Peronist government sought a solution to the crisis of ISIET based mainly on the export of cars, did the companies begin to shift their orientation. Though the government provided strong promotion incentives oriented towards the external market, the Argentine firms lagged significantly behind international best practice. (Kosacoff et.al. p. 171). Exports to Chile started in 1972 and to Cuba in 1974.
Finally, and with regards to macroeconomic implications, the initial growth of the Argentine automotive industry was not free from balance of payments problems because of the increase in imports, that was not accompanied by exports. If one takes into account the remittances of profits and services abroad during the same decade, and the increase in the service of the external debt due to the financing of the activities of the new industry, the net effect of the whole industrial policy of ISIET over the savings in foreign earnings is highly doubtful. (Sourrouille, 1980, p.62). Furthermore, local car prices were more than double those of international markets.
The result was that the automotive industry operated with a sub optimum technology of production and of work organization. Local engineering was devoted, to a great extent, to solving the technological problems of inadequate scale of work and industrial organization prototypical of a less mature industrial context than that of developed nations. (Katz and Lengyel, 1991). This outcome is not surprising if we consider that local market sales were insignificant by international standards, within the level of production of each TC. Yet, Sourrouille (1980) concludes, the indirect effects of early automotive growth were important in terms of workforce training, technology incorporation obliging local adaptation, introduction of quality control techniques, more complex machinery, new administrative practices, etc.
Production systems
There are no fieldwork studies on labour process organization during the ISIET phase. The topic is still a subject of debate, as we have only 'historical reconstructions' of such period. Catalano and Novick (1994) for instance, argue that Argentinean lines were instances of a 'protoTaylorism' to the extent that they were oriented towards attaining labor control rather than increases in productivity. (See Katz et al. 1986) among others, for a different vision. Also atypical - considering prevalent employertrade union centralized collective agreements of that phase, that regulated wages and work conditions at branch level - were automotive agreements of the ISIET phase. Main assemblers managed to establish agreements by firms, but counted on the participation of the national trade union federation, SMATA. That is, local negotiations were articulated to national level negotiations, an important precedent for contemporary developments 14.
Let us explore vertical interfirm relations. According to the same author, 2/3 of sales at the end of this period were conducted by 75 firms. The foreign presence is also important : seventy foreign firms controlled more than 50 x of total autopart production in the '70s. The high degree of concentration and the dominant foreign presence in the component/autopart world : engines, brakes, transmissions, gear boxes, etc. as well as in car tires production. (Firestone, Goodyear) is well documented. Also at this stage 'controlled' autopart firms - i.e. those firms owned by Terminales, a crucial feature of today's industry - already existed.
The majority of autopart firms occupy the lower echelon of the autopart pyramid. At the bottom of the autopart pyramid are smaller and locally owned firms, with less automated processes, and using universal machines. Sourrouille (1980) estimates that some 700 autopart firms had less than 50 workers. With short term contracts and low levels of capital they were not able, on their own, to design technological advances. Their future was highly dependent on the purchasing policies of car makers, the economic policies of the country itself, the rate of exchange, tariff systems and import quotas. (p. 168).
To sum up. the above author calls the relationship between assemblers and autopart firms a case of asymmetrical integration given that it was defined by TC automotive firms, that exercised decisive economic power. Autopart firms operated under rigid norms. TCs bought most of autopart production, determined their price, and demanded a given technological design that required foreign licensing in many cases. That is, design followed the vehicle the world over. The autopart manufacturer carried out the work assigned, under strict quality control checks, and ran the risk that assemblers might buy from another supplier. The international insertion of local autopart producers was marginal at this stage.
However, according to the legislation of the ISIET phase, they had a guaranteed access to the assemblers' market. Vertical integration of car makers was forbidden, and there were strict limitations on autopart imports. The changes introduced in the late 70s and 80s would show the weak foundations of the national segment of the autopart industry.
The new military dictatorship coming to power in the mid 70s, prepared the ground for a definitive break with the model of development that had shaped the socioeconomic dynamics of the country for more than four decades 15. This 'preparation' stage extended over a period of 15 years, and exhibited different features during the military and civilian periods.
During the military phase, (19761982) generalized social repression and the lives of 30.000 'disappeared' men and women made possible the first dismantling of the socioeconomic regulatory scheme of the ISIET stage. In its place, a neoliberal legislation including new laws on foreign investment that re-established the principle of equality between local and foreign investors conveyed higher degrees of economic and financial liberalization. The manufacturing sector, and the metal mechanical industries in particular, were severely undermined 16. The military Junta's economic strategy culminated in a severe recession in the early 80s, which increased firms' indebtedness, and led to a flight of capital abroad and serious balance of payments problems. In 1982, through the financing of private debts with regulated interest rates, in an inflationary context, and a regime of rate of exchange insurance, firms balanced their budgets. Simultaneously, the State took over private debts, increasing the site of the public debt that continues to hamper Argentina's economy in the years of 'structural adjustment'.
The new democratic government in 1983 was therefore faced with the disarticulation of the productive structure, external indebtedness, inflation and balance of payment problems. The economic team argued that with price stability, non traditional export expansion could overcome industrial stagnation 17. However, with high international interest rates and big decreases in the prices of agricultural exports, the Alfonsin government (19831989) had little room for manoeuvre. This 'transition' phase ends with the beginning of Menem's first presidency in 19891990, that initiated the neoliberal ideal of a minimum site State, and growth achieved through the free operation of market forces, as sought by the military back in 1976. These strategies acquired a definite shape with the new regulation of 1991 and will be taken up in Section 4.
In sum. The coercive social intervention of the State during the military rule set off profound changes in the socioeconomic organization of Argentina : a growing concentration of capital, deindustrialization, rising unemployment, regressive patterns of income distribution ; and an increase in socioeconomic inequalities amidst unheard of levels of external debt creation. The inauguration of this trend was accompanied by instability and economic stagnation that set the stage for the changes introduced during the 'boom' years of 19911994. The manufacturing sector lost its old role of engine of the economy, through a process that Kosacoff et. al. (1993) call 'regressive restructuring leading to structural heterogeneity'. The decline and bankruptcy of many (generally smaller) firms coexists with the growth and the modernization of fewer (generally bigger) firms. The economy as a whole, in the view of the above authors, started assuming an increasingly 'tertiary profile'. These domestic changes are in turn set within the framework of the international scenario of a new competitiveness, 'uncertainties' and seemingly 'globalization' of the '80s.
The social intervention of the State in the area of labor market regulation 18. As Cortes and Marshall (1991) show, changes in the regulation of the labor market during this stage shares one feature in common : the reduction in labor costs is now deemed a necessary feature of capital accumulation. Hence labour system changes followed the trends of industrial 'transition'. It was not until 1988, during Alfonsin's democratic rule, that labour norms applied before 1976 were re-established and centralized collective bargaining reinitiated, the first of its kind after 13 years. However, it already reflected the weakening of the Argentinean labour movement, traditionally based on the manufacturing sector, and the important new presence of service unions. (Catalano and Novick, 1995).
With the beginning of Menem's first term, trade union power continued declining. Both Menem and the majority of unions belonged to the same Peronist faction. By giving benefits to some of the unions in exchange for support the government managed to fragment the labor movement, and to consolidate the economic model now under way. Of course, the situation of the Peronist government in 1989 was different from that of 1976, when the military cut salaries and severely repressed trade union activism. At the beginning of the 90s wages were much lower and unions much weaker. This explains that for the first time that under a civilian government the State could take measures directly and negatively affecting labor without provoking the reaction of the unions. (Cortes and Marshall, 1991).
Together with new laws on foreign investment and industrial promotion, the military government established a new regime for the automotive industry and the import of vehicles, (Law 21.932, February, 1979). Its principal clauses eliminated the suspension of imports of finished vehicles, and increased the volume of imported autoparts allowed to be incorporated into vehicles produced in the country, setting low tariffs that would be further reduced in the course of four years. In contrast to the 1971 legislation, restrictions on the vertical integration of assemblers, the production of new models, and the setting up of new assemblers, as well as the preferential treatment accorded to national capital, were also eliminated.
This Law also benefited future regional integration, by establishing that autoparts imported as a result of multilateral or bilateral exchange agreements between governments or firms. will be considered 'national' autoparts. Thus mechanisms for the promotion of compensated bilateral exchanges between Argentina and Brazil were set up in an attempt to attract main assemblers support through substantial tariff reductions. All aspects considered, it can be argued that national autopart firms, the supporters of the 1971 legislation, had been marginalized by the new normative framework.
How did direct foreign investment in the automotive industry fare under the 1979 law ?. Contrary to the expectations of the 'globalization approach', the threat of market opening (in fact high tariffs had prevented a real automotive opening), did not originate a new trend of investment in this industry. As Chudnovsky, Lopet and Porta (1994) explain, in the 80s, in a framework of recession, fall in demand, high inflation and strong uncertainty, direct foreign investment flows were relatively weak and unstable. There was an abrupt reduction in investments with the debt crisis in 1982, and some reaction at the end of the decade due to the programmes on capitalisation of the external debt. This external debtrelated investment accrued to 'controlled' autopart firms, i.e. those owned by the same Main assembler 19.
Sourrouille (1980) summarizes the situation as follows : 'What was needed was a different regulation to take care of the situation, not State deregulation. The risks involved in massive investments to induce up scaling in the site of plants and to improve their competitiveness for insertion in foreign markets needs special compensations. (mutual advantages) (p. 231) Undoubtedly, these 'contrapartidas' were insufficient in firms' eyes, and for the period under study.
Internal demand had fallen. Exports to other countries had not been encouraged. The threat of complete opening of the internal market. if carried through - quite apart from balance of payments and labor market problems - would have provoked a complete withdrawal, as local firms would have been forced to compete with other foreign companies, including Japanese, not a palatable menu. Firms' profitability to the extent that it was derived from local production directed to the local market only had been affected, a situation that is only partially reversed at the end of this period.
