TRADE BETWEEN

MEXICO VS U.S

Letter of Transmittal

22n A!ril 2"# 2$"2

Masura Rahamatullah BBA, Department American International University- Bangladesh Banani, Dhaka. Su !ect" Submission of Transmittal.

Dear Madam,

It is a %reat !leas&re for &s to s&'mittin% t(e re!ort to )o& on Tra e an Barriers 'et*een Me+i,o an U.S a'o&t a&tomo'ile in &str). It (as 'een a %reat !leas&re for &s to *or- on t(is re!ort as it !ro.i e man) o!!ort&nities to %ain insi%(ts a'o&t tra e an its !oli,) in Me+i,o.

We are %ratef&l to )o& for )o&r ,ontin&o&s %&i an,e in !re!arin% t(e %ro&! !ro/e,t. 0inall)# *e
also 'elie.e t(at t(is re!ort *ill satisf) )o&.

Sin,erel) )o&rs#
#ame #ame #ame #ame

Ta'le of Content1 Titles

Intro &,tion of t(e or%ani3ation Or%ani3ational O.er.ie* Intro &,tion to t(e St& ) S,o!e of t(e St& ) Met(o olo%) Limitation Anal)sis an Dis,&ssion Ma/or 0in in%s Sol&tion Con,l&sion Referen,e A!!en i+

2a%es

1. Introduction

Mexico is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by uatemala! "eli#e! and the $aribbean Sea. It is the fifth lar%est country in the Americas by total area and the thirteenth lar%est independent nation in the world. It is the ele&enth most populous country and the most populous Spanish'spea(in% country.

It is a federation comprisin% thirty'one states and a )ederal *istrict! the capital city. Mexico has one of the world+s lar%est economies! and is considered both a re%ional power and middle power; ,his country was the first -atin American member of the Or%ani#ation for .conomic $o' operation and *e&elopment O.$* and considered an upper'middle income country by the /orld "an(. Mexico is considered a newly industriali#ed country and an emer%in% power. ,he economy is stron%ly lin(ed to those of its North American )ree ,rade A%reement 0NA),A1 partners! especially the United States. Mexico has been one of the emer%in% mar(ets and star economy sector in the world. "oth domestic and international. Mexico manufacturin% has been always impro&in%. After the 2"racero pro%ram3 was si%ned between United States and Mexico! Mexico manufacturin% sector %rows rapidly. $ompanies from United States started settin% up their assembly in Mexico because Mexico had plenty of raw materials a&ailable.

1. Analysis and Discussion

Country Profile Mexico

United States Area Population Capital City People Area Population States Languages Capital City Religion Languages Religion Currency Currency Head of State Head of State Government Government People 4!567!789 (m :;; million /ashin%ton *.$ /hite 84.47<! "lac( ;6.59<! Asian =.=:< ;!47=!:89 sB (m American Indian and Alas(a nati&e >.48<! ;;6 million Nati&e ?awaiian and Other >.;5<. :; .n%lish Mexico $ity Protestant 9;.:<! @oman $atholic 6:.4<! Spanish! 76 indi%enous lan%ua%es. Mormon ;.8<! Aewish ;.8<! Muslim >.7<! @oman $atholic 54<! Protestant 7<! other Others 6.9<! no reli%ious affiliation ;6.;< denominations 9<. .uro Mexican Peso President "arac( Obama President )elipe de Aesus $alderon ?inoCosa $onstitution'based )ederal @epublic with a )ederal system stron% republic democratic tradition. mixed .uropean and indi%enous ancestry

2.2 Macro-environmental Factors:

A macro en&ironmental analysis can be completed alone or in a brainstormin% session! howe&er doin% some research before startin%. ,o simplify the Macro .n&ironment Analysis the followin% 7 broad headin% will pro&ide some structure! a %ood start is to list all of the trends you can thin( of or can find and indicate whether they will ha&e a positi&e impact or ne%ati&e impact on the si#e of your industry.

2.2.1 Economic Trends:

W(ile ,&rrentl) s(a-en ') o&'ts lar%el) relate to t(e !er,ei.e re,ession in t(e Unite States# in fa,t re,ent )ears o.erall (a.e 'een ones of im!ressi.e %ro*t( in t(e Me+i,an e,onom). S&,( %ro*t( is not *it(o&t its !ro'lems s&,( as e+,essi.e e!en en,e on t(e res&lts of intra4firm tra e relate to NA0TA4lin-e arran%ements t(at essentiall) aim at !rofitin% from lo* la'o&r ,osts in Me+i,o. 5et# it is in most terms t(e %reatest !ro%ress t(e nation (as ma e in a ,ent&r).

