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Date: 18 Sep 94 18:51 PDT
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Subject: NAFTA & Inter-Am Monitor 9/19/94
Produced by the Institute for Agriculture and Trade Policy
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NAFTA and Inter-American Trade Monitor, vol. 1, #17
September 19, 1994
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HEADLINES
NAFTA BUSINESS NOTES
PORK DISPUTE SETTLED
LABEL, CERTIFICATE OF ORIGIN RULES FINALIZED
NAFTA PARTNERS IGNORE CUBA TRADING BAN
LATIN AMERICAN ECONOMIC OVERVIEW
RESOURCES/EVENTS
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NAFTA BUSINESS NOTES
% Mexican cement maker Grupo Cementos de Chihuahua, has acquired
a cement plant in Tijeras, New Mexico for $42 million. The plant,
previously owned by Holnarn Inc., can produce 500,000 metric tons
per year of Portland-brand cement.
% A number of US pet food companies are building new plants in the
Mexican state of Queretaro.
% Mexico's second-largest corn miller, Grupo Minsa, bought a
previously-idle corn flour plant in Red Oak, Iowa. Maseca, a
Monterrey-based competitor, has corn flour milling and tortilla-
making operations throughout Mexico and in southern California.
Bimbo, one of Mexico's biggest bakers, distributes Sara Lee and Mrs.
Fields products in Mexico, has also purchased some small US
companies, and is trying to acquire General Mills.
% US-owned Sharp Healthcare, Inc., with the backing of Mexican
investors, is building a private $25 million hospital in Mazatlan. The
hospital is expected to find customers among the upper-income
population. Company officials say at least 20 more Mexican cities may
be targeted for such hospitals.
% The Montreal-based Jean Coutu Group, currently operating Canada's
second-largest drugstore chain, agreed to pay Revco $147.5 million for
221 Brooks Drug stores in New England. Jean Coutu operates 249
drugstores in Quebec, Ontario and New Brunswick.
% US package express firms are enjoying the benefits of NAFTA's
increased US-Mexico trade. United Parcel Service already had five
planes serving the market in 1992, followed by DHL Worldwide and
Federal Express with three planes. UPS launched a major service
expansion for small shippers in November 1993, with door-to-door
guaranteed delivery of letters and documents.
% Pizza Hut announced the opening of its biggest restaurant anywhere
in the world in Torreon, Coajuila, Mexico in early September. The
newest Pizza Hut expects to serve about 1,000 pizzas daily.
% Wal-Mart Stores and Mexican partner Cifra SA announced the mid-
September opening of the fifth Sam's Club in Mexico City, the
company's 17th warehouse club in Mexico.
% A cut-throat price war between smaller, regional airlines and the
two largest Mexican airlines, Aeromexico and Mexicana, has
threatened the financial stability of Mexicana. Aeromexico increased
its ownership share of Mexicana to 55 percent in 1993. Both airlines
were previously state-owned, and the government still owns 34
percent of Mexicana. Gerardo de Prevoisin, chair of Mexicana and
Aeromexico, resigned on September 2, the latest victim of the turmoil
caused by two years of deregulation and privatization of the airline
industry.
Source: "Mexican Firm Buys Plant," U.S./LATIN TRADE, 9/94; "In the
News," TWIN PLANT NEWS, 9/94; "Mexican Corn Miller to Open First
U.S. Plant in Iowa," MILLING & BAKING NEWS, 8/23/94; Alva Senzek,
"Big Moves Afoot," EL FINANCIERO, 8/29-9/4/94; "U.S. Private Health
Care Expands to Mexico," CCPA Monitor, 9/94; Richard Ringer,
"Canadian Group to Buy 221 Brooks Drugstores from Revco," NEW
YORK TIMES, 9/13/94; Kevin G. Hall, "Package Express Firms Thrive in
Mexico," JOURNAL OF COMMERCE, 8/24/94; "Biggest Pizza Hut;" "Wal-
Mart in Mexico;" Anthony DePalma, "Top Mexican Airline Executive
Quits," NEW YORK TIMES, 9/6/94
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PORK DISPUTE SETTLED
The Mexican National Pork Producers Commission claims that US
producers dump meat in Mexico at prices far below those in the US,
forcing small and medium Mexican pork producers out of business.
