For some time now we have been hearing dire news coming out of Detroit regarding the performance of GM, Ford, and Chrysler. Even before the collapse of the stock market, their share of the US car market had steadily been declining, losing ground to Asian manufacturers such as Toyota and Honda. Burdened by pensions and union contracts, these companies make less money per car sold than their competitors. Their gas-guzzling fleets, so popular for so long, suddenly seem dated and unaffordable to the average consumer.
What to do then? Evidently, the priority has to be redesign of their models to make them competitive again, and the Big Three's lobbying for a bailout package is sold precisely as an investment for retooling plants and developing new, competitive vehicles.
However, the other main issue remains. How can they compete with foreign companies that have much less expenses and are much more flexible? Something that is not said too loudly but is well known is that all three companies (Ford in particular) intend to offshore car production, with Mexico being the main beneficiary because of its close distance to the US, lower wages and costs, and competitive exchange rate.
What do you think? Will the Big Three be able to get a bailout package when Congress knows full well that the intention is to export jobs and invest overseas? Will they be able to survive this downturn, betting everything on their new product lines and a government rescue of the employees' pensions?
Sunday, November 09, 2008
Wednesday, November 05, 2008
Obama Victory - Is Latin America Even on the Map?
Now that it is confirmed that Democrat Barack Obama defeated John McCain, and that Dems will hold on to and extend their control of both the House and Senate, we can start thinking what this will mean for US foreign policy agenda.
I think that the government's priorities will be as follows:
1. Afghanistan (and Pakistan to a lesser degree): recovering the lost ground to Al Qaeda and taking decisive steps to finally eradicate this organization. From a national security standpoint, this is a far greater threat than Iraq, because a fortified Al Qaeda will definitely try to inflict serious harm to US and its allies' interests, as well as attacking the general population of these countries.
2. Iraq: the idea that the country is headed for civil war as soon as the troops are brought home is somewhat diminished, but there is a real threat of regional instability if a weakened national government if left alone to guard its security interests and territorial integrity. Arguing national security, Iran, Syria, and even western allies Turkey and Saudi Arabia would be tempted to act preemptively and enter Iraq before their neighbors do.
3. China and Southeast Asia: China is already the main exporter into the US (link) and the third destination for its exports, so commercial issues will continue to dominate the rest of the agenda. China, along with neighbors such as Malaysia, Thailand, the Philippines, and Vietnam, will definitely continue to expand their participation in world trade, displacing Latin American producers of both commodities (South America) and finished goods (Mexico, Central America) in the US market.
4. Russia: becoming ever more assertive as the price of oil went up, Russia was capable of acting upon its own national security interests without having to worry about the consequences. When NATO expanded east in the 90's Russia was powerless to act, but now the situation is quite different and it should be no surprise to anyone if we see repeats (or variations) of what happened in Georgia some months ago. Lower prices of oil will dampen these acts but will not stop them because Russia is seeing its long-standing buffer zone disappear, and it will do anything in its power to revert this. Granted, Europe has to play a leading role in bringing back regional balance, and trade with Europe is vital for Russia (especially with Germany, who depends on Russian gas for its energy needs), so the possibility of conflict is very limited. However, the US will definitely have to devote serious resources to this issue.
5. Israel/Palestine: this issue will forever be a priority because Israel is probably the most solid ally the US has in the world, and there is huge political pressure within the US government (lobbying, elected representatives) to find a solution to this conflict (none foreseeable any time soon).
6. Mexico (finally!):I think a distinction has to be made between Mexico and the rest of Latin America, because sharing a border creates issues that don't exist with all the other countries in the region.
a. Migration is still the top issue. Millions of Mexicans living in the US provide Mexico with one of its most important sources of foreign revenue, and this income is usually directed to small communities in middle and low-income states (central and southern Mexico, though not as much to the southernmost and poorest states). Because of this the Mexican government will continue to push for migration reform, vying for a stable and predictable way to formalize what already happens informally.
b. Trade: we all know NAFTA has been a great success for Mexico, but only parts of the country have truly benefited. Border states have gained the most because manufacturing capacity has moved there in order to supply the US market on short notice. Another big winner is Mexico City, focusing on all service industries. However southern Mexico has seen little gains as it has no real competitive advantages over the north. Poor infrastructure, lower education levels, and geography all play a part in hindering the region's progress. Finding a way for NAFTA to benefit the whole country is one of the biggest challenges the Mexican government faces, and the US should have an interest, because development will slow down immigration and the problems it brings with it.
c. Drugs: evidently, the US has a major interest in having a stable and secure neighbor on its southern border, and the drug trade is by far the most important issue the US needs resolved. US-Mexico cooperation has paid off with the arrest of several major heads of drug cartels and the disruption of their business. The violence seen now in Mexico attests to this progress, as "the deck is reshuffled" and drug dealers are scrambling to secure territories, supplies, and markets. Something relatively new in the media in Mexico is the issue of weapons coming in from the US. It is well known that this is a common phenomenon (guns are illegal in Mexico), but until recently there was little talk of cooperation between the US and Mexico on controlling this flow. This issue will be very difficult for the US, as there are some very strong lobbyists and corporations in the US with interests in maintaining the statu quo.
