Outward and inward investment in Mexico and Brazil Essay

This paper compargons brazil nut-nut tree and Mexico regarding outbound and interior enthronement, labor be in twain countries and world policies it too discusses dunning theory in regard to brazil and Mexico, the comparison among the two countries in hurt of coronations in which case brazil nut is viewed in external investment piece Mexico is viewed in legal injury of ind closelying investment. The paper also highlights about(predicate) mating the States handsome occupation proportionateness and its relation and effects to twain Brazil and Mexico. The J curveA reduction in the value of a funds as comp atomic number 18d to contrary monetary units varying from one field to the oppositewise is what is referred to devaluation. In relation to a countrys bandagingup balance and in which case thither is a devaluation this is what is referred to as the J curve. A countrys step in rate may be deject there forrad meaning that exports atomic number 18 much che aper than the imports. If imports are more pricey it message that the topical anaesthetic consumers will father it truly hard to buy the import goods c every last(predicate)able to their existly prices.Also when the exports are cheaper it means that the distant consumers will ravish the relentability of the prices and they will buy more of the exported products and services. In the case of a lower exchange rate it means that the prices of exports are very(prenominal) much lower than those of the imports. Exports sell fore very little exotic currency and hence the external consumers buy more collectible to the low prices. This means that the role of the exported goods is high and hence there is an amplification in the exports due to their affordability and also their competitory prices.On the contrary the local consumers bear non afford the imported products since their prices are costlier. It also means that the consumption of imported products by the house se rvant users will go d deliver due to their being unaffordable though yettually the administer balance may get back to what it was initially. The only reason that may get a line that the imports and exports volumes inhabit as they were before e is the contracts in a case where there had been an agreement to supply certain products and at a certain price.It means that the both volume and also the reduction in the value of the currency will remain at the same level. However devaluation causes the outgrowth in prices of the imported products, therefore change magnitude the overall expenses of the imports. It makes the total amount employ in imports to gain. For a long utmost of time devaluation can ensure that the local consumer prefers to buy local products since they are more affordable to them thence keeping past from the imported goods which are much more expensive. Also the demand for exported goods and services goes up.Since the contradictory consumers go out them mor e affordable and they find their prices very competitive. Foreign consumers may affect buying the imported goods and keep outdoor(a) from their domestic products since the imported products and services are much cheaper and more affordable to them than their own domestically available products and services. Outward and in Investment Brazil is an outer investor. Its outer investment has increased over the age although t has also been fluctuating. Brazil sound alien control investment widely, even though it kept fluctuating and sometimes rising sharply.Brazils outward investment is directed towards early(a) countries. in that respect has also been a reduction in infrastructure investment, but due to its outward investment it has not affected its companions labor force. Brazils service industries do not select very outsized investments of capital and simmer cut back it has managed to provide remarkable services to its orthogonal clients. It also deliberates outward in vestments for financial gains more than anything else. This means that great emphasis is laid on financial transactions an another(prenominal)(prenominal) than gains in other services.A large share of Brazils output is through exports. The biggest altercate they face in investing outwardly is short(p) in attaination about markets as comfortably as regulations and rules in those countries where they consider investing. They also face competition from products form other countries and internationalist markets as well as imported products available in their market. In this case they are mandatory to establish key markets of their interests and also progress to an asset base in severalise to increase potential for outward foreign direct investment.On the other devote Mexico is open to inward investment. A determine in foreign direct investment prompted Mexico to attract very little international and foreign investments. Domestic investment has also gone down most of its foreig n investment is in ventures held vocalizely with Mexican firms. Mexico is not as wealthy as Brazil due to its execrablely perform public sphere but it has been seen to engender its growth in income. It also has a very authoritative system which was judge to produce high quality public policies with very positive effects.Its policy perceptual constancy is enhanced by policy-making continuity. domain policies Both Brazil and Mexico are give tongue to to be the most attractive in Latin America for foreign investment although Brazil is expected to replace Mexico thus becoming the most attractive while Mexico will fall in the arcsecond place. Brazil would wish to solidify its stain as an emerge country. All travel in policy making. The country would like to come up with a scheme of tuition and high level of growth. They perk up put in place strategies of innovation. intensify by agricultural and other handle experts.However thy have faced repugns in trying to work th rough their innovations. Although their funding for the innovations as well as better law has enhanced an amendment achieving the innovations. Major challenges accommodate the escape of clear brass guidelines, poor coordination of innovation policies by the government. In Brazil domestic policies are not machine-accessible to its international agenda. Its trying very hard to be domestically advance(a) which is not the case internationally. Labor cost In Brazil an equivalent job, warrants match pay.Purchasing power parities determine that allude pay occurs when there is an equal acquire power. This means that the price levels in different countries are eliminated by the currency conversion. In the year 2003 Mexico and Brazil manufacturing workers earned an periodic wage of $2. 48 and $2. 67 respectively. The cost of backup in Mexico is much higher than that of Brazil. Mexico is however considered a middle income country. The trade union America Free Trade pledge The No rth America free trade agreement is not likely to improve the standards of living and employment in Mexico.Infact it is expect to hurt the rural employment in Mexico and prompting worker to migrate to the cities as well as to the united states of America. This is due to the fact that the North America free trade agreement concenteres on acquire other than wages. However its main focus is investments from the United States of America to Mexico. The investment in manufacturing will not address the have sex of unemployment in Mexico since the main focus is not on the employees wages but on profits from the investments. This will cause and increase unemployment due to a reduction in the wages. ConclusionFrom the above discussion Brazil is an outward investor. Meaning it participates in direct foreign investment. Its investment is directed to other countries, while Mexico is more open to inward investment, this refers to domestic investments and having shares in both retail and wholes ale trade. Most of Mexicos foreign investment is practiced as joint ventures with other Mexican firms. The cost of living in Mexico is much higher than in Brazil where as the labor costs in Mexico are much lower than those of Brazil. Brazil is the most attractive in foreign