From iatp@igc.apc.org Date: 18 Sep 94 18:51 PDT From: IATP Reply to: "Conference trade.news" To: "Recipients of conference trade.news" Newsgroups: trade.news Subject: NAFTA & Inter-Am Monitor 9/19/94 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #17 September 19, 1994 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - 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 cfpa@cap.gwu.edu. $10 Guide to NAFTA for state legislators, emphasizing effect of NAFTA on state laws. - - - - - - - - - - - - - - - - - - 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. 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