The State Department definitely has its hands full, and Latin America is not even close to the top of the list, so we shouldn't expect any changes in foreign policy coming out of the US.
I think that the government's priorities will be as follows:
1. Afghanistan (and Pakistan to a lesser degree): recovering the lost ground to Al Qaeda and taking decisive steps to finally eradicate this organization. From a national security standpoint, this is a far greater threat than Iraq, because a fortified Al Qaeda will definitely try to inflict serious harm to US and its allies' interests, as well as attacking the general population of these countries.
2. Iraq: the idea that the country is headed for civil war as soon as the troops are brought home is somewhat diminished, but there is a real threat of regional instability if a weakened national government if left alone to guard its security interests and territorial integrity. Arguing national security, Iran, Syria, and even western allies Turkey and Saudi Arabia would be tempted to act preemptively and enter Iraq before their neighbors do.
3. China and Southeast Asia: China is already the main exporter into the US (link) and the third destination for its exports, so commercial issues will continue to dominate the rest of the agenda. China, along with neighbors such as Malaysia, Thailand, the Philippines, and Vietnam, will definitely continue to expand their participation in world trade, displacing Latin American producers of both commodities (South America) and finished goods (Mexico, Central America) in the US market.
4. Russia: becoming ever more assertive as the price of oil went up, Russia was capable of acting upon its own national security interests without having to worry about the consequences. When NATO expanded east in the 90's Russia was powerless to act, but now the situation is quite different and it should be no surprise to anyone if we see repeats (or variations) of what happened in Georgia some months ago. Lower prices of oil will dampen these acts but will not stop them because Russia is seeing its long-standing buffer zone disappear, and it will do anything in its power to revert this. Granted, Europe has to play a leading role in bringing back regional balance, and trade with Europe is vital for Russia (especially with Germany, who depends on Russian gas for its energy needs), so the possibility of conflict is very limited. However, the US will definitely have to devote serious resources to this issue.
5. Israel/Palestine: this issue will forever be a priority because Israel is probably the most solid ally the US has in the world, and there is huge political pressure within the US government (lobbying, elected representatives) to find a solution to this conflict (none foreseeable any time soon).
6. Mexico (finally!):I think a distinction has to be made between Mexico and the rest of Latin America, because sharing a border creates issues that don't exist with all the other countries in the region.
a. Migration is still the top issue. Millions of Mexicans living in the US provide Mexico with one of its most important sources of foreign revenue, and this income is usually directed to small communities in middle and low-income states (central and southern Mexico, though not as much to the southernmost and poorest states). Because of this the Mexican government will continue to push for migration reform, vying for a stable and predictable way to formalize what already happens informally.
b. Trade: we all know NAFTA has been a great success for Mexico, but only parts of the country have truly benefited. Border states have gained the most because manufacturing capacity has moved there in order to supply the US market on short notice. Another big winner is Mexico City, focusing on all service industries. However southern Mexico has seen little gains as it has no real competitive advantages over the north. Poor infrastructure, lower education levels, and geography all play a part in hindering the region's progress. Finding a way for NAFTA to benefit the whole country is one of the biggest challenges the Mexican government faces, and the US should have an interest, because development will slow down immigration and the problems it brings with it.
c. Drugs: evidently, the US has a major interest in having a stable and secure neighbor on its southern border, and the drug trade is by far the most important issue the US needs resolved. US-Mexico cooperation has paid off with the arrest of several major heads of drug cartels and the disruption of their business. The violence seen now in Mexico attests to this progress, as "the deck is reshuffled" and drug dealers are scrambling to secure territories, supplies, and markets. Something relatively new in the media in Mexico is the issue of weapons coming in from the US. It is well known that this is a common phenomenon (guns are illegal in Mexico), but until recently there was little talk of cooperation between the US and Mexico on controlling this flow. This issue will be very difficult for the US, as there are some very strong lobbyists and corporations in the US with interests in maintaining the statu quo.
The State Department definitely has its hands full, and Latin America is not even close to the top of the list, so we shouldn't expect any changes in foreign policy coming out of the US.
Monday, November 03, 2008
US Elections - Impact on Latin America
So, the elections are finally upon us and the effect of the next US president in Latin America is still out in the air. Something very curious usually happens in opinion polls across Latin America regarding the US: people usually favor Democrat candidates and governments, although the policies of these (pro-unions, anti-trade when compared to Republicans) definitely benefit the rest of the continent less than Republican governments.
Why is this? Is it that Latin Americans are generally more left-wing and agree with Democrats on more issues than with Republicans? Is it that Latin Americans are more morally conservative, finding more points of coincidence with the Republican ideology? Pragmatically, the single most important issue that can benefit Latin America is trade, because it promotes economic growth, creates jobs, and solidifies economic stability. Why then the incongruency?
Thanks for your input!
Why is this? Is it that Latin Americans are generally more left-wing and agree with Democrats on more issues than with Republicans? Is it that Latin Americans are more morally conservative, finding more points of coincidence with the Republican ideology? Pragmatically, the single most important issue that can benefit Latin America is trade, because it promotes economic growth, creates jobs, and solidifies economic stability. Why then the incongruency?
Thanks for your input!
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