Some firms withdrew during this period, GM, Chrysler, Citroën and Peugeot. There are shut downs and increasing concentration of Assemblers. In 1982 only four of the latter remained, Fiat, Renault, Ford and VW, delivering an average of less than 150.000 vehicles per year during 19821985. ( Table 1). During another upward shortterm cycle, 19861987, production rose up to close to 180.000 units and again reached a plateau, suggesting firms did not have the same installed capacity of the '70s.
Parallel to that evolution, and in accordance to the 1979 legislation automotive subsidiaries incremented their share of imported autoparts to be used in local production, as well as explored new options in work rationalisation. This included shutting down some plants, mergers, specialisation of parts, among others Fiat absorbed Peugeot, but later sold most of its shares, licence use and trademark to a local group (Sevel). Ford and VW constituted Autolatina in 1986, in both Brazil and Argentina, representing a first attempt to unify their strategies in both markets. These mergers did not prevent production going down once again in the years to follow, reaching the lowest level of 99.639 units in 1990. (Table 1). The continued existence of the automobile sector itself was then in danger.
Another feature of this stage is the fall in employment at main assembler. From a top level of 57.400 (mainly men) workers in 1974 there were only some 20.000 left in 1989. (Table 1). Rationalization had started, however, and labor productivity grew, based on the crude indicator of total number of hours worked per volume of production. (Table 1). Considering that investment in equipment was almost nill, and that the introduction of organization al innovations did not take place until the end of 80s, discipline of the labor force was brought about by the strategy of coercion of the military Junta first, and unemployment later on. It is possible to agree with Kosacoff, Todesca and Vispo (1991. p. 15) in that productivity growth was probably mainly due to work intensification during this period.
Lastly, but not least, a crucial strategy of the 'transition' years is manufacturers' specialization in autopart production, through 'controlled' firms and their export orientation to headquarters or to the regional market. Autolatina was a champion of this approach. As a result, support started growing among certain government circles for a strategy in favour of facilitating intrafirm productive integration through closer links with Brazil. A number of treaties between the governments of both countries began setting the foundations of this future growth. (See 31 below, Agreements of 1990).
Production systems. There is no detailed fieldwork research on this topic. According to estimates by Catalano and Novick (1995) innovations in the organization of production were introduced, in a very partial and slow fashion, at the beginning of the 80s : for instance Renault began a programme in problem solving improvements. Ford started Quality Circles. Team work was tried by Sevel in 1982, but later discontinued. All in all, those authors conclude, management innovations at this stage varied in depth, degrees of application and impact over the contents and nature of work. With regards to trade union strategies, this transitional phase maintained the continuity of the localizedcumnational collective negotiations started during the ISIET stage.
The autopart pyramid included some 120 firms (20%) suppliers to assemblers exclusively ; some 360 (60 %) that sell to car makers and to the spare parts markets ; and some 120 (the remainder %) oriented towards the latter market exclusively. According to the same authors, within the first group there exists a core or nucleus composed of some 1520 firms which are 'controlled' autopart producers i.e. firms owned by car assemblers. The strategies of these firms responds to the world or regional strategy of their head quarters. They are also considered the maximizers of the opportunities brought about by the changes in regulation of the '80s.
As Kosacoff, Todesca and Vispo (1991) point out, the 1979 automotive regime had a commercial bias ; this favored the increment of margins of accumulation of assemblers, not of national autopart firms. The strategy of the former was to privilege imports over the knowhow development of the supplier chain, and to increase the share of supplies originating from their own subsidiaries. As a result, purchases from abroad and from local 'controlled' autopart firms increased and originated the endogeneization of the productive processes within plants of the same firm. (increased vertical integration).
That process took place mainly through mergers and purchases of autopart firms, and concerned parts and components demanding higher degrees of machining and 'matriceria' : engines, gear boxes, transmission, etc. At the same time, assemblers externalize marginal operations, in plastic components, cables, foundry operations. (Kosacoff, Todesca and Vispo, 1991, p.19)
Within the segment of 'independent' firms, i.e. those not directly owned by assemblers, we also find TC autopart firms, many of which were former national producers operating under licence and later absorbed. They generally have a 'sister or cousin' plant in Brazil and a low degree of autonomy of local management. The same authors estimate that some 150 companies were operating for a given line of product, with foreign licence. In turn, national firms in this stratum, operating under licence, with 'homologación' (quality accepted by Terminales) kept a certain amount of autonomous decision making and had some export experience, be it in relation to compensated exchanges of Brazil, or in search of very specific quality niches within or without the region. (Roldán, 1994, a)
Smaller national firms in contrast, saw their participation in the assemblers' markets reduced and are excluded from more recent technological developments and, as a result they had less export possibilities (Roldán. 1994, a). Many smaller firms went bankrupt, or they themselves became autopart importers.
As an overall picture of this stage it is useful to quote Kosacoff's et. al. (1993)
The new sectorial model has a very different national insertion, as it now it participates in the world globalization processes of the car industry, at which Mercosur agreements have a privileged position...ln their search for a way to compensate new requirements in imports, activities become structured towards an export specialization. Investments were oriented towards the consolidation of productive nucleus, highly specialized in the autopart sector, (engines. geer boxes, differentials, 'matrices', aluminium blocks, etc.) with a decisive participation of main assemblers. (i.e. controlled autopart firms). This specializaton is based on operating with close to best practice technologies, oriented towards external markets that generate enough foreign earnings to produce cars with a high content of very diverse imported autoparts.
This new export orientation on the basis of specialization in groups of autoparts has very different features from the one of the import substitution export orientation, that was based on export of automobiles, with strong promotional incentives, oriented towards the regional markets and strongly lagging behind in comparison with international best practice'. p. 171. (My own translation and underlining).
As Eghivar and Rua Boiero (1991) stress, 'neither the most enthusiast supporter of economic integration nor the most anxious manager could expect (at the time) a reduction in terms or automatic mechanisms for the dismantling of obstacles to trade' (p. 160). This is precisely the big change introduced by the Act of Buenos Aires, signed in July, 1990, by the new presidents of Argentina and Brazil, Menem and Collor de Melo respectively.
The Agreements of l990
With Menem's access to power, amidst hyperinflation and a 'market coup d'état', Argentina's orientation towards bilateral and regional integration radically changed. The Act of Buenos Aires declares the intention of Argentina and Brazil to set up a Common Market, beginning the first of January, 1995. This same Act established, among a number of other norms, that tariff reductions be generalized to the whole universe of commodities ; they would be lineal and automatic. and this would be the primary methodology for the construction of a regional common market, i.e. partners would, by that date, be without tariff barriers of any kind.
It should be stressed that the Act of Buenos Aires radically changed the situation of the whole Argentinean industry, not only the automotive sector. Instead of a period of ten years to prepare for a common market, Eguivar and Rua Boiero note, firms would have only four years and six months. From flexibility, gradualism, and symmetry firms would have to face systematic, generalized, lineal and automatic tariff lowering (p.161). In other words, if the Act of Buenos Aires was to be observed to the letter, car makers would have a very short restructuring period, and would soon be forced to compete in a completely open market and in true global terms, for example with Asian firms not yet operating in Argentina. The reaction of automobile and other manufacturers was immediate and shaped through the Acuerdo de Complementación Económica. ACE 14 - or Agreement on Economic Complementation called Protocol 21, whose Annex VIII refers, to the automotive sector specifically.
Eguivar and Rua Boiero, 1991, give a detailed account of the political manoeuvring that preceded and accompanied the signing of ACE 14. Suffice it to say here that after the Act of Buenos Aires, important Argentinean and Brazilian business and State circles that, obviously, did not agree with the terms set up in that Act, decided in September, l990, via one of the committees of ALADI 21 that all in process negotiations between Argentina and Brazil that were carried out within the context of ALADI, and that would continue following the lead of the Act of Buenos Aires would be re-grouped within one only instrument. The latter would be an agreement on economic complementation, later numbered ACE 14.
Actors wanted two avoid two risks. 1) That mutual concessions between Argentina and Brazil could be extended to third countries through the application of a 'most favored nation' clause, and 2) That being unprotected, all agreements between both countries in the period of transition to the common market could be exposed to observations or vetoes from the GATT. These risks were overcome by putting negotiations towards a common market within the ALADI framework, because the latter was recognized by the GATT. With these aims in mind, more than 100 manufacturers and their Chambers met in September of 1990 in Montevideo to start re-negotiating the whole tariff universe, setting preferences, quotas and exceptions. The end result was ACE 14, signed in December, 1990. It has as an objective to promote the economic, industrial and technological complementation of both countries.
Very succinctly the Protocol 21 of ACE 14 allows the exchange of vehicles, and of parts and components to be used in the manufacturing and / or as spare parts' of exchanged vehicles,.paying 0 tariff and free from any nontariff trade restrictions. Until December, 1994 this exchange would take place through special agreements between main assemblers and autopart firms from both countries and would have to be approved by their governments. These programmes should seek balanced exchanges and should reflect productive complementation.
On this basis exchange quotas were set : 10.000
units for 1991 ; later these quotas were raised to 25.000
in 1992 and included busses, chassis, etc. As far as autoparts
were concerned global quotas reached the 600 million dollars mark
for 1991. The effects of ACE 14 will be referred to in the following
section.
From 1991 onwards, a regulatory framework more 'congenial' to the economic model was adopted. With this the model took on a definitive shape, accompanied by sequels of increasing economic and social polarization.