T(e Me+i,an e,onom) (as %ro*n in re,ent e,a es to 'e,ome t(e *orl 6s "2t( to "7t( lar%est# *it( a 8D2 of some 9:7$#$"2 million in 2$$;. Sin,e t(e "<<7 ,rises *as s&,,essf&ll) resol.e an NA0TA 'e%an to a!!l) in t(at same )ear# t(e Me+i,an !eso (as ne.er 'een more sta'le &rin% an) ot(er time in re,ent (istor). Wit( !er ,a!ita in,ome stan in% at 9:#$;; !er ann&m# Me+i,o en/o)s t(e ==t( (i%(est in t(e *orl an is f&ll) a nation of mi le4in,ome stat&s. No lon%er ,(roni,all) !oor# t(e !er,enta%e of its !o!&lation in e+treme !o.ert) (as fallen nationall) from 27.2> to "?.;>.In ee t(e !ro%ress in r&ral areas (as 'een e.en more im!ressi.e *it( t(ose in t(is Con ition fallin% from 72> to 2?.<> in t(e !erio 'et*een 2$$$ an 2$$7. T(is (as lar%el) 'een t(e res&lt of sta'ilit) s&staine sin,e earl) "<<7 &n er t(e @e illo an 0o+ %o.ernments. 0rom "<<= to 2$$2 t(e a.era%e %ro*t( of t(e e,onom) *as some =.">. T(is (as 'een !arti,&larl) .isi'le in t(e ma,roe,onomi, an fis,al s!(eres alt(o&%( it is also more %enerall) .isi'le *it( inflation o*n to re,or lo*s an %ro*in% mi le ,lass 2ros!erit). It is im!ortant to note t(at t(e !re.io&s s(ort o*nt&rn in t(e U.S. e,onom) in t(e earl) 2$$$s# on *(i,( Me+i,o is so e!en ent# 'ro&%(t t(at rate of %ro*t( o*nA (o*e.er# it m&st 'e sai t(at re,o.er) *as B&i,- follo*in% t(e fast re,o.er) of t(e U.S. e,onom) ') 2$$7. In t(e latter )ear t(e e,onom) of Me+i,o %re* ') C> an ') t(e ne+t to 7.">.7 Me+i,an e!en en,e on t(e U.S. is nota'le. After t(e fail&re of t(e ri.e to i.ersif) tra e !atterns in t(e "<?$s an ei%(ties Dt(e lo,al eB&i.alent of Cana aEs T(ir O!tion !oli,)F# a ERealistE a!!roa,( 'e%an to mar- t(e nationEs tra itional nationalist an !rote,tionist .conomy. )rom opposition to excessi&e U.S. dependence! Mexico mo&ed to welcome it as ine&itable. /ith time! the Mexican economy became e&en more dependent on the United States than the $anadian economy. Presently the United States represents well o&er 5>< of total Mexican trade. Such *ependence! especially with the current trend of includin% increasin% amounts of strate%ic Materials! is deeply disturbin% to nationalists.: Also as $hina ma(es continuin% inroads into ,hat mar(et and the U.S. economy wea(ens! such concerns mount apace.

Economy of MexicoD G P D E;.6:; trillion 0nominal; 6>;61 E;.8=5 trillion 0PPP; 6>;61 *P %rowthD 9.9 <0 6>;>1 *P per capitaD E;;!;;= 06>;61 0nominal1 E;9!856 06>;61 0PPP1 *P by sector a%ricultureD :.4<! industryD :6.7<! ser&icesD 7:.9< 06>;> est.1 Inflation 0$PI1D :.7< Population below po&erty line D ::< of the populations are in po&erty 0asset based1 and ;>< Of ,he population li&es in extreme 0food based1 po&erty. inny coefficientD 9>.4 06>>91

-abor forceD 85.6 million 06>;6 .S,.1 -abor force by occupation a%ricultureD ;>.8<! industryD ::.=<! ser&icesD 99.4< 06>;61 UnemploymentD 7.6< plus considerable Underemployment D067<1 06>>41 .lectronics! food and be&era%es! ,obacco! chemicals! iron and steel.

Now see the forei%n direct in&estment you can easily see that in manufacturin% sectors there is a massi&e percenta%e %rew in ;449'6>;;.

Mexico Unemployment rates!

Mexico inflation rate!

Political and Legal "actors! ,he political'le%al dimension of the %eneral en&ironment also affects business acti&ity. ,he philosophy of the political parties in power influences business practices. ,he le%al en&ironment ser&es to define what or%ani#ations can and cannot do at a particular point in time. ,he le%al en&ironment facin% or%ani#ations is becomin% more complex and affectin% businesses more directly. It has become increasin%ly difficult for businesses to ta(e action without encounterin% a law! re%ulation! or le%al problem. A &ery brief listin% of si%nificant laws that affect business would include le%islation in the areas of consumerism! employee relations! the en&ironment! and competiti&e practices. Many of the laws also ha&e an associated re%ulatory a%ency. Powerful U.S. re%ulatory a%encies include the .n&ironmental Protection A%ency 0.PA1! the Occupational Safety and ?ealth Administration 0OS?A1! the .Bual .mployment Opportunity $ommission 0..O$1! and the Securities and .xchan%e $ommission 0S.$1. .stimates of the cost of compliance &ary widely! but could well exceed E;>> billion annually. Many of these costs are passed to consumers. ?owe&er! costs of le%al expenses and settlements may not be incurred for years and are not li(ely to be paid by consumers of the product or owners of the company when the &iolation occurred. Still! potential le%al action often results in hi%her prices for consumers and a more conser&ati&e attitude by business executi&es. #ec$nological "actors! ,echnolo%y is another aspect of the en&ironment a firm should consider in de&elopin% strate%ic plans. $han%in% technolo%y may affect the demand for a firm+s products and ser&ices! its production processes! and raw materials. ,echnolo%ical chan%es may create new opportunities for the firm! or threaten the sur&i&al of a product! firm! or industry. ,echnolo%ical inno&ation continues to mo&e at an increasin%ly rapid rate. ,echnolo%y can chan%e the lifestyle and buyin% patterns of consumers. @ecent de&elopments in the field of microcomputers ha&e dramatically expanded the potential customer base and created innumerable opportunities for businesses to en%a%e in business &ia Internet. /hereas computers were traditionally used only by lar%e or%ani#ations to handle data processin% needs! personal computers are commonly used by smaller firms and indi&iduals for uses not e&en ima%ined fifteen years a%o. Similarly! new

de&elopments in technolo%y led to a reduction in prices for computers and expanded the potential mar(et. -ower prices allow computers to be mar(eted to the %eneral public rather than to business! scientific! and professional usersFthe initial mar(et. ,echnolo%y may also cause certain products to be remo&ed from the mar(et. Asbestos'related illnesses ha&e se&erely limited asbestos as a resource used in heat'sensiti&e products such as hair dryers. )urther! a number of chemicals that ha&e been commonly used by farmers to control insects or plants are prohibited from use or reBuire licensure as a conseBuence of those chemicals appearin% in the food chain.