Mexican producers formally complained to the Mexican Commerce
Secretariat, Secofi, which launched an anti-dumping investigation on
18 pork categories in March, 1993. Despite an early and preliminary
finding of dumping, Secofi decided in August to end the investigation
without penalties. A similar investigation of US beef continues.
The current tariff on US and Canadian pork is 18%, compared to a
tariff of 20 percent on imports from anywhere else in the world, and
the intra-NAFTA tariff will drop by 2 percent per year until it is
eliminated entirely.
Gambling on successful tariff reductions due to NAFTA, Mexican meat
distributor Gabriel Guzman Ruiz's Grupo Sucarne invested $7 million in
early 1993 in expanding refrigeration and trucking facilities. Guzman
says the move was a success, and expects 1994 sales of $20 million,
twice as high as in 1993, and as much as $40 million by 1995. Citing
chronic Mexican pork shortages, Guzman depends heavily on US
imports.
Total US pork imports to Mexico are up roughly 40 percent this year.
US pork production costs are lower due to larger production volumes,
lower energy prices and feed costs, and greater use of high-tech h
testing equipment. The US prohibits importation of all fresh or frozen
Mexican pork and pork products, citing the danger of transmission of
hog cholera. A hog cholera epidemic in 1986 wiped out about a third
of the country's pigs, and lack of credit further handicaps small and
medium producers.
Source: Leon Lazaroff, "This Piggy Goes to Market," U.S./LATIN TRADE,
9/94; Kevin G. Hall, "US Pork Producers Welcome End of Mexican
Dumping Investigation," JOURNAL OF COMMERCE, 9/1/94; "Mexico
Drops Its Complaint Against U.S. Pork Industry," AG WEEK, 8/29/94
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LABEL, CERTIFICATE OF ORIGIN RULES FINALIZED
Rejecting exporters' preference for stick-on Spanish-language labels,
the Mexican Commerce Secretariat, Secofi, has decided to require
Spanish packaging, including warranties and product-safety
information, according to sources within the agency. "Stickering is
dead," said one official.
The rules will result in a one-time cost of millions for manufacturers
who want to export to Mexico. While large companies will have little
problem with compliance, smaller manufacturers may be kept out of
the Mexican market by the cost and the need for distinct kinds of
packaging for each country. US rules already require English labels in
the US, and Canadian rules require French and English labels in
Canada.
Certificate of origin rules for countries outside NAFTA that are
members of the General Agreement on Tariffs and Trade have also
been published by Secofi. The requirements are part of a crackdown
on cheap Chinese and Asian-made goods that are flooding into Mexico
through third countries.
Source: Kevin G. Hall, "Mexico Rejects Sticker Substitute for Import
Labels," JOURNAL OF COMMERCE, 8/29/94; Kevin G. Hall, "Mexico
Finalizes Certificate of Origin Rules," JOURNAL OF COMMERCE, 8/31/94
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NAFTA PARTNERS IGNORE CUBA TRADING BAN
Canada and Mexico have increased their investment in Cuba, ignoring
US efforts to halt trade with Cuba, with Mexico displacing Spain to
become Cuba's largest foreign investor. Mexico is the only Latin
American country to maintain recognition of Cuban President Fidel
Castro's government over the years, giving Mexican companies an
inside track for investment. Canadian companies are looking to invest
in tourism, mining, and oil exploration. Canada has also exported an
average of $94 million yearly to Cuba over the past three years,
mostly in agricultural products. Mexican exports to Cuba in 1993
reached $100 million. Cuban exports to Mexico have fallen, but
exports to Canada remain stronger.