During President Menem's first term in office, drastic policy measures were taken to 'clean up' the economy and honour external commitments. The new economic team created the socalled New Public Policies (NPP}, comprising the privatization of public enterprises and selective opening and deregulation of the economy. These were implemented with the expectations that they would create the conditions required for a new stage of accumulation. The privatization of public enterprises would attract direct foreign investment in those are as and hopefully in others as well. Trade liberalisation under Mercosur agreements would allow the use of imported inputs to lower costs and would also encourage TCs intra firm trade and productive specialization.
To carry out those objectives, another legislation 'packet' was passed. This includes a Convertibility Law which fises a rigid one to one rate of exchange between the dollar and the peso ; a law on State reform to allow privatizations, capitalization of external debt, and foreign investment in light, gas, water, telecommunications, and post services, among others. A new law on foreign investment, in turn, eliminates restrictions on profits remittances abroad. Profits are not specifically based, and foreign capital can be withdrawn from the country at companies' will. It should be stressed that, contrary to the official ideology supporting the free operation of market forces, once again foreign capital was attracted by offering a captive market and high profitability levels. Both of these are guaranteed in the privatization cum external debt capitalization contracts. Creditor banks are major players in acquiring privatized firms 22.
Government expectations, however, have not been fulfilled. GNP growth during 19911994 and the reduction of inflation are wellknown facts. But these indicators can not be taken as signs of the emergence of a new, stable regimen of accumulation based on the export of tradable goods and services.
There has been some growth in productive investment. Inflows of capital have been mainly directed to the purchase of privatized State companies, to sectors with 'natural' comparative advantages and viable export orientation, or to shortterm financial operations. (Chudnovsky, ed. 1996). At the beginning of 1995 due to the 'Tequila' Effect, short term capital was withdrawn, bringing the financial system to the brink of collapse.
In the industrial sphere, specifically, intrasector and interfirm heterogeneity has become more acute 23. The application of the NPP, further promoted ongoing processes of industrial concentration with increasing predominance of Transnational Corporations and domestic 'Great Economic Groups' (Azpiazu and Nochteff, 1994). Simultaneously, those same policies further contributed to contemporary manufacturing heterogeneity, many factories becoming simple assemblers and importers of foreign products for sale in Argentina. The metal mechanical industries, in particular, continued declining. The automotive industry itself was an exception, (see below). Moreover, there is a clear trend towards new principles of societal structuration on the basis of heterogeneity and polarization leading to increases in unemployment, under employment and precarious employment and marginal living conditions for broad sections of the population 24.
The social intervention of the State in the area of labor market regulation :
Changes in the regulatory framework converged with these trends. Substantial transformations in labour legislation concerning employment, right to strike norms ; workplace accidents ; collective bargaining regulations, health and retirement plans, social security, among others, have been approved. Trade unions are now allowed to bargain collectively at more decentralized, even plant or company level, and negotiations over wage increases can only take place in case of productivity increases since firms can no longer transfer cost increases to their prices. (Catalano and Novick, 1995). At present, the dismantling of the suigeneris 'Fordist agreements' of the ISI stage is almost complete. Perhaps it can even be argued that the modification of these institutional networks together with an increasing degree of social polarization/exclusion are creating in Argentina an industrial environment 'congenial' to the implementation of JIT/TQC principles. (p.36)
19951996
It is still too early for a full analysis of 19951996 developments. There is growing awareness, however, that the stability and growth of 19911994 had fragile foundations. Recent data show that the 1995 recession has not yet been surmounted. Increased deindustrialisation, historically high rates of unemployment, growing fiscal and trade deficits, the external and internal debts all continue seemingly out of control. The social intervention of the state in the area of labor market regulation has further deteriorated employment and earnings, and mounting social unrest during recent months turns coercive regulation into a credible possibility for the future. The economic model itself has lost its initial legitimacy, and few of the economic, political and social certainties of the early '90s remain.
a) The domestic sphere. The sectorial agreement of March, 1991
This agreement called 'Act for the Stability and Growth of the Automotive Industry' was signed by government, manufacturers, autopart, dealers and union representatives. Its objective was to find a solution to the crisis of the sector by drastically cutting prices to boost domestic demand. The Ministry of the Economy proposed to reduce taxes in exchange for 'sacrifices' from the other sectors, in the belief that price cuts of around S4000 would increase demand enough for production to surpass the 90.000 unit limit of 1990 and reach 120.000 by the end of that year 25. To this effect nominal car prices were reduced by 33 x and frozen for a year on the basis of tas cuts, a lower margin charged by dealers, reduced prices for autoparts, and other concessions made by manufactures and unions. There would be a gradual opening of the automotive market with a quota of 4.000 imported units in 1991.
There was an immediate market response. Stocks were soon exhausted, a consequence of elastic demand, the application of the Convertibility Plan, and credit availability. This Act was late ratified by Decree 2677, in December of that same year.
b) Regional Normative Framework. The Treaty of Asuncion, March. 1991.
Meanwhile, in accordance with the Act of Buenos Aires, July, 1990, (see p. 18), the Treaty of Asuncion, announced the creation of Mercosur as of Jan. 1, 1995 for Argentina and Brazil, and a year later for Paraguay and Uruguay. This solution to the crisis of the 80s was not free from tensions. According to Schvarzer (1995) as late as February 1991 automotive manufacturers held different positions on this matter. Autolatina and Sevel were in favor of production integration with Brazil. Renault, in contrast, not having a subsidiary in Brazil, preferred an opening to world market. This internal feud lasted for months and finally the government set as one of its objectives the integration of the Southern Cone and in particular with Brazil.
The Treaty of Asuncion established :
* The free
circulation of goods, services and productive factors through
the elimination of tariffs and non tariff trade barriers, among
other mechanisms.
**The setting of a common external tariff vis-à-vis
third countries.
*** A period of 'transition' was established
to last until 1/1/95. During this transition a programme of trade
liberalization was set in terms of progressive, lineal and automatic
tariff reductions on all products in order to establish the beginning
of Mercosur with 0 tariff.
**** The signing parties guarantee
respect for all previous agreements including those formulated
under the sphere of ALADI. (p. 19).
The signing of the Treaty of Asuncion confirmed the worst scenario expectations of an unrestricted market opening to take place in a short period. (p. 18). Setting a,programme of trade liberalization through progressive, lineal and automatic tariff reductions on all products ran counter to the ALADI principles which was based on product by product negotiations. At the same time, ACE 14, Protocole 2 I, under the 'umbrella' of ALADI also had to be observed.
c) The articulation of domestic and regional regimes.
A) Decree 2677. December. 1991. Once again a regulated 'custom made' market for the automotive sector turned regional ?
In Argentina, the tensions between Protocole 21 norms and the Treaty of Asuncion were settled at the end of the year by Decree 2677, the regime for regulation of the production and import of vehicles until the end of this century. From the year 2000 onwards only GATT regulations would be applicable to the industry. (In fact, in January, 1996 both Decree 2677 and Protocole 21 were partially modified. See Section 2.2.2 below.
* Briefly, Decree 2677 establishes a new protectionism for the automotive industry by means of a quota system for importing complete vehicles ; eliminating restrictions on vertical integration of production ; and further reducing the level of national integration requirements for the industry.
The import regime sets up a programme of compensated exchanges, between Argentina and Brazil, i.e. one dollar imported has to be compensated by one dollar exported. But car makers located in Argentina can import vehicles by paying a lower tariff than other agents. (dealers, nonresident car makers, individuals). This means that car manufacturers can now complement their supply, design, and mix of production according to their own plans and scale requirements, i.e. carry out global sourcing policies through higher levels of imported autoparts to be incorporated into locally manufactured vehicles. This level reaches 40% for cars.
Import tariffs are reduced to 2% for vehicles and autoparts for 'resident' car makers that keep an equal trade balance. Exports of complete vehicles will be computed as 1.2 dollars for each dollar effectively exported by car makers in the country. They also can compute as exports 30% of investments made on national tools and machinery. Nonresident car makers will pay an 18% tariff provided they incorporate a given level of Argentine autoparts to the vehicles exported to this market.
** In exchange for these benefits, manufacturers are obliged to compensate imports for exports, and to present to the government with a plan for investments and restructuring based on the reduction of the variety of models manufactured in the country.
B) OuroPreto Bilateral Agreement between Argentina and Brazil. 1994
The search for a regional automotive regime.
In Brazil, in turn, the crisis of the automotive sector of the 80s, and the tensions between different regulatory frameworks started settling in 1992, when the first agreement between sectorial partners was concluded. In 1993 through the second of these agreements, Brazil returned to the path of production and sales growth, surpassing the best peaks of the 80s. (Vigevani, Candia Veiga, and Goncalves, 1996)
From then on, new negotiations took place between Argentina and Brazil in search of a definition of a common automotive regime. According to Vigevani et.al. (1996), p.8, there were two major reasons for this evolution. On the one hand, Brazilian perceived that the 1991 Argentinian sectorial agreement was leading to industrial modernization, and apparently influencing investment decisions, attracted by the potential of the local and regional markets (i.e. investments in Argentina that could could have been directed to Brazil). On the second hand were changes brought ahout in the Brazilian economy by the stabilization plan of 1994. Until the Plan Real in 1994, Brazil had a trade sur plus with respect to Argentina. Argentina's exchange rate was frozen at 1 peso for the dollar, while that of Brazil's was continually devaluing, leaving the exchange rate out of equilibrium, Argentina's being overvalued with respect to Brazil.