%&' Goods Are #raded! ,housands of used &ehicles from as far away as $olorado and Missouri Cam tiny car lots and auto sal&a%e yards in this %ritty border city. An estimated 69!>>> families ma(e a li&in% here hustlin% U.S. castoffs. Amon% them is Aose Ga&ala! a wiry used'car dealer with a truc(er+s cap and an eye for bar%ains. At a recent auto auction in nei%hborin% .l Paso! ,exas! he sna%%ed a decrepit ;48= )ord ran ,orino that brou%ht snic(ers from the crowd. "ut it+s Ga&ala who may ha&e the last lau%h. ?e fi%ures he can sell the wi#ened muscle car to some HStars(y I ?utchH wannabe in Auare# for at least four times the E;>> that he paid for it. ,hat+s precisely what is worryin% en&ironmentalists and new'car dealers! who say fallin% trade barriers are fuelin% an in&asion of smo(y Aun(ers. More than : million late'model &ehicles ha&e rumbled le%ally south of the border in the last 6 ;J6 years. Millions more are on the way! than(s to the North American )ree ,rade A%reement. ,he &inta%e metal is rattlin% Mexico+s retail car mar(et. Sales of new &ehicles ha&e stalled at ;.; million a year as used imports ha&e o&erta(en them. Sales of new subcompacts '' the most popular class of cars in Mexico because of their price '' s(idded ;7.=< last year as buyers snapped up cheaper! roomier used &ehicles from the U.S. )actory wor(er *a&id Orti# was chec(in% out sport utility &ehicles recently on $alle $arlos Amaya in $iudad Auare#. ,he public street doubles as an open'air auto ba#aar with hundreds of hi%h'milea%e! late'model &ehicles par(ed bumper to dented bumper. ?e said used cars from the

U.S. were more desirable than those from Mexico because they tend to be bi%%er and to ha&e spent less time on pitted! unpa&ed streets such as those common in parts of Auare#. )or decades! Mexico restricted imports of used &ehicles and slapped hefty taxes on new ones! which meant Mexicans! paid more than U.S. consumers for the exact same &ehicles. ,hat spawned a hu%e blac( mar(et in Calopies! particularly in the border re%ion. ,hin%s chan%ed in summer 6>>9 as the Mexican %o&ernment was %earin% up to meet its NA),A obli%ations. ,hat trade deal reBuires Mexico to be%in openin% its mar(et to some used &ehicles from the U.S. and $anada next year. ,he pact is structured to protect Mexican car dealers from immediate competition a%ainst their newest! most profitable models. Only &ehicles ;> years and older will be allowed in initially. ,hose a%e restrictions will %radually be reduced until 6>;4! when the used'car mar(et will be completely open. "ut in a mo&e that surprised en&ironmentalists and new'car dealers! former Mexican President Kicente )ox sped up the process in Au%ust 6>>9! si%nin% a decree to allow the import of &ehicles ;> to ;9 years old. ,hat decree was modified this year to allow imports of only ;445 models for the rest of 6>>5. NA),A re%ulations will %o into effect Aan. ;! 6>>4. Location economies leverage! Mexico enCoys a strate%ic %eo%raphic position! %reat natural wealth and an exceptional demo%raphic bonus. ,his! added to the &ariety of strate%ic industries! solid international business relations! economic stability and a noteworthy political maturity constitute Mexico as one of the best destinations for in&estment. ?istorically! the automobile industry has been a strate%ic sector for de&elopment in Mexico. Its share in the national economy places it as the second most important industry in Mexico. /ith a &ast infrastructure and o&er ;!>>> auto parts companies! the Mexican automobile sector is the lar%est &ehicle producer in the world! and an important platform for manufacturin% %lobal products to the hi%hest standards of Buality and safety. In 6>>;;! Mexico produced 6!;>6!5>; cars! an increase of =< on 6>;>! and exported ;!77;!=>7 &ehicles! :< more than the pre&ious year. Such increases are noteworthy in the context of the steep drop in sales of ;5< recorded by the American automobile industry. In the same year! &ehicle exports by the Mexican automobile sector rose than(s to a %reater di&ersification of the mar(et. .xports to .urope increased by 4.5<! while sales to Asia and -atin America rose by 6.6< and 8.:< respecti&ely! o&er the same period.

,he Mexican automoti&e industry is focused on in&estment mar(ets as much as it is on exports. Ley models built in Mexico for worldwide sales are the -incoln MLG! the Kol(swa%en "eetle! the Nissan ,iida! the ?onda $@'K! the *od%e Aourney and the armored "M/ M9. Precision

machinin%! plastic inCection moldin%! aluminum castin%! nodular iron! cold and hot for%in%! alon% with sheet metal stampin%! ma(e this a window of opportunity for the industry. $*M Auto consultants forecasts that automobile production in Mexico will reach :.; million units by 6>;:! double the 6>>5 output.

US(ME)*C+ Regional Economic *ntegration! ,he bilateral economic relationship with Mexico is amon% the most important for the United States because of Mexico3s closeness and because of the lar%e amount of trade and in&estment transactions. ,he most si%nificant feature of the relationship is the North American )ree ,rade A%reement 0NA),A1 throu%h which the United States! Mexico and $anada form the world3s lar%est free trade area with about one'third the world3s ross *omestic Product 0 *P1. Relative G P of Mexico, US and influential States! Mexico3s *P has %rown at approximately twice the rate of the U.S o&er the last ten years on a

nominal basis. ,his has transformed into a noticeable increase in U.S exports to Mexico as the country3s middle class %rows and pro&ides more opportunities for U.S firms to expand their sales to Mexican consumers. $urrently re&enues %enerated from U.S consumer ' related exports are o&er E9>" annually. $on&ersely the &alue of U.S imports from Mexico! while partially influenced by the increase in the price of the refined petroleum from Mexico! has increased by E;>>" with the import of raw materials! autos! aerospace! computer parts and food stuffs. Mexico has become the fourth lar%est car producer in the world behind the Nbi% threeO P United States! ermany and Aapan. ,he influence of the rapidly %rowin% ?ispanic! primarily Mexican! populations in $alifornia and ,exas on trade %rowth! each of these are considered borderland economies. /ith $alifornia! while -os An%eles $ounty still carries the lar%est concentration of ?ispanic people! the $entral Kalley 0$K1 re%ion3s ?ispanic population has been outsi#ed %rowth o&er the last ten years. In fact the ?ispanic population %rew 9=< faster in the $K than it did on statewide basis.

