The impact of intra-firm trade in the automotive industry in Mexico

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Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Paris (2011)

Abstract:

In the intra-firm trade affiliates of U.S. companies in the sector "transport equipment", Mexico stands out as the country with increased investment, employees, sales and value added of all the countries, except Canada and Germany, beating China and Brazil in its trade with the United States (U.S.), but not in electrical equipment and computers. Transport equipment, electrical equipment and computers are the areas of  major manufacturing activity in "affiliates." The fact that these companies have a significant economic impact, causes a dual economic impact. On the one hand, increased foreign direct investment  brings about beneficial consequences for the country to create jobs, strengthen infrastructure and increase foreign trade (imports and exports), on the other hand, because that exports are made by foreign companies, it is necessary to know the real impact on the Mexican economy.
 
In national statistics, exports of autos and auto parts account for 20% of total exports and the production value is greater than 3% of GDP. These figures are subject to adjustments involving imports necessary to make the same cars and parts and the amount of outflow via transfer of profits and transfer pricing.
 
Clearly the interest that the "Big Three" (GM, Ford and Chrysler), Volkswagen and Nissan to invest in Mexico, mainly because of cheap labor, as well as its quality and proximity to the U.S. market, which is the country that consumes 80% of cars produced in Mexico and 20% of those occurring in the world. Since the eighties of last century the U.S. has increased its investment in Mexico to offset declining production in Detroit, which to some extent may be an indication that in the future will continue on this path, because of the great facilities the Mexican government granted to these companies.
 
 
 
 
 
 
 
 
 
Nonbank Foreign Affiliates by Country of afiliate 2007 (U.S. $ mln)                                               
 
 All countries
 Mexico
 China
 Brazil
 Mexico / All
 China / All
Brazil / All
Sales of goods
 5,517,143
 199,571
 146,175
 134,087
 3.6
 2.6
 2.4
Exports to affiliates
 257,660
 39,523
 4,546
 nd
 15.3
 1.8
 
Import affiliates
 331,934
 52,245
 4,548
 nd
 15.7
 1.4
 
Transport equipment sales
 844,956
 35,737
 3,523
 19,254
 4.2
 0.4
 2.3
Electrical Equipment Sales
 80,807
 3,364
 3,010
 2,799
 4.2
 3.7
 3.5
Computer and electronic equipment sales.
 377,668
 14,450
 38,979
 5,983
 3.8
 10.3
 1.6
Exports / Sales
 4.7
 19.8
 3.1
 
 
 
 
Imports / Sales
 6.0
 26.2
 3.1
 
 
 
 
Transp. equipment sales / Total Sales
 15.3
 17.9
 2.4
 14.4
 
 
 
Electrical equipment sales / total sales
 1.5
 1.7
 2.1
 2.1
 
 
 
Computer Sales / Total Sales
 6.8
 7.2
 26.7
 4.5
 
 
 
                       
Source: Based on data of U.S. Multinational Companies Operations in the United States and Abroad in 2009, By Kevin B. Barefoot and Raymond J. Mataloni Jr., August 2009, p.81
 
 
As shown in the table above, sales of U.S. affiliates in Mexico holds 3.6% of total sales, vs.. China 2.6, and 2.4 in Brazil, in the line of transportation equipment, Mexico has 4.2%, vs. China's 0.4 and 2.3 in Brazil. In Mexico, sales of these companies have 17.9% vs. China 2.4% and 14.4% in Brazil.
 
These data can configure the almost total dependence on the Mexican automotive market, American companies. The work will refine these numbers, providing a context of impact on the national economy.

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

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