During the second half of 1994 this scenario changed. Brazil, in pursuit of its own stabilization plan, abruptly reduced its own import tariffs to 20%, disrupting the process of tariff reduction already settled between the two countries. As Vigevani, et. al. (1996) explain, for car makers this was a sign of a new opening of the economy. With a sudden revaluing of the exchange rate and a new import tariff that was low for Brazilian standards, assemblers started substituting imported vehicules for Brazilian made ones, seriously endangering the industry's survival. Thus, assemblers started programming massive imports into Brazil, even in the 'popular segment' sector. The balance of trade deficit increased. Suspicions arose as to whether Brazil could finance its increasing deficit in the balance of current accounts'. (p. 81)
Simultaneously with these developments, Argentina and Brazil had started mutual recognition of some of the automotive rules in both countries. This was done within the framework of the Treaty of Ouro Preto, 1994, that consolidated the creation of Mercosur as a Customs Union. The Council of Mercosur approved a plan for formulating a definitive automotive regime on the basis of the bilateral agreements between Brasil Argentina, Argentina Uruguay and Brazil Uruguay.
Main clauses of the Ouro Preto automotive regime determine that Brazilian autoparts be considered 'national' with respect to Argentinian laws and the calculations of 'national' contents. Until then Brazilian autoparts did not enjoy any special preference for purchases by Argentine assemblers. In addition, each dollar of autoparts imported from Brazil to Argentina will be considered equivalent to 1.2 dollars exported to Brazil. For this calculation it is not necessary that the 'export' compensation be directed to Brazil. It is only necessary that imports are compensated by exports. It should be stressed that this gives an incentive to the Argentinian production of autoparts, and means a possible risk for the Brazilian balance of trade (in case autoparts exports were directed to this country). In exchange, Argentina recognizes the fiscal regime of the Brazilian 'popular car' which gives an advantage for exports of this segment of economic cars to Argentina. Finally, Argentina accepts Brazilian regulations concerning the 'popular car' until the year 2000, and Brazil accepts the Argentinian internal regime (and its norms on compensated exchanges with Brazil) until that same year.
How to interpret the Ouro Preto regime ? From a Brazilian perspective, Vigevani et al. (1996) conclude that this regime led to the strenghtening of Argentinian interests, because there was not a consistent policy on the Brazilian side. As a result, it allowed compensated exchanges until the year 2000, and forced assemblers to invest in Argentina, even if much less than in Brazil. From an Argentinian perspective instead, it may be said that it consolidated existing asymmetries between both countries, while preventing a wider gap until the year 2000, when vehicles and autoparts will be freely exchanged between the two countries. From the assemblers' perspective the same agreement can be read as the best regulatory framework to facilitate 'resident' car makers' regional - rather than national - production, and the insertion of their own import/export strategies into more global plans. For independent autopart makers the situation was unresolved, as there did not exist specific regulation concerning their interests. This will be modified in 1996.
As those authors stress, p.9 Brazilian new sectorial policy was not due to asymmetries with Argentina, but to the pressure exerted by vehicle imports that were affecting the Brazilian balance of trade. Brazil had reduced import tariffs to 20%, and there were signs that the traditional surplus in the balance of trade, as well as the financing of current accounts would be affected. As a reaction to the Mexican crisis, the Brazilian government raised vehicles tariffs to 32% ; then to 70%, and finally adopted a quota system, forbidden by the World Trade Organization (ex-GATT). While assemblers were pressing for 'clear rules of the game', Argentina was also affected by the Brazilian quota system. A diplomatic confrontation between the two countries broke out as a result. During the last part of 1995, negotiations took place in search of a convergence between Mercosur and WTO regulations, and the national regulations of Argentina and Brazil.Within this contest the following regulation were approved
a) 'Transition' agreement on bilateral exchanges with Brazil
This agrement modifies the Ouro Preto Agreement of 1994. Both countries acknowledge each others' own national regimes until December 31st, 1999. From the year 2000, free trade for the sector will be the norm.
The main clauses of this agreement establish that vehicles finished in each country would have free access to the other country's market, with the only obligation that imports must be compensated with exports, of the same amount and to any destination in the world. In the case of new models, vehicles must arrive at a minimum of 50% national content, calculated over a period of three years.
Clauses are roughly similar with regards to the autopart industry, Autoparts originating in either of the two countries will have free access to the market of the other country (0 tariffs) provided imports are compensated with exports (to any country), in accordance to the legislation applicable in each of the two countries. This requirement does not apply in the case of autoparts imported for the spare part market of the importing country. In this fashion, autopart manufacturers are now subject to the same regime as car makers, a clause that Argentine (smaller) autopart firms attribute as a special concession to their Brazilian (larger) peers. Autoparts incoming from other countries would pay tariffs as high as 20%.
Autoparts originating in one country imported into the other and compensated by exports to anywhere in the world will be considered 'national' by the importing country in the calculation of the Index of Nationalization of Vehicles of the importing country, according to the legislation of this importing country. This means the agreement accepts the Index of Nationalization of both countries (maximum participation of imported autoparts and components].
A secret annex ? According to newspapers commentaries in Argentina, that have not been denied by the government, there would also exist a 'secret quota system' of 20.000 vehicles, for manufacturers that have 'residence' in one of Mercosur member countries only. This would apply to Ciadea (exRenault) and Sevel, no longer counting with Fiat shares in Argentina, and to Chrysler, Honda and Hyundai in Brazil.
b) Decree 33/96. Autopart imports and the incorporation of 'independent' autopart firms to the Argentinian automotive regime.
The decree of January, 1996 establishes special norms for autopart imports carried out by manufacturers and by independent autopart firms themselves. With respect to car makers' situation, main changes concern the levels of imported autoparts allowed to be incorporated into locally manufactured vehicles. Imported content levels for each category of vehicle will be lowered over a period of three years. For category A cars they will be down to 32.5% in 1999. These levels are applicable to specific models only, and can not be compensated by category as under the previous regime. For new models, imported content levels can average 50% during three years. For balance of trade calculations and to promote exports, each dollar exported (cars or 'controlled' auto part firms autoparts) is counted as 1.2 dollars. The same calculation applies to 'independent' autopart exports that have transferred their credit to car manufacturers.
Independent autopart firms may attain tariff benefits for imported parts for their production. The intrazone tariff is thus 0, and extra zone tariffs reach 2%. Firms may benefit from this regime provided they fulfill special requirements under a plan of industrial specialization. They must have a Programme of Compensated Exchanges approved by national authorities. Imports must be compensated by exports of new national autoparts carried out by the same autopart firm or a transfer from another independent autopart firm. Exports and imports within the programme are calculated as FOB value. Exports are calculated multiplying the FOB value by 1.20.
Other special clauses refer to-
- 1) investments in national capital goods used in locally manufactured vehicles that also receive promotional export treatment ;
- 2) the use of 'temporarily admitted' imported elements in export calculations, and
- 3) the definition of national assemblies or subassemblies of autoparts. In all cases imports and exports must be compensated. Firms must accompany their applications with investment plans and should pay penalties if they do not fulfill their obligations under the new plan.
To sum up
As it now stands, Mercosur regulations set 0 tariff
to vehicle and autopart trade between partners, and consolidate
a regional external tariff of 20% effective by the year 2000.
(These terms have been accepted by the WTO, ex-GATT). The national
policies of Argentina and Brazil should converge into a common
set of automotive regulations establishing free trade of vehicles
and autoparts also by the year 2000. Compensated exchanges of
vehicles and autoparts would only hold until then.
However, direct foreign investment in this industry did not quite respond to the expectations of the 1991 regime. According to Chudnovsky et al. survey, some investment did materialize during 19921993. Inflows were mainly directed to export oriented autopart production, improvement in production capacity and introduction of new models.
A more enthusiastic response only began to take shape after the signing of the Ouro Preto Agreement of 1994. I would call it the response of TC car and autopart firms to regional market construction and profitability One of the managers of a subsidiary of an European car maker explained that evolution and strategies in these words :
'The great changes started with the Argentine agreement of 1991. The government reduced taxes by 2025% and gave us some other facilities. We could then reduce our prices to the dealers and the public. There were rising expectations about the new economic model ; there was trust in government's action towards a more competitive and productive economy. But the big thrust came with the Ouro Preto Treaty, in 1994. The transition period between 1995 and the year 2000 is crucial. To us the signing of the Ouro Preto Treaty indicated that the Brazilian market was open to Argentine production. It was a very important sign. The transition path justifies our new investments. It is important not to face quotas from the Brazilian side. There are government policies in Argentina and in Brazil and we also have our own company's policies. It is not always easy to reconcile them all'.
"Hence our objective is to be well positioned in case Brazil changes its policies once more. In this fashion investing here and there we are covered in case of political oscillations. We have programmes to face any eventuality.
There can always be changes in government policies. Some years ago it was said that Mercosur would be in full swing by 1995, without any restrictions. However car manufacturers negotiated with the government a period of transition...the Argentine government understood that such an abrupt passage between 1994 and 1995 would be extremely detrimental for Argentine interests. That is why we could all agree on a transition period. This period is important because it allows companies to position themselves in the broader context.
'The Argentine government helped a lot with the automotive regime, but we also have strict rules to fulfill. It is a hard regime, but it allows companies to specialize. Before there were too many models. Many of them were obsolete. Our present goal is to manufacture cars of the same quality as our parent company and to take advantage of model specialization and component production. Cars in the intermediate-to-economic range, two models that will not be produced in Brazil..We shall also import other models, from Europe... Now we export 70% of our production to Brazil mainly... Besides we shall continue producing excellent engines, that we sell to different car makers in Argentina, and we export them to many places in the world, not only to Brazil. We do have the obligation to take care of the balance of trade'.
"Now the Brazilians neither want Ouro Preto nor the Argentine regime and compensated exchanges because they run counter their own automotive laws and they also have problems with Asian producers. But we believe the situation will be resolved to everyone's satisfaction'.
In broad terms, his vision of 'car politics' in the context of Mercosur creation, and the strategy of model and Component specialization is shared by managers of other TC automotive firms I interviewed during a recent pilot fieldwork 26. All suggests that car makers' expectations concerning market demand within the region are positive. Car and autopart makers pledge future investments and have started building new plants in Argentina and Brazil.