Mexico(US multilateral "oreign irect *nvestment!

)orei%n direct in&estment 0)*I1 forms another part of the economic relationship between the United States and Mexico. U.S in&estment into Mexico has focused on Machinery and auto manufacturin%! chemical and pharmaceutical processin%! and minin% and a%riculture. In contrast! in&estment by Mexican companies in the U.S has focused on the food and be&era%e industries! buildin% materials! communications and hospitality. Mexican )*I in the United Stated is much lower than U.S in&estment in Mexico! with le&els of Mexican )*I fluctuation o&er the last years. Approximately two'third of Mexican companies3 in&estment in the U.s has been in $alifornia and ,exas historically. In sum! these capital flows' emi%rant remittances! tourism and )*I' account for in excess E9>" in flow of funds in 6>;> from the U.S to Mexico. NA),A pro&isions on forei%n direct in&estment helped to loc( in the reforms and increase in&estor confidence. Under Mexico %a&e U.S in&estors non discriminatory treatment of their in&estments in Mexico as well as in&estor protection. Much of the %rowths ha&e occurred Mexico would ha&e continued to free up its forei%n in&estment laws with or without NA),A.

-or.er remittances to Mexico!

@emittances from wor(ers abroad play a stron% role in the Mexican economy and form an important aspect of the US'Mexico economy relationship. /or(ers in the U.S are the leadin% source of for wor(er3s remittances worldwide. Studies on remittance flows to Mexico report that in southern Mexico states! remittances mostly or completely co&er %eneral consumption or housin%. One study estimates that 5>< of the money recei&ed by households %oes for food! clothin%! health care! and other household expenses. ,he economic impact of remittance flows is concentrated in the poorer states of Mexico. ,he %o&ernment has sponsored pro%rams to channel the funds directly to infrastructure and in&estment rather than consumption. @emittances from mi%rant wor(ers o&erseas! mainly in the United States! are expected to remain steady and support moderate %rowth of pri&ate consumption.

S-+# analysis of ME)*C+! Strengt$s It offers si%nificant sa&in%s on labor costs when compared to other in&estment options in the Americas! Asia or .urope. Its wide &ariety of natural resources fa&ors the lar%e number of producti&e acti&ities includin% those related to biotechnolo%y and %eneration of renewable ener%y. ,he amount of time and procedures to open and close a business! as well as the time and procedures needed to obtain construction permits are easier compared to other countries. It has flexible access to lar%er mar(ets It has a low transportation cost which facilitates the business such as the demand and in&entory costs. ,he operation costs are lower which includes tax rates! number of tax payments etc.

-ea.nesses Is hea&ily dependent on US economy Inefficient %o&ernment bureaucracy that is Coined with the corruption. ?as an inadeBuately educated wor(force. Unfamiliarity with forei%n mar(ets -ac( of exportin% experience

+pportunities It has se&eral internal distribution terminals which communicate with the main ports which if used properly reduce costs and Buic( departure of %oods. It will experience a better exchan%e actual performance than many of the countries it competes with international mar(ets. It has le%al certainty for forei%n in&estment in the forthcomin% days

#$reats Ille%al immi%ration and the political conflict it en%enders here will rise Mexico3s lac( of economic pro%ress nurtures the increasin% influence of dru% %an%s! which ha&e effecti&ely ta(en o&er half of Mexico and are threatenin% ci&il order and democracy. )inally! la%%in% %rowth means that the U.S. trade deficit with Mexico will continue to %row. S-+# analysis of US economy Strengt$s It has the lar%est and the most important mar(et in the world It carries hi%h &alue in&estment on @esearch and *e&elopment and .ducation. It has the world3s lar%est economy! ha&in% almost : times the si#e of Aapan3s economy. It has the stature of bein% a bi% dri&er of the %lobal economy. ,he country has hu%e reser&es of natural resources such as Phosphates! Ginc! -ead! $oal! Uranium and old. Ad&anced in technolo%ical systems; computers! medical! aerospace! military eBuipment etc. Utili#es open trade as a stron% influence o&er international relations. ,reasury bills accounted for bein% sold as a means to %eneratin% money for %o&ernment reser&es! in order to contribute to economic acti&ities. *P approximately E;=.67 trillion! which is

-ea.nesses G G ,he country has detected a record of low household sa&in% rate. It has a lar%e fiscal deficit that is increasin% which ma(es it the bi%%est debtor country. $redit mar(ets are wea( and are lac(in% a sustainable amount supply of money to stabili#e the economic conditions. G ,he economy suffers from hi%h ener%y prices! many commodity shorta%es! and e&en steeper coffee prices. +pportunities ,he country can support different adCustments by stron% national sa&in% that would a&oid the burden of fallin% on both in&estment and %rowth. ,he merchandise trade deficit can be decreased in order to decrease the o&erall deficit. Inflation can be decreased due to the decreasin% commodity prices and the decrease in demand in the domestic mar(et. )inancial encoura%ement to the consumers will result in %reat help to stabili#in% the economic conditions of the country. Increased fundin% in sectors such as housin% will ha&e a %reat affect in times of crisis.

#$reats ,he %rowth rate is forecasted to %row at a lesser rate due to the adCustments for housin% sector and the credit crunch! which will also ha&e ne%ati&e effects on the US export mar(ets. It has se&eral barriers to access the international mar(ets due to ri&als.

,he %rowin% economies in .urope and recent de&elopments in Asia which are expandin% economies %lobally! especially $hina which is forecasted to o&erta(e the US mar(et in si#e in :> years.

?ouse and mort%a%e crisis due to the occurrence of the financial crisis. Stoc( &alue %oin% down.

Mexicos Automotive Production

Me$ico en!oys a strategic geographic position, great natural %ealth and an e$ceptional demographic onus. &his, added to the variety o' strategic industries, solid international usiness relations, economic sta ility and a note%orthy political maturity constitute Me$ico as one o' the est destinations 'or investment.

