Brazil in Mexico

Mexico and Brazil have had a long exciting tradition of commercial trade between the two countries. In fact, this is based on a privileged commercial relationship existing between Mexico and the MERCOSUR. Since signing the Economic Complementation Agreement with the MERCOSUR, the Mexico and Brazil relationship has grown in a dramatic way.

The relationship between Mexico and Brazil reflects some very special circumstances, for example, together the two nations represent more than half of the territory, population and economic production of Latin America. Brazil and Mexico are the countries with the greatest combined presence and success on the Latin region.

These two countries, highlighting significant degrees of development and technological training standards, together represent a market of over 300 million people. This has had a multiple effect, contributing to an important increase in political dialogue, commercial trade, and it has also given a strong push to the dynamic cooperation existing in commercial and industrial areas shared by the two countries.

Mexico’s President Felipe Calderon and his Brazilian counterpart Luiz Inácio Lula da Silva, look forward to a continuing dialogue between the two nations. They have had reciprocal visits with the main purpose to strengthen their bilateral relationship and facilitate an exchange of common interests in such diverse areas on the international agenda as the environment, human rights and energy issues. In the academic, cultural, scientific, and parliamentary but for the most part economic – commercial areas, the tendencies are more and more positive as time goes by. Their multilateral issues are guided by solid principles of respect for international law, defense of multilateralism and the strong promotion of social justice.

Exhibit 1 shows the Trade Balance between Mexico and Brazil. It shows that commerce between the two countries reached its maximum level in the year 2008. What stands out is that since the year 2000 commerce between Mexico and Brazil has been evolving in a very satisfactory way, with the exception of last year (2009). This was because of the global recession and its impact on the Automotive Industry.

Several important factors in the trade balance between Mexico and Brazil are revealing. Take, for example, the fact that during the 10 year span from January 1999 to December 2009, total exports from Mexico to Brazil rose 371%. But, imports from Brazil to Mexico also showed an impressive 209% growth during the same period.

Total commerce between the two countries and reciprocal action brought in US$5.9 billion during the year 2009 in trade between the two partners. The total commerce between Mexico and Brazil showed important improvements, especially during the period since 2005. In fact, the period 1999- 2009 represents a 260% growth rate in total commerce between the two countries, but the year 2009 (US$5.9 billion) the first step back was taken compared with 2008 (US$8.6 billion) in commerce.

Exhibit 2 shows Brazilian Investment in Mexico. During the period from January 1999, through December of 2009, companies with capital from Brazil invested US$462.8 million.

By September 2006 Mexico had recorded 271 companies with registered Brazilian capital. This is 0.8% of the total number of companies (34,535) with direct foreign investment documented in Mexico. Companies which received Brazilian capital are dedicated mainly to commerce (37.6%); next is the services sector with (33.9%); and then comes the manufacturing industry with (23.2%).

Brazil is an important major investor in Mexico. Brazilian’s top investors include Petrobras, Banco de Brasil, Marcopolo, WEG, and Busscar. There are also firms like Oxiteno, Andrade Gutierrez y Odebrecth plus Iterlbras. In the textile industry Marisol and Brasisul promote impressive numbers of products in the Mexican market. The IT industry is certainly wellcovered by Brazilian companies like Microsigna, Datasul, Itautec and Stefany. Aginomoto and Tramontina are also important Brazilian companies with solid investments in Mexico.

The energy sector is an area that has great expectations for further Brazilian investment. After the necessary legal reforms in Mexico allowing for the participation of foreign companies in the exploitation of oil on Mexican territory, action is anticipated from Petrobras.

Regarding the aerospace industry, Embraer was Brazil’s largest exporter from 1999 to 2001 and the second largest in 2002, 2003 and 2004. It currently employs more than 16,500 people, of which 95% are based in Brazil.

Embraer has become one of the largest aircraft manufacturers in the world by focusing on specific market segments with high growth potential in commercial, defence, and executive aviation by developing and adapting successful aircraft platforms and judiciously introducing new technology whenever it creates value by lowering acquisition price, reducing direct operating costs, or delivering higher reliability, comfort, and safety. Aeromexico, the largest airline of Mexico has integrated the Embraer 190 to their fleet.

Exhibit 3 illustrates the distribution among economic areas receiving Brazilian investment during the time span beginning in January of 1999 and lasting through December of 2006. It shows that most of the investment goes into manufacturing (51%); commerce (29.40%); and services (13.70%).