Let us mention some of these announced investment plans in Argentina. (in US$) This information is extracted from Vigevani, Veiga and Goncalves (1996) ; pagina 12, Cash. Supplement, January, 1996, and my own pilot fieldwork in 1996).
GM, investment : 80 million. In the Greater Cordoba area. Using Ciadea, ex Renault painting shop, it is now producing pick ups for Argentina and Brazil.
GM, total Investment of 1.1 billion (1995-2000) for a new plant in Alvear, close to the City of Rosario and along the Mercosur trade belt. It will produce cars and small trucks for Latin America and the Mercosur markets.
Autolatina : Ford and VW decided to separate in 1994. By 1995 the divorce was a fact.
Ford, investment 1 billion. It will produce new models, engines, trucks and pick ups in its Pacheco plant in Buenos Aires.
VW, investment 280 million. Enlargement of its Pacheco plant in Buenos Aires for the production of new models and of its autopart plant in Greater Cordoba for the production of transmissions.
Fiat, investment 600 million (199697). It has almost completed the largest new plant in the Greater Cordoba area for the production of cars for the Latin American and Mercosur markets.
Chrysler, investment : 80 million. It vill start producing Cherokee sports utility vehicles at the end of this year in its new plant in the Greater Cordoba area.
Toyota, investment 150 million. It is finishing its new plant in Zarate, also alongt he Mercosur trade corridor, for the production of pick ups.
CIADEA (exRenault). Investment 500 million. Production of new models in its plant already located in the Greater Cordoba area.
Sevel, investment 260 million. This Argentinian group will produce Peugeot and Citroën models and some lines of Fiat until the end of this year in its location of El Palomar, Buenos Aires.
We do not have comparable information for Volvo, Iveco and Saab Scania. Total Mercosur investments will be close to USS 15.122 billion.
To complete this picture of Mercosur related investments it is useful to bear in mind that investments in Argentina are accompanied by much larger investments in Brazil. According to Vigevani et. al. (1996) for instance, GM will invest 2 billion, Ford 2.2 billion, Fiat 1.5 billion, VW 2.5 billion, Mercedes 830 million, and Scania 100 million in this country. Also Renault, Honda, Hyundaï and Asia Motors have announced investments in Brazil.
** The response of large autopart manufacturers.
During 1995, AFAC (the new association of autopart manufacturers) in Argentina, comprising resident TC autopart firms as well as - mainly large - national firms, argued there did not exist any autopart policy in Argentina equivalent to the one existing in Brazil and approved during that same year.
This led, automatically, to an 'artificial uncompetitiveness'. National autopart firms were losing markets and investments in Argentina were de-inçentivated. As a net result there would come the end of the national autopart industry in the country.
Decree 33/96, by including autopart firms in the automotive regulation, can be considered to satisfy a great part of the demands of large autopart manufacturers. A recent AFAC mimeo does not criticize that decree as such, but only proposes aspects to improve and further regulations. These improvement measures suggested include the harmonization of the legislation with Brazil regarding tases on raw materials ; the prevention of the 'recirculation' of compensated autoparts to control real national integration to the extent it is agreed upon ; the replacement of the Index of Nationalization system and calculations established, among others. In spite of these regulatory shortcomings, investment in the autopart industry is estimated by AFAC to be between 500 million to 1 billion US$ in 19951996. This includes important investments from Brazilian autopart firms in Argentina.
*** The response of smaller-scale national autopart manufacturers.
The small/medium sited domestic autopart industry, under current regulations, is in fact doomed. This is the informal opinion voiced by the Chamber of Metallurgical Industries in Cordoba. On the one hand, there does not exist any financial help from the State. Argentine interest rates are much higher than in central countries, and smaller national firms have no access to these credit facilities. On the second hand, the transition period is too short to manage on their own. Chamber members can not possibly compete with autopart TCs already in Argentina or in Brazil, or soon to come to this country. FIAT's new project - following a global trend - is expected to arrive together with 6 or 7 autopart satellite firms, that will build their premises close to Fiat's. The same is rumoured of Chrysler's, a neighbour of Fiat's in Cordoba.
Despite the sacrifices of many of the Chamber members to reach ISO 9000 quality certifications, perhaps only three or four of them, - counting with foreign licences, or in joint ventures with foreign producers - would remain as direct suppliers to car makers or as second tier suppliers to the manufacturers of assembly or subassembly (complexes ?) in turn suppliers to car manufacturers themselves. Hopefully more firms could make it to the third or 4th tiers.(See 4. The Autopart Industry). Other experts consulted add that the definition of 'national' contents has hit a new bottom ground, further reducing the possibilities of national autopart firms in Argentina. In their view a 4th subcontracting tier is presently non-existent in Argentina.
To sum up, the regulatory foundations of a sui generis 'globalization of production within the area is now under way. From interview data and investment announcements, I suggest that this process is accompanied by changes in intra-firm and inter-firm relations in the area, in coincidence with the central role to be played by the automotive industry of Brazil, in the framework of inter-regional car and autopart politics.
With regards to parent companysubsidiary relations, changes seem to be beyond doubt at least in the case of GM and Ford. Parent company strategies are closely linked to their Brazilian subsidiaries', now turned into regional headquarters. Argentine subsidiaries then, would be complementing Brazilian production and export schedules. Subsidiaries that were related to parent company independently during the ISIET phase, would be now related to each other in a hierarchical way. With regard to vertical inter-firm relations, the national smaller-scale echelon of the autopart pyramid seems to be quickly engulfed by advancing concentration of production and an increasing TC presence in the field. If Chamber estimates are correct, only a few firms will survive possibly in association with foreign siblings.
With regards to employment in assembly plants, Table 1 shows that although employment had fallen during the post/lSIET phase, from 50.626 in 1973 to 17.430 in 1990, employment went up again, increasing from 18.317 in 1991 to close to 25.734 in 1994, a rise of 32%. Yet, from an historical perspective, the number of people employed is about half that of 1973. Production certainly grew, but employment never fully recovered.
Labor productivity instead went up steadily. In terms of hours worked per vehicle produced, it went from 195.8 h. in 1991 to 117.7 h. in 1994, although Argentina still lags behind developed nations in productivity. (Table 1).
Vehicle production continues to be directed towards the Argentine domestic market. Table 2 shows sales were mainly in the internal market, and this non remarkable export performance was accompanied by a historical record of units imported. Clearly, the 1991 regulation has not led to compensation between imports and exports of vehicles, an imbalance that continues to exist.
Hence the macro implications of this growth, in terms of balance of trade deficits are particularly alarming. In 1993, according to Nofal, 1994, the incidence of vehicle trade deficit into the overall trade deficit was of 42%.
19951996
Automotive evolution since 1995 crashed early hopes of total production stabilizing at some 500.000 units per year in the second half of the decade. The economic recession began to weaken the favourable 'contextual niche' of 1991-1994. Credit restrictions and higher interest rates affected final demand and stocks of vehicles started to climb. Assemblers cut production down to 285.272 units in 1995, a fall of 30.2% compared to 1994 (Table 1). Many workers were laid off, a situation that continued during 1996. In spite of reduced domestic demand, imports of vehicles increased. A total of 102.898 units were imported in 1995, amounting to 31.9% of domestic sales. Exports were about half of total imported units (Table 2). (No balance of trade data yet available on this topic).
Preliminary figures for 1996 indicate that total vehicle production between January and July of that year was 8.1% less than during that same period in 1995. (Source : ADEFA, Association of Automotive Manufacturers. Press Bulletin, July 1996). During this same month production amounted to 31.121 vehicles and 13.162 units were exported, 90% of them to Brazil. However, imports soared, covering 44.7% of total domestic sales. Most vehicles were imported by the same assemblers who restricted local production to a few selected models.
These developments required new negotiations with Brazil, still unsettled. In Argentina, meanwhile, and with minor differences in detail, the interplay between government threats of penalties, suspended sentences, manufacturers excuses and offers of future amendments, as well as their high social costs, continues.
According to the Chudnovsky et al. survey for 1992-1993, plants did introduce some changes with a view tovard improving production and management and to reduce the productivity and quality lag between local subsidiaries and their parent company. But although there were productivity increases during this period, industry is still lagging quite far behind international standards. Traditional quality deficits have also increased due in turn to increases in the volume of production.
My own exploratory study this year comprised four plants : two US subsidiaries, one in Cordoba, and one in Buenos Aires ; an European subsidiary and an Argentine manufacturing plant associated to European car makers, the latter two also in the Greater Buenos Aires area. Initial findings show that the three TC plants are involved in a process of quick 'transitionperiodrepositioning' in the regional arena. Production or assembly of new models has meant the incorporation of new equipment and tools and the implementation of organizational innovations. (see production systems, below). These are recent changes, that show the partial adaptation only of models brought from headquarters or from Brazilian subsidiaries to local plants in Argentina. Yet, only a few technicians and engineers were devoted to this task. The high level of imported autoparts now being incorporated into nationally manufactured vehicles helps to explain that the extent of adaptation engineering demanded is low. Experts consulted in Cordoba, consider that the new region al regulatory framework makes it possible to assemble one car in Argentina, incorporating only imported autoparts, and still call the product a national vehicle. (national now being synonimous with regional or Brazilian).
In addition, they point out that to the extent that car makers in Argentina are indeed producing models in volume and quality similar to those originating in central countries, less adaptations are needed. International quality standards are now the rule and are increasingly demanded of local suppliers. Thus research and development activities are nill, and product engineering innovations are few and far between if compared to the ISIET phase.