(istorically, the automo ile industry has een a strategic sector 'or development in Me$ico. Its share in the national economy places it as the second most important industry in Me$ico. )ith a vast in'rastructure and over *,+++ auto parts companies, the Me$ican automo ile sector is the largest vehicle producer in the %orld, and an important plat'orm 'or manu'acturing glo al products to the highest standards o' ,uality and sa'ety.

In -++**, Me$ico produced -,*+-,.+* cars, an increase o' /0 on -+*+, and e$ported *,11*,/+1 vehicles, 20 more than the previous year. Such increases are note%orthy in the conte$t o' the steep drop in sales o' *.0 recorded y the American automo ile industry.

In the same year, vehicle e$ports y the Me$ican automo ile sector rose thanks to a greater diversi'ication o' the market. 3$ports to 3urope increased y 4..0, %hile sales to Asia and 5atin America rose y -.-0 and 6.20 respectively, over the same period.

&he Me$ican automotive industry is 'ocused on investment markets as much as it is on e$ports. 7ey models uilt in Me$ico 'or %orld%ide sales are the 5incoln M78, the 9olks%agen Beetle, the #issan &iida, the (onda :R-9, the Dodge ;ourney and the armored BM) <=. >recision

machining, plastic in!ection molding, aluminum casting, nodular iron, cold and hot 'orging, along %ith sheet metal stamping, make this a %indo% o' opportunity 'or the industry.

:DM Auto consultants 'orecasts that automo ile production in Me$ico %ill reach 2.* million units y -+*2, dou le the -++. output.

A&to e+!orts in 0e'r&ar) /&m!e 2=> to "<7#;7$ .e(i,les# an lo,al sales %aine "2> to ?7#?$C &nits. 0e'r&ar)Es !ro &,tion n&m'er *as t(e (i%(est e.er for t(e se,on mont( of t(e )ear an !&t Me+i,oEs ,ar in &str) on !a,e for a re,or )ear. Me+i,o .e(i,le o&t!&t set ne* re,or s in 2$"$ an 2$"" on t(e stren%t( of e+!orts. A,,&m&late a&to !ro &,tion for t(e first t*o mont(s of 2$"2 *as &! "C> ,om!are *it( t(e same !erio last )ear to 77=#$": .e(i,les# an e+!orts *ere "$> (i%(er to C=2#<:2 a&tomo'iles. Lo,al sales rose ""> to "=$#$$$ .e(i,les in t(e t*o4mont( !erio . Alt(o&%( e+!orts to t(e U.S. ma-e &! t(e '&l- of Me+i,oEs a&to sales a'roa # t(e fastest4%ro*in% re%ion for Me+i,an4ma e ,ars an li%(t tr&,-s ,ontin&es to 'e So&t( Ameri,a# in,l& in% Bra3il.

Mexico trade rules and regulation!

,he North American )ree ,rade A%reement supplanted Mexico+s Automoti&e *ecrees on li%ht and hea&y &ehicles! pro&idin% for the sta%ed elimination of Mexican tariffs! local content reBuirements! mar(et access restrictions! import trade balancin% reBuirements! and mar(et share restrictions. /ith only the two exceptions noted below! all barriers ha&e been eliminated on imports from the U.S. that meet the NA),A rule of ori%in. #ariffs! Q Mexican import duties on cars and truc(s produced in the United States or $anada that meet the NA),A rule of ori%in were reduced to #ero on Aanuary ;! 6>>:! one year ahead of schedule. Q Mexico maintains a 6> percent tariff on U.S. and $anadian &ehicles not meetin% the NA),A rule of ori%in and on &ehicles from all other countries not meetin% preferential trade arran%ements. Mexico has also si%ned ;6 )ree ,rade A%reements co&erin% trade with =: countries! includin% such maCor mar(ets as the United States! $anada! Aapan and the .U member states #axes! ,he Mexican Kalue Added ,ax 0KA,1 is ;> percent for &ehicles that are re%istered in the Northern border re%ion. ,he KA, for the remainder of the country is ;9 percent. ,he KA, is assessed on the sum of the $ustoms &alue of the &ehicle! plus import duty! plus the $ustoms processin% fee of >.5 percent of the $ustoms &alue. Rule of +rigin! ,he NA),A rule of ori%in is a re%ional content measurement that establishes the minimum criteria that products must meet in order to Bualify for preferential tariff treatment between the U.S.! $anada! and Mexico. As of Aanuary ;! 6>>6! at least 76.9 percent of a passen%er car or li%ht truc(+s net cost must be of &alue ori%inatin% in North America. All other &ehicles must reach 7> percent North American content to Bualify for #ero duty rates. ,here is an additional! special cate%ory for &ehicle manufacturers settin% up a new plant! or si%nificantly retoolin% an existin% plant! to produce a class or si#e of &ehicle not pre&iously produced at that plant. ,his pro&ision allows for 9> percent re%ional content to meet rule of ori%in reBuirements! for a period of either two or fi&e years 0two years for production of a new type of &ehicle at an existin% plant! fi&e years for a new type of &ehicle in a new plant1! be%innin% on the date the first prototype &ehicle is produced in the 0Bualifyin%1 plant.