Source: John M. Nagel, "Nafta Partners Ignore Ban, Increase
Investments," JOURNAL OF COMMERCE, 9/2/94
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LATIN AMERICAN ECONOMIC OVERVIEW
With Latin American economies expected to grow an estimated three
percent in 1994 for the fourth consecutive year, governments and
economists are enthusiastic about the neoliberal economic
prescriptions of open markets, privatization, deregulation, and
austerity measures that have brought success. At the same time,
Bolivian workers are striking, Mexican peasants staged a revolt in
January, and Argentine workers burned a provincial government
building and marched on the capital this summer. Although it has
brought economic expansion, the neoliberal medicine has not cured
the poverty that continues to afflict millions.
Most of the new money has gone to the already-rich. From the
pueblos jovenes of Peru to the villas miseria of Argentina to the
favelas of Brazil and the ranchos of Venezuela, many of the 73 percent
of Latin Americans who are now city-dwellers live in increasing
poverty. Lack of running water, garbage collection, and sewage
systems increase the health problems of a population suffering from
the malnutrition of the chronically unemployed.
According to Peter Jensen, regional coordinator for human settlements
at the UN Economic Commission on Latin America and the Caribbean,
"Growth has been really on only one end of the spectrum, the wealthy.
The rich are getting richer and the poor are getting poorer. And this
will generate social conflict." Jensen estimates that 46 million people
are homeless and another 85 million live in homes that should be
demolished. Another 100 million lack water, electricity, or proper
construction. The total of people ill-housed: 231 million of the
estimated 441 million in the region.
Chile, which lifted many people out of poverty in the past four years,
has targeted education as its spending priority for the next six years,
choosing education as a strategy for development as well as for
fighting poverty, according to finance minister Eduardo Aninat. Still,
overall government spending will be cut, so money for education must
come from cuts elsewhere.
Argentina, lauded by International Monetary Fund Michel Camdessus
as a dynamic economy with a "strong and laudable capital investment"
record, is planning still more privatization of state-run enterprises,
from nuclear power plants to the national mint and the postal service.
As the economic plans bring down inflation, poverty and
unemployment have increased in Argentina.
Source: Nathaniel C. Nash, "Latin Economic Speedup Leaves Poor in the
Dust," NEW YORK TIMES, 9/7/94; James Brooke, "IMF Chief Gives
Argentina Economy Two Thumbs Up," REUTER, 8/30/94; "Argentina
Plans Sweeping Sell-Off for Privatization," WALL STREET JOURNAL,
9/1/94; David Pilling, "Chile Targets Education as Spending Priority,"
FINANCIAL TIMES, 8/31/94; Thomas Kamm, "Epidemic of Slums
Afflicts Latin America," WALL STREET JOURNAL, 8/30/94
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RESOURCES/EVENTS
"Agricultural Interest Groups and the North American Free Trade
Agreement," David Orden. NATIONAL BUREAU OF ECONOMIC
RESEARCH, 1994. National Bureau of Economic Research, 1050
Massachusetts Avenue, Cambridge, MA 02138. $5.00
Working paper from NBER Conference on the Political Economy of
Trade Protection evaluates influence of US agricultural interest groups
on NAFTA.
"The New Supremacy of Trade: NAFTA Rewrites the Status of States,"
Robert Stumberg. CENTER FOR POLICY ALTERNATIVES, 1993. Center
for Policy Alternatives, 1875 Connecticut Avenue NW, Suite 710,
Washington, DC 20009-5728. Telephone 202/387-6030; fax 202/986-
2539; email
[email protected]. $10
Guide to NAFTA for state legislators, emphasizing effect of NAFTA on
state laws.
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The NAFTA and Inter-American Trade Monitor is available in both
English and Spanish on Association for Progressive Communications
(APC) computer networks on the conference eai.news. It can also be
faxed or sent via mail on request. We welcome your comments and
contributions.
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For more information about the Institute for Agriculture and Trade
Policy, send email to
[email protected].
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Produced by: Mary C. Turck, Institute for Agriculture & Trade Policy
1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414-1546 USA
Tel: (612) 379-5980, Fax: (612) 379-5982, email:
[email protected]