Production systems
Chudnovosky et. al. (1994) generalizing for the period 19921993, consider that the introduction of new manufacturing techniques is wide but uneven, ranging from plant XX 'best practice' plant - introducing JIT assembly, team work, TQC and other key elements of 'lean production' - to embryonic forms in other factories. The tradition of Fordism and uneven suppliers' development would work against that type of production. Catalano and Novick (1996) and Shaiken (1995) agree with Chudnovsky et.al. (1994) in that the incorporation of new production concepts is uneven and fragmentary, but they disagree on the nature ot the resulting hierarchies.
In effect, Shaiken sees two industries coexisting in Argentina side by side. Vehicles and components for the domestic market would be produced by old plants, adopting inefficient production processes, using obsolete equipment, and employing low-skilled and more senior personnel. The reverse would hold true for plants producing for the Brazilian market, mainly some very modern 'controlled' autopart firms. The educational level of this mainly young personnel would be high (high school or plus). Catalano and Novick (1995) in turn, estimate that although differences between plants do exist, these are differences along a 'continuum' rather than differences originating from two separate industrial universes.
From my own exploratory work I suggest that the introduction of JIT/TQC related practices after the signing of the Ouro Preto Treaty in 1994, is both quick and uneven. Its features vary according to the role assigned to each plant in question by the 're-positioning' strategy of specific car makers during the 'transition period' until the year 2000. For instance, subsidiaries may have more than one plant : one devoted to assembly operations only, and a second, integrated plant, including stamping and main body shop operations. It is to be expected that both will differ in their internal organizational set up and external JIT logistics (see 4. below) ; This will apply even if final assembly operations may resemble one another.
Hence it is too early to tell the extent and nature of production concepts implementation, or what will be the fate of hybrids now emerging. Certainly 'lean production' or 'Japanese model' terminology is now fully diffused in all plants visited (a big change in less than two years). Also practises observed in the TC plants show young people team work and task rotation in action. Task cycles are always coupled to production cycles. The speed of the line, and the definition of operations continue being determined by the central Methods Office. Production decisions continue in the hands of Engineering Offices/Production Managers, even if these professionals now expend more time in the plant itself, and supervisory levels have been reduced.
Human resources managers, in turn, have raised admission requirements to complete or partial high school levels. Training courses including some technical education and much emphasis on behavioral skills are now a must. In all cases new productive systems are gendered masculine (2 women remain in one plant). In fact managers could not imagine why women should be in production, unless some 'operative reason' were shown, in terms of productivity, discipline, lower salaries, to compensate for funds spent in bathrooms, maternity leaves and so forth.
With regards to capitallabour relations, different versions of industrial systems coexist, always keeping the continuity of localized - cum - national trade union negotiations. The most 'advanced' collective agreement to be in force in 1995 concerns the new GM plant in Cordoba. The union has accepted all flexibility demands, reduction of work categories, and other 'lean' requirements.The agreement recently signed with Fiat, follows the GM agreement and expands company' privileges. It is still too early to estimate shopfloor reaction to the loss of most of the traditional workers' rights.
Some of these features, as well as the relations with suppliers are summarized for Plant A. Firm 1, next page.
Emerging Profile of Plant A. Firm 1 : US Automotive Manufacturer
Firm l.
US TC. 80% /capital in parnertship with another car maker for its Cordoba plant's operations only.
Plant A
Specialization : Light pick ups.
Working towards lSO 9000 quality level
Production workers : 380 men/2 women. Average age : 26 years.
Market strategy : National : 20%
Regional : 80% (Brazil : 100%)
International : 0% at present
Suppliers : Production materials :
Origin : Local : 5% (very few)
Imported : 95% (Brazilian mostly, more than 150 main suppliers)
Process materials :
Origin : Local : 90%
Imported : 10%
Nonproduction materials : 100% local
According to the Supplies Manager (himself a Brazilian man) Firm A is actually developing around 30 local suppliers. The supplier chain in Argentina is throughly disrupted and might take from 5 to 10 years to raise it to standard. The strategy of Firm A is to guarantee a share of the market first, even if bringing materials from Brazil may be more costly, time consuming, etc. However, materials from Brazil that in this case include even the stamped parts of the pick ups are considered national according to regulations (and pay no tariff). The obligatory 60% national content required by law is fulfilled in this fashion. Many complex materials are themselves produced by TC autopart firms established in Brazil.
Production system : On line with Brazil, from where they receive all instructions, production schedules, customer identification and the like.
Education : (production workers). All high school education and higher ; several levels. Polyvalent (task rotating) personnel. Formal and on the job training, (SPC. TCQ) and behavioral skills.Trade Union : Smata. Professional categories :4. Average salary with bonuses and other fringe benefits, between 400500 pesos. (1 peso : l dollar). Wage costs around 3% of total costs. Manager commented that he could pay less according to law (and new collective agreement, but there is no point in further reducing already low wages).
There is also a lack of detailed analysis of production linkages and autopart development per se during the early 90's. AFAC's experts estimate that some 350 autopart firms were operating in the country in 1994. Several other Sources, always for the 1991-1994 period, show the exacerbation of previous trends concerning industry concentration, specialization of production, the importance of 'controlled' autopart firms, and their export-oriented production, and the growing presence of TC and Brazilian autopart firms in the country. (Chudnovsky et.al. 1994 ; Kosacoff et. al.l993 ; Nofal, 1994 ; journal and newspaper articles)
For instance, data from Nofal (1994) indicate that there is an increasing concentration among independent producers. Some 30% of firms supply 70% of the sectors' sales. Exports from this segment are derived from leading autopart firms, TCs mainly, and show a heterogeneous mix. Exports from 'controlled' autoparts, in turn, are concentrated in transmission, gear boxes and engines.
Table 3, extracted from Business Trends (1994), shows the importance of autopart exports growth. In fact, export values in the automotive industry are mainly derived from the export of components and spare parts, that account for 75%, 70.5%, and around 60% of export values in 1991,1992 and 1993/94 respectively. Notice that data provided refer to autopart exports only. No information is given for component imports during those same years. Finally, that same publication reports the signing of a number of agreements between Mercosur companies, a strategy that facilitates production in more economic volumes for local and export sales. (p.244). Other journals also report mergers between autopart companies of Brazil and Argentina, and signs of increasing purchases of Argentine firms by Brazilian manufacturers.
Production systems
Research on changes in work organization in the autopart industry in Argentina is largely nonexistent. My own fieldwork during the early '90s - among smalland mediumsized firms selling both to main assemblers and to the spare parts market or to the latter exclusively - shows a variety of situations, corresponding to different struggles for survival in the face of the 1991 NPP's (New Public Policies, p. 20).
On the basis of these findings I argued that there was a consistent and gendered variation in 'hybrid' organizational forms which spans the whole spectrum from 'high level' or dynamic JIT, (closer to the 'classical vision of the Japanese model), to Crisis JIT, with variants of potential high level JIT and low level JIT in between. Each hybrid variety was associated with firms' strategies regarding product, size and resources, market (domestic or international) and competitive strategy (price or quality),which in turn is associated with specific training and skills demands. The links between firms' stratategies and changes in contextual niches, their feedback, and gendered implications were also part of those reflexions. (Roldan, 1994, a, b ; 1995).
1995-1996
We do not have comparable information and figures for 1995-1996, when the implications of the Ouro Preto Treaty of 1994 began to be discerned. The following are some of the views on buyer-supplier relations - for production materials only - expressed by TC supply managers interviewed during a recent pilot fieldwork 27.
1. They outsource whatever production material is not considered a 'core' supply produced by its own 'controlled' autopart firm in Argentina, Brazil or elsewhere. The quality of vehicles now produced in Argentina would be as high as that of vehicles manufactured by the parent company (a point stressed in particular by the European car maker). For this company, the quality of autoparts supplied is taken for granted, and discussions would refer to price only, not to quality (related to ISO 9002 or higher).
2. Suppliers must be able to deliver in the volume, quality, and quantity required. This does not necessarily mean JIT delivery. Car makers have different mixes of production schedules according to 'imports' and 'exports' strategies, and logistics problems to be resolved. Optimum regional mixes are far from being achieved. For example, the European manufacturer intends to buy or lease another piece of land, in a different location, and have suppliers of 'assemblies' established on the same ground to deliver JIT.
In the meantime, this company has settled for maximum assembly only operations, and is already trying 'module design'. Part of its Buenos Aires plant is rented to autopart makers who use their premises and offices, and have their own space for the 'assemblies' and 'subassemblies'. Years ago, these assembly operations were carried out by the car makers' own personnel. Now suppliers are in charge of assembling seats, doors, and instrument panels that are later sealed directly into the car. For example, doors, once painted, are separated from the car body and assembled in the 'door assembly area'. Once all the door components are in place, the complete door is returned to the car in the line. It should be borne in mind that workers of these supplier companies are paid lower wages that car maker's personnel, although they belong to the same union. They all eat together, in the same company restaurant, a situation that facilitates communication and might lead to trouble as one respondent feared.
3. The tendency is to have fever suppliers, first tier ones, able to guarantee delivery of the assembly or subassembly (brake systems, instrument panels and so forth) directly on the line. In the words of one Manager interviewed :
'There is no point in making what they themselves know better how to produce, i.e. their own product. This is different from what we used to do. Before there was a design and we used to ask. 'Who can make it, at what price ?. We then chose the supplier. Now it is different. We ask budgets for the whole assembly, let us say, brake systems, with such and such features. The specialist makes it, it is much more efficient, ready to go to final assembly. Of course this demands a great logistic effort, reception of materials, JIT delivery. Of course they must arrive JIT, for this reason we are looking for a long term association. For this we need a very stable economy, a situation allowing for long term planning and we are achieving this in Argentina'.