a. eneral Importation ,ax P ;> percent of the &alue of the &ehicle b. $ustoms ?andlin% *uties P >.5 percent of the &alue of the &ehicle c. New Kehicle ,ax P 9>';>> percent of the &alue of the &ehicle d. Kalue Added ,ax 0IKA1 i. ;> percent of :> percent of the &alue of the &ehicle if the importer li&es within 69 miles of the U.S.'Mexico border ii. ;9 percent of :> percent of the &alue of the &ehicle if the importer li&es beyond 69 miles of the U.S.'Mexico border 7. Pay all taxes and fees at a desi%nated ban( and obtain the receipt necessary to continue the customs procedure. 8. Present the customs bro(er with payment receipt. ,he customs bro(er will wor( with the Mexican customs a%ent to recei&e all documents necessary to complete the process! and to recei&e the holo%ram re%istration stic(er. 5. Pay the customs bro(er. )ees &ary bro(er to bro(er on a competiti&e basis. In addition to the application for import or export! the exporter must chec( to see if a license is needed to import or export! and if so! then he must acBuire it prior to import or export! as the case may be. As well! if for import! the importer must &erify whether there is any duty payable for the import! and if so! he must pay it. Customs /ro.er! ,he )ederal o&ernment of Mexico licenses persons that ha&e shown 0by examination1 their ability to handle the customs bro(era%e acti&ity on behalf of the %eneral public. ,he customs bro(ers are pri&ate parties 0not %o&ernment a%ents1 that are in the business of assistin% pri&ate parties and businesses in their importationJexportation acti&ities! by performin% filin%s! obtainin% permits and payin% duties! as needed.See $ustoms "ro(ers below. )ilin%s! Permits and *uties. ,he %eneral rule on imports to Mexico is that there will be a need of a filin% 0HPedimentoH1 and possibly the payment of a duty andJor the acBuisition of an import permit.

/onded -are$ouses! Mexico permits the existence of bonded warehouses! under the control of $ustoms. /hen the Mexican %oods are placed in one of these bonded warehouses it is considered as ha&in% been exported from Mexico. ,his bonded warehouse procedure will permit the Mexican exporter to see( certain tax incenti&es at the time of deposit. 0ational Registry of *mporters and Exporters of Mexico!

Mexico maintains a National @e%istry of its authori#ed importers and exporters. ,hose persons and companies that customarily import or export are to be re%istered there! otherwise they can not import or export. ,he Mexican %o&ernment a%ency controllin% o&er the re%istry 0?acienda1 will reBuire more of the re%istrar for imports than exports 0since it fa&ors Mexico balance of trade and forei%n debt ratios to export1. If you are a one time importer and of minor importance! the $ustoms authorities will permit you to perform the import personally or with the assistance of a customs bro(er! without this re%istry. If the matter is of %reater importance 0hi%her &alue1 you may be able to %et help from a bro(era%e firm. Provisions! ,he %oal of NA),A was to eliminate barriers to trade and in&estment between the US! $anada and Mexico. ,he implementation of NA),A on Aanuary ;! ;44= brou%ht the immediate elimination of tariffs on more than one'half of Mexico+s exports to the U.S. and more than one' third of U.S. exports to Mexico. /ithin ;> years of the implementation of the a%reement! all US' Mexico tariffs would be eliminated except for some U.S. a%ricultural exports to Mexico that were to be phased out within ;9 years. Most U.S.'$anada trade was already duty free. NA),A also see(s to eliminate non'tariff trade barriers. It also see(s to protect the intellectual property ri%ht of the products. ,he fi&e lar%est cate%ories in 6>;> were mineral fuel and oil 0crude oil1 0E;;7.6 billion1! &ehicles 0E57.: billion1! electrical machinery 0E7;.5 billion1! machinery 0E9;.6 billion1! and precious stones 0%old1 0E;:.4 billion1. /order States and *nternational #ruc.ing ! One person close to the NA),A transportation ne%otiations noted that when they were completed! no one li(ed them. ,hese were difficult ne%otiations with many competin% interests to satisfy. In the truc( transportation area! NA),A created a timetable for the remo&al of barriers for cross'border truc(in% ser&ices.

International HRM Policies:

Wit( t(e a .ent of %lo'ali3ation# or%ani3ations 4 'i% or small (a.e ,ease to 'e lo,al# t(e) (a.e 'e,ome %lo'alH T(is (as in,rease emer%e Mana%ement. E.en t(ose or%ani3ations *(o ,onsi er t(emsel.es imm&ne to transa,tions a,ross %eo%ra!(i,al 'o&n aries are ,onne,te to ,om!an) *o&l not li-e to 'e ,alle as lo,al# (o*e.er t(e same *ants a omesti, to&,( in t(e (ost ,o&ntr) an t(ere lies t(e ,(allen%e. t(e *or-for,e to t(e i.ersit) an ,&lt&ral sensiti.ities (a.e li-e ne.er 'efore. All t(is le e.elo!ment of 8lo'al I&man Reso&r,e

Enumerate t e o!"ectives o# $lo!al HRM as #ollo%s: 1. Create a lo,al a!!eal *it(o&t ,om!romisin% &!on t(e %lo'al i entit). 2. 8eneratin% a*areness of ,ross ,&lt&ral sensiti.ities amon% mana%ers %lo'all) an (irin% of staff a,ross %eo%ra!(i, 'o&n aries. Trainin% &!on ,&lt&res an sensiti.ities of t(e *i er net*or- %lo'all). T(e) are in one *a) or t(e ot(er e!en ent &!on or%ani3ations t(at ma) e.en not (a.e (ear a'o&t. T(ere is inter e!en en,e 'et*een or%ani3ations in .ario&s areas an f&n,tions. 1. T(e !reliminar) f&n,tion of %lo'al I&man Reso&r,e Mana%ement is t(at t(e or%ani3ation ,arries a lo,al a!!eal in t(e (ost ,o&ntr) es!ite maintainin% an international feel. To e+em!lif)# an) m&ltinational J international t(e (ost ,o&ntr). T(e strate%i, role of I&man reso&r,es Mana%ement in s&,( a s,enario is to ens&re t(at IRM !oli,ies are in tan em *it( an t(e ,onte+t of 8lo'al IRM. 1. Decision Ma&in$: T(ere is a ,ertain an t(e rest are e,entrali3e . 2. 'o-ordination: A (i%( e%ree of ,oor ination is reB&ire in *a-e of t(e ,ross ,&lt&ral sensiti.ities. T(ere is in a ition also a (i%( nee for ,&lt&ral ,ontrol. (. Inte$ratin$ Mec anisms: Man) inte%ratin% me,(anisms o!erate sim&ltaneo&sl). e%ree of ,entrali3ation of o!eratin% e,ision in s&!!ort of t(e firm6s strate%)# str&,t&re an ,ontrols. S!e,ifi,all)# *(en *e tal- of str&,t&res an ,ontrols t(e follo*in% 'e,ome *ort( mentionin% in

ma-in%. Com!are t(is to t(e International strate%)# t(e ,ore ,om!eten,ies are ,entrali3e

)lo!al HRM and t e *ta##in$ Policy

Iere also t(e role is no ifferent i.e. (irin% in i.i &als *it( reB&isite s-ills to o a !arti,&lar /o'. T(e ,(allen%e (ere is e.elo!in% tools to !romote a ,or!orate ,&lt&re t(at is almost t(e same e.er)*(ere e+,e!t t(at t(e lo,al sensiti.ities are ta-en ,are of. Also# t(e e,i in% &!on t(e to! mana%ement or -e) !ositions %ets .er) tri,-). W(et(er to ,(oose a lo,al from t(e (ost ,o&ntr) for a -e) !osition or e!lo) one from t(e (ea B&arters

ass&mes im!ortan,eA an finall) *(et(er or not to (a.e a &niform (irin% !oli,) %lo'all) remains a 'i% ,(allen%e. Ne.ert(eless an or%ani3ation ,an ,(oose to (ire a,,or in% to an) of t(e staffin% !oli,ies mentione 'elo*1

1. Et

nocentric: Iere t(e Ke) mana%ement !ositions are fille

') t(e !arent ,o&ntr)

in i.i &als.

2. Polycentric: In !ol),entri, staffin% !oli,) t(e (ost ,o&ntr) nationals mana%e s&'si
*(ereas t(e (ea B&arter !ositions are (el ') t(e !arent ,om!an) nationals.

iaries

(. )eocentric: In t(is staffin% !oli,) t(e 'est an

t(e most ,om!etent in i.i &als (ol -e)

!ositions irres!e,ti.e of t(e nationalities. 8eo,entri, staffin% !oli,) it seems is t(e 'est *(en it ,omes to 8lo'al IRM. T(e (&man reso&r,es are e!lo)e !ro &,ti.el) an it also (el!s '&il a stron% ,&lt&ral an informal mana%ement net*or-. T(e fli! si e is t(at (&man reso&r,es 'e,ome a 'it e+!ensi.e *(en (ire on a %eo,entri, 'asis. Besi es t(e national immi%ration !oli,ies ma) limit im!lementation. 8lo'al IRM t(erefore is a .er) ,(allen%in% front in IRM. If one is a'le to stri-e t(e ri%(t ,(or in esi%nin% str&,t&res an ,ontrols# t(e /o' is (alf one. S&'si iaries are (el to%et(er ') %lo'al IRM# ifferent s&'si iaries ,an f&n,tion o!erate ,o(erentl) onl) *(en it is ena'le ') effi,ient str&,t&res an ,ontrols.

Mexico logistics in automobile &he glo al market is huge pro a ly ?/++ illion %hen one looks at the logistics. &here are ,uite a it o' the opportunities o' the logistics in Me$ico. In -+*+, vehicle manu'acturer sector led the automotive logistics spending accounting 'or a share o' 6=0. A'termarket sector accounted 'or the remaining -=0 share o' the total automotive logistics spending Suppliers are moving to Me$ico manu'acturers that have een in production %hich creates opportunity 'or the logistics %ho likes to service the automotive industry. Almost 6+0 o' all Me$ican automo iles and parts are destined to the US@ ho%ever, :entral and South America are ecoming gro%ing markets 'or Me$ican automo iles, particularly BraAil. Increasing capacity has een created to uild ne% vehicles. Mexico automotive Landscape 9ehicle production is gro%ing -M units in -++6 to -.6M units in -+**.

>roduction capacity is e$panding :urrent B3MCBriginal 3,uipment Manu'acturerD uilding ne% plantsE capacity #e% B3MS considering ne% plants

:omponent manu'acturing is e$panding Almost 10 per year

Key challenges in Mexico Relia ility o' transportation providers B%ner operators make up 4+0 o' total providers B%ner operators have //0 market share #ational career gaining prominence and capa ility

5ogistics in'rastructure :ost e''ective road net%ork Rail connectivity >ort capacity

Me$icoFs ma!or ports such as the >ort o' 5aAaro :ardenas, the >ort o' 9eracruA and the >ort o' ManAanillo have ene'ited 'rom the increasing trade and handle the ma!ority o' its automo ile

trade. &he >ort o' 5aAaro :ardenas, located on the countryFs %est coast reported an **0 increase in automo ile e$ports 'or the 'irst ten months o' -+** over the same period in -+*+. Gor the 'irst ten months o' -+**, the >ort o' 9eracruA announced that automotive trade increased -..20. 9eracruA is considered the gate%ay 'or Me$icoFs automo ile industry, %hich is concentrated in the center o' the country, in the states around Me$ico :ity. 5ocated on the south-central coast, the port handles the ma!ority o' automo iles e$ported. &he >ort o' ManAanillo is located 'urther south o' 5aAaro :ardenas, on the %est coast and handles almost hal' o' all containeriAed cargo arriving in the country and 1.0 o' all cargo 'rom the >aci'ic.

National Logistics Ambition in Mexico Hovernment launches IInnovation 'or logisticsJ Increase competitiveness- cost and ,uality 5ogistics %orkshops o''ered to usiness Gederal government support provided

Gederal 'unds 'or those %ho innovate 3ncourage est practice >romote and sustain logistic leadership :reate a 'orum 'or logistics e$pertise

Infrastructure Improvement Strategies ModerniAing *6=++ km o' high%ay ?-1B in *++ pro!ects