4. Local autopart suppliers do not need to be TC's but, as another Manager put it :
'The domestic supplier can no longer improvise. To this end he needs to be associated to a foreign supplier, pay for licences, or make a contract for technology transfer with the international supplier of the parent company in Europe or the States. We are used to negotiate with some TC autopart companies... they do not need to belong to our own parent company ('controlled' auto part firms). But they are the firms that have the right quality and are familiar with the requirements of each company. We are in fact sponsoring their coming to Argentina. lf we make the same products we need the same quality. For example, our parent company has its own national autopart suppliers, but it also buys from the Japanese, and many other sources, in Europe and North America. These firms compete among themselves and reduce prices around the world'.
5. Car makers expressed an interest in developing local suppliers able to meet requirements of higher quality and lower prices and to facilitate specialization and up to date technology diffusion. (Roughly they refer to 3rd or 4th tier suppliers to manufacturers of 'assemblies' or 'subassemblies'). To this end, car manufacturers and large autopart firms would be providing technical assistance, while promoting the association between local and foreign firms.
For example, one US subsidiary directly calls their own suppliers from USA : 'We sponsor them and we help their joint venture with local firms, we give the design. Joint ventures allows local firms to have quality and quantity. This, of course, if they can get some company for a joint venture. Some foreign firms prefer to come directly and to purchase Argentine firms. They do not enter into partnership with them. But if they do we are happy to contribute to the quality upgrading of local firms.
To sum up : a process of concentration and increasing transnationalization of the autopart industry, due to higher imported contents and quality specifications, support increasingly hierarchical interfirm divisions of labor.
Production systems.
Data from the same pilot research 28 - covering different echelons of the autopart pyramid - show that restructuring for re-positioning during the 'transition period' is also a must for autopart makers interviewed. See emerging profiles of several firms, in the 'controlled' or 'independent' strata.
According to their position in the autopart pyramid,
firms show distinct market strategies, production systems, training
and wage policies. Surviving smallerscale manufacturers
are undergoing quick processes of updating tools and labour processes
to qualify as suppliers to upper echelon supplying tiers. These
are, of course, only initial findings. The possibility of generalizing
these features for the whole autopart universe remains a subject
for future research.
Emerging Profiles of Some Autopart Firms
* 'Controlled' autopart firm.
Firm 1 : 100% European (German) capital.
Specialitation : gear boxes, brake parts, assembly of Diesel engines
ISO 9002 quality level
Production workers : 800/2 women. Average age : Early 30s
Market strategy : National : 20% (Car manufacturers : 100 %)
(Spare part mkt : indirectly/dealers)
Regional : 80% (Brazil : 75%)
International : Ocasionaly, depending on product (S. Africa and Iran)
Supplies : 40% imported.
Production system. Hybrid machining cells and assembly lines.
Education : production workers : All high school education and higher ; several levels. Polyvalent (task rotating) personnel. Formal and on the job training, (SPC. TCQ) and behavioral skills.Trade Union : Smata. Have had social peace for 20 years. Professional categories. Now 6. Formerly 9
**'Independent' autopart firms
Firm 2 : 100% US capital. A well known national firm recently bought by a TC that is also buying other autopart firms in several locations in Argentina. Production and market strategies 'in flux'
Specialization : Steering links and tie rod ends, suspension ball joints
Not yet ISO 9000, but struggling to meet this goal
Production workers : 200 men Average age : 30s.
Market strategy : Before purchase, production was sold to car makers in Argentina, but also to steer box makers. As car manufacturers now prefer to buy complete steer boxes, it is possible that future production will be directed to steer box/makers/assembles who, it turn, will sell directly to car makers. Export strategies to be redefined by new owners.
Supplies : Data not ascertained.
Production system : Hybrid machining 'islands'
Education : production workers : Mainly high school education ; partially polyvalent personnel.Three technical employees run the CNC machines (programming and corrections). Professional categories, being discussed.Wage costs aproximately 48% of total costs.
Firm. 3 : 85 % national capital, 15 % US capital.
Specialization : Springs ; 2200 different products. Main ones : 300
Struggling towards ISO 9002 quality level
Production workers : 40 men. Average age : 30s
Market strategy : National : 100% (Close to 100% of production sold to car manufacturers in Cordoba and Buenos Aires, but some % also to large autopart companies). This firm is in the process of changing its market strategies in as much as car makers are now purchasing in the international market and Firm C, a small company - not yet with ISO 9000 level certification - can not meet foreign competitors' prices and quality levels. At the time of our interview, one of the owners was in Italy trying to negotiate a joint venture with Italian firms that will accompany Fiat's new plant in Cordoba.
Supplies : 35% imported, according to mix of production. It used to be 65% some years ago.
Production system : Hybrid machining cells.
Education : Production workers : All technical high school education and higher ; several levels. Polyvalent (task rotating) personnel. Formal and on the job training, 20% ; behavioral skills : 80% problem resolution and group dynamics. Trade Union : UOM, plant delegates attend union meetings during work hours. (This common practice until few years ago is no longer prevalent among Smata Union workers). Average salaries in this firm, that takes pride in meeting all legal requirements is approximately 800 pesos, almost double that of Firm D. Wage costs approximately 45% of total costs. Production manager was about to talk to personnel to announce salary reduction as the organization could no longer fulfilled traditional obligations.
Firm 4 :100% national capital : Family enterprise.
Specialization : Variety of small parts/accesories for cars. Struggling towards ISO 9002 certificate.
Production workers : 25 men. Average age : 35
Market strategy : National : 100% (To one 'controlled' autopart : 80% firm. Also to car makers).
Supplies : 100% national
Production system : Hybrid machining cells.
Education : production
workers : 30% primary school education ; 70% high school
education ; some university students. Partially polyvalent
personnel ; CNC machines run by technicians. Wage costs approximately
45% of total costs. Union :UOM. No shop stewards as nobody
wants to volunteer. The owner suggested this is because workers
know that no union is needed to solve their problems. They also
know that if they are stewards they would not receive advances
on their wages, if needed. (most workers do)
Let me summarize some dimensions of that exercise.
The ISIET 'contextual niche' and, in particular, the succession of regimes of the automotive industry during that phase, offered attractive incentives to direct foreign investment. A long unsatisfied demand and a highly profitable captive market help explain the often criticized automotive industrialization of that age. The industry was born small, amidst absolute tariff protection, and in no need to pay attention to regional or international competitiveness. It operated with a suboptimum technology of production and of work organization, requiring adapting engineering only, and never including First World research and development departments. Local subsidiaries enjoyed a high degree of autonomy vis a vis parent companies and other Latin American subsidiaries, choosing their own level of activity and the price of their production (always much higher than in international markets). Both factors led to production and employment reaching historical peak levels, as well as to balance of payment problems as increasing imports were not accompanied by exports.
With regards to the autopart industry, early automotive growth was associated to the shaping of an autopart pyramid showing a high degree of concentration and an important foreign presence, but both were less acute than in later stages. The majority of national, smaller scale firms occupied the bottom of this pyramid. Although this was a clear case of asymmetrical integration, hegemonically defined by automotive manufacturers, increasing requirements of national integration obliged firms to develop production linkages that almost reached the 100% level in the early '70s. Thus a domestic autopart industry was developed, together with adaptative design and process engineering to meet car makers' requirements.
All in all, however, the Argentine automotive industry never approached best practice levels of car manufacturers in the developed world. Already during the ISIET phase, local car subsidiaries, and national autopart makers and the workers of both, occupied a subordinate position within the hierarchization of the world automotive industry of the time.
The social intervention of the State in the area of labour market regulation, however, was effective in beginning the reduction in labour costs that was thought necessary to support renewed capital accumulation. (that did not take place during this stage). Military coercion first, and rising unemployment later, became effective mechanisms of union control.
The neoliberal post lSIET contextual niche and the 1979 automotive regime did not promote a new wage of foreign investment in this sector. On the contrary, the postlSIET phase was characterized by the withdraval of many car makers, and the beginning of restructuring of all firms of this branch. Hence, this stage shows, conclusively, that in a situation of drastic decline in domestic demand and uncertain 'rules of the game, market liberalization per se is not conducive to car manufacturers' investments. Production and employment reached bottom levels, technological improvements were few and far between, while labour productivity and work intensification started to grow.
The component industry showed parallel signs of concentration and the growing polarization of the autopart pyramid. Exportoriented 'controlled' autopart firms became the core of the peak, dynamic stratum, while also accounting for the increased vertical integration of the branch. Many national, smallerscale autopart manufacturers saw their participation in the assembler market reduced, were absorbed by TCs, merged with other firms, went bankrupt or, if possible, they themselves became autopart importers.
At the end of the decade car manufacturers themselves showed a possible way out from the neoliberal impasse and potential sectorial demise. By specialiting in export oriented autopart production they made it clear that investments could be forthcoming if governments facilitated intrafirm productive integration to meet regional, rather than national demand. Therefore, during 1990 assemblers started a counter offensive and actively participated in the shaping of bilateral exchanges with Brazil and, in the longer run, of a regional 'contextual niche'.
The perspective from the automotive sector is different. Car manufacturers, have ensured through their intervention in the design of national and regional agreements, and, in particular, of the Ouro Preto Bilateral Agreement with Brasil in 1994 the making of a regional market/demand, and profit rates high enough to constitute adequate incentives to ongoing and future investments in export oriented automotive/autopart production. A period of transition until the year 2000 has added extra time to plan and carry out their 'repositioning' within the area ; to insert subsidiaries into more encompassing arenas (regional. international) and to look for an optimum regional mix of model specialization and component production for contemporary and future intrafirm productive integration and trade. They carved, and continue carving their own specific habitat - a new 'custom made' market - within the broader 'contextual niche'. The social intervention of the State and high unemployment have also been instrumental in ensuring a skilled and seemingly docile, young, and predominantly male labour force.
Hence it can be argued that in a period of three decades direct foreign investment in the Argentine automotive industry is switching from a national, highly profitable, captive market, to a regional, also highly profitable regulated market whose definitive profile before the World Trade Organization remains to be resolved. This process appears to be associated to changes in intrafirm relations within the region. Parentcompanysubsidiary relations in Argentina seem to be mediated by the Brazilian main subsidiary. Former autonomous links with parent company are now being replaced by hierarchical relations within regional subsidiaries themselves.
With regards to the autopart industry, the dynamics of concentration, transnationalization, and polarization continues. The trends reported - fewer firsttier autopart suppliers, specially suppliers of assemblies or subassemblies (brake systems, instrument panels and so forth) ; higher demands on these local or foreign suppliers who must be capable of delivering materials in the volume quantity and high quality required (at. least ISO 9000 level of higher), 'module design' and JIT if so demanded all highlight a supplier profile that is different from the one that was prevalent during the ISIET and post ISIET phases. It is not surprising, therefore, the displacement of smallerscale local suppliers due to the higher imported content of new models coupled to the hierarchization of the autopart network as a result of the higher complexity of parts/components required. The competition betwen national and foreign producers in the segment of 'independent' firms has become very intense. Smallerscale national manufacturers struggle to secure access to upper echelon tiers to remain in the race.
*Automotive and autopart growth have multiplying effects, create new employment, and bring about the implementation of new forms of work organization requiring a polyvalent labour force. The extent and nature of these processes, as well as their consequences from social and macro economic angles must be ascertained. For instance : What are the features of JIT hybrids, the nature of skills required, and the reasons of their being gendered, predominantly, masculine jobs ?
** What are the social costs involved in the destruction of the national autopart industry, and in the creation of new balance of trade and payment deficits related to bilateral and international car and autopart exchanges ? Present disequilibriums are very problematic both for Argentina and for Brazil. This perspective is even more alarming considering the future, when free car and autopart trade is established within the region in the year 2000. Besides, the experience of other more advanced integration schemes, such as the European Community, shows the dangers involved in delegating national decision making power to central regulatory bodies. Are we in the Southern Cone committing the same mistakes with regards this particular industry ?
***The above questions and issues concern consequences of given industrial processes. But what ate the ultimate sources of their dynamics ? Gerpisa stresses the need to study explanatory factors. I agree with the urgency of this plea. But I will argue that if we are concerned with sources of dynamics, our efforts can not be restricted to the analysis of : 'the interfirm and intra firm management of international production structures in the framework of a spacial division, of labor between countries and regions'. (Gerpisa's call for papers, 1996/My underlining). That is, if by the last phrase we mean that the divisions referred to are already given and that automotive firms simply adapt to a preexisting market environment.
I have argued that globalization and hierarchization processes in the automotive industry can not be isolated from specific 'contextual niches' that support and reproduce the economic model implemented. These 'niches' are evolving from national into regional arenas. I have also argued that TC automotive makers are active economic and political actors who exercise a fair amount of decisionmaking power at national, regional, and international forums (see for example the recent discussion at the World Trade Organization concerning Asian denouncement of the Brazilian automotive regime...). Car makers may be activelly competing among themselves, but they also act collectively, often in cooperation with their own national political bodies.
As a result the study of the dynamics, and not just the consequences of given patterns of growth of the world car/ autopart industry, must necessarily include the consideration of these decisionmaking levels. But this would require, in my view, to go beyond the limitations imposed by concentrating our efforts on the study of the dynamics of change at the microlevel only.
But how to accomplish this task ? How are we
to relate our own national and regional 'contextual niches' with
other regional 'niches' to understand their interlinked dynamics ?
Car makers are pioneers in suggesting regulatory frameworks in
the Southern Cone of Latin America. These are 'islands' of regulation
amidst neoliberal 'contextual niches' that are leading to
polarited societies in the South and in the North. Perhaps Gerpisa
members, as concerned scholars, can contribute through research
and knowledge/ sharing to the construction of alternative 'contextual
niches' conducive to Equity oriented patterns of growth.
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ANNEXE
Table 1. The Argentine Automotive Industry. Basic Sectorial Statistics
Table 2. Automotive Production, Overall Sales and Stocks
Table 3. Automotive Industry Export Values
| Year
(1) | Production
(2) | Sales
(3) | Stock
(4) | Workers
(5) | Men-Hours
Work (6) |
| |
| 1959 | 32,952 | 32,319 | s/inf. | 9,900 | 12,300 | 373.3 | |
| 1960 | 89,338 | 87,723 | s/inf. | 17,500 | 20,900 | 233.9 | |
| 1961 | 136,188 | 134,926 | s/inf. | 24,400 | 31,000 | 227.6 | |
| 1962 | 129,880 | 124,447 | 8,698 | 25,500 | 36,000 | 277.2 | |
| 1963 | 104,899 | 106,166 | 5,802 | 28,200 | 30,800 | 293.6 | |
| 1964 | 116,483 | 167,538 | 5,305 | 33,493 | 42,278 | 253.9 | |
| ISIET' Stage | 1965 | 194,536 | 190,785 | 12,223 | 36,710 | 47,099 | 242.1 |
| 1966 | 179,453 | 177,374 | 12,658 | 39,500 | 48,239 | 268.8 | |
| 1967 | 175,318 | 177,577 | 9,764 | 34,528 | 42,882 | 244.6 | |
| 1968 | 180,976 | 185,419 | 5,122 | 35,295 | 44,247 | 244.6 | |
| 1969 | 218,590 | 211,603 | 11,988 | 40,349 | 51,998 | 237.9 | |
| 1970 | 219,599 | 221,595 | 10,015 | 41,561 | 54,679 | 249.0 | |
| 1971 | 253,237 | 254,324 | 10,061 | 42,909 | 55,276 | 218.3 | |
| 1972 | 268,593 | 265,289 | 12,830 | 46,316 | 57,673 | 214.7 | |
| 1973 | 293,742 | 296,514 | 7,771 | 50,626 | 64,065 | 218.1 | |
| 1974 | 286,312 | 286,702 | 6,918 | 57,400 | 69,218 | 241.7 | |
| 1975 | 240,036 | 240,572 | 7,948 | 54,556 | 66,374 | 276.5 | |
| 1976 | 193,517 | 191,158 | 11,417 | 50,012 | 59,863 | 309.3 | |
| 1977 | 235,356 | 220,314 | 25,965 | 48,765 | 64674 | 274.8 | |
| 1978 | 179,160 | 194,844 | 9,925 | 38,402 | 48,609 | 271.3 | |
| 1979 | 253,217 | 251,931 | 11,883 | 41,201 | 55,156 | 217.8 | |
| 1980 | 281,793 | 278,665 | 14,183 | 38,851 | 55,436 | 196.7 | |
| 1981 | 172,363 | 179,133 | 11,053 | 28,334 | 35,975 | 208.7 | |
| 1982 | 132,117 | 135,039 | 8,294 | 23,267 | 29,207 | 221.1 | |
| Transition/Crisis Stage | 1983 | 159,876 | 155,683 | 12,467 | 23,449 | 31,929 | 199.7 |
| 1984 | 167,323 | 169,783 | 10,313 | 23,620 | 32,934 | 196.8 | |
| 1985 | 137,675 | 146,341 | 1,474 | 20,715 | 27,784 | 201,8 | |
| 1986 | 170,490 | 165,956 | 5,839 | 22,129 | 32,214 | 188.9 | |
| 1987 | 193,315 | 191,257 | 7,911 | 21,820 | 36,661 | 189.6 | |
| 1988 | 164,160 | 164,151 | 8,836 | 21,313 | 29,693 | 180.9 | |
| 1989 | 127,823 | 134,762 | 1,980 | 19,281 | 23,930 | 187.2 | |
| 1990 | 99,639 | 95,913 | 4,151 | 17,430 | 20,812 | 208.9 | |
| 1991 | 138,958 | 142,380 | 1,440 | 18,317 | 27,216 | 195.8 | |
| 1992 | 262,022 | 259,716 | 2,431 | 22,161 | 40,939 | 156.2 | |
| Boom Stage | 1993 | 342,344 | 341,189 | 2,671 | 23,027 | 45,155 | 131.9 |
| 1994 | 408,777 | 399,378 | 11,372 | 25,734 | 48,135 | 117.7 | |
Source: ADEFA; own calcul
| Year | |||||
| 1975
1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994(2) | 240,036
193,517 235,356 179,160 253,217 281,793 172,363 132,117 159,876 167,323 137,675 170,490 193,315 164,160 127,823 99,639 138,958 261,966 342,344 408,647 | 226,831
177,716 213,301 190,559 249,679 275,058 178,848 131,805 150,565 165,059 145,524 165,575 190,827 162,517 132,921 94,787 137,175 243,382 311,213 360,570 | 13,741
13,442 8,013 4,285 2,258 3,607 285 3,234 5,118 4,724 817 381 430 1,634 1,841 1,126 5,205 16,302 29,976 38,432 | 81,000 60,126 5,339 1,075 519 747 1,049 1,530 1,379 642 1,173 28,631 105,882 109,637 146,908 | 7,948
11,417 25,965 9,925 11,383 14,183 11,053 8,294 12,467 10,313 1,414 5,839 7,911 8,836 1,980 4,151 1,440 2,431 2,671 12,316 |
Source: Business Trends, 1994
(1) At end of each period
(2) Provisional figures.
(in 000 US dollar)
| Years |
|
| ||
| 1980
1984 1988 1989 1990 1991 1992 1993 1994* | 88,806
49,434 113,144 124,515 141,206 182,210 317,117 447,731 600,000 | 21,504
35,205 24,776 62,262 24,941 60,700 132,952 300,004 400,000 | 108,310
84,839 137,920 186,777 166,147 242,910 450,069 747,735 1,000,000 | 80.1
58.4 82.0 66.7 85.0 75.0 70.5 59.0 60.0 |
Source: Business trends 1994