Building */++km o' ne% rail track ?/.1.? have een invested on e$pansion 'unds

Streamlining logistics in Mexico Reduce miles %ith in'rastructure improvements :onsolidation services and shared automotive delivery net%orks 3lectronic mani'ests and customs clearance 2>5 services providing standardiAation

utsourcing automobiles to Mexico

Me$icoFs auto industry is ooming, ut parts outsourcing is keeping a cover on %ages. &he country produced a record - million cars and light trucks last year, e$porting three-'ourths o' them, %hile more than ?/ illion in 'oreign investment poured into the sector. But Me$icoFs auto %orkers %ere %orried. &he reason" outsourcing. U.S. carmakers are shuttering plants up north, %hich %ill likely lead to ne% 'actories in Me$ico. Heneral Motors :orp. 'or e$ample, is uilding a ?1++ million plant in San 5uis >otosK that has employed -,+++ starting in -++.. &he Me$icans, though, 'ear ne% investments may not mean plenty o' relatively high-paying !o s. &hatFs ecause even south o' the order automakers 'ace relentless pressure to cut costs. So theyFre saving on inventory and la or y shi'ting %ork to suppliers, %hich delivered preassem led pieces o' cars directly to the 'actory 'loor. More than *2,=++ parts !o s %ere created in Me$ico last year, vs. /,=++ popular assem ly positions, %hich have een a ticket to the middle class 'or many Me$icans. Gord and other automakers are increasingly relies on outsourcing. Me$ican assem ly %orkers average !ust ?2.=+ an hour plus ene'its, compared %ith a out ?-6 hourly plus ene'its at a HM or Gord plant in the U.S. But less skilled %orkers at parts makers such as Delphi :orp. In Me$ico earn as little as ?*.=+ per hour and their ene'its are skimpier ecause unions are %eaker in the 'ragmented parts industry. But 'or the past 'e% years outsourcing to Me$ico has increased signi'icantly out o' %hich -+** has een the record year in automotive industry. ItLs estimated that net currency income 'or Me$ico 'rom automo ile sector %ill reach ?2+ illion in year -+** %hich has e$ceeded ?-6 illion received last year. Me$ican plants have manu'actured - million *1/ thousand 2+6 units. Some assem lers such as 9olks%agen have said they have gro%th e$pectations in their production rates 'or this year. Gord has assem led 2=/,=6. units and the American Assem ler, Heneral Motors has manu'actured /1/,6/6 units and the Asian (onda has assem led 2.,+++ units and &oyota assem led /-,-1. units in Me$ico. ItLs elieved that ne% plants uilt y MaAda, #issan, :hrysler-Giat representing more than ?= illion in investment, %ill have opened in Me$ico in the 'orthcoming days.

!.S.A logistics in automobile

Automotive industry in America is e$pected to e seasoned, sound and healthy. :armakers and suppliers are carrying lo% levels o' de t thanks to restructuring and ankruptcies, are making strong pro'its, are carrying lo% levels o' inventory, and have average plant capacity utiliAation. But due to the 'inancial crisis, it have een going through, it %asnLt surprising that to hear that 'orecasts 'or US vehicle sales this year and ne$t have een do%ngraded. :aution appears to have pushed the sector to%ards rene%ed interest in industry colla oration and e''iciency. Grom redesigning in ound net%orks through ne% 'uel-saving techni,ues, and 'rom pooled I& to sharing ackloads 'or vehicle distri ution, there %as evidence that the logistics sector has learned the lessons o' the crisis %ell. &he M'uel ageL impact, com ined %ith the %eak economy, is likely to hold ack car sales over the medium-to-long term, according to I(S. &he M'uel ageL impact, com ined %ith the %eak economy, is likely to hold ack car sales over the medium-to-long term, according to I(S. )hile in recent years carmakers appear to have given more consideration to risk and logistics costs in their sourcing decisions. Some o' the natural disasters that US have su''ered 'rom have a''ected the industry drastically. Bne o' our iggest challenges that US is 'acing today is developing port property. )ater property is not in a undance, especially %ith docks that can handle ships %ith 2.'t or more dra't. Also at issue is getting competitive rail into those ports. &here is no 'le$i le port availa le to support the logistic. Manu'acturers use the most land in the #ortheast, Glorida, and :ali'ornia. Due to container pressures, cars have 'allen out o' 'avor in the #ortheast, and more are eing railed up 'rom the South Atlantic ports. &here is land availa le in Bruns%ick, ;acksonville, and :harleston, ut not developed enough. Beyond natural disasters, supplier capacity risks that are more related to the economic cycle and a lack o' resources. Some suppliers, particularly o' tyres, had not increased their production capacity at the rate o' the marketLs recovery. #o precautions %ere seen to e needed to improve 'orecasting et%een carmakers, suppliers and providers to help anticipate and react to these potential shortages. &he advantages US hold in logistics o' automo iles are" Implementation o' asset tracking >roactive transportation planning Material scheduling to optimiAe transportation

utsourcing automobiles to !SA

US outsourcing o' automo iles has een the most admired sectors since long. ItLs gro%ing phenomenally. Its automotive industry has 'ull distri ution rights 'or vehicles and parts. &he 'act that it has een to the potential to produce certain parts due to its trained and skilled la or 'orce and advanced technology, it holds the reputation despite several controversies. But it is also is e$pensive in terms o' la or %hen itLs compared %ith other countries. &he very reason %hy USA itsel' outsources to other countries in reducing and saving the cost .&he areas %here US have een success'ul in various parts o' automotive are" :hassis and drive train category" ABS s)stems Dantilo,- 'ra-e s)stemsF :lutch disks, 'acings, pads, rake hoses Shock a sor ers Aluminum alloy %heels

"omparative Analysis of !S and Mexico are#

*D &he ene'its en!oyed y Me$ico automotive logistics are 'ar competitive than USA such as mentioned elo%" $enefits of trends in Mexico auto supply chain services Scheduled pickup and delivery US 2D &he streamlining logistics o' Me$ico is supportive and handy %hich has een a success 'or the last 'e% years. /D 5ogistics is highly encouraged in Me$ico and has set the enchmark 'or others to 'ollo% in the upcoming days. =D &he cost o' la or is cheap in Me$ico %hen it comes to outsourcing to Me$ico. 1D &echnologically, USA is sounder than Me$ico. 6D Me$ico has sho%n positive changes in comparison to US that had su''ered huge set acks %hen the 'inancial crisis kicked in. Reduced transit time Shared cost structure Increased relia ility

-D Me$icoLs ports are much 'le$i le and developed that 'acilitates the logistics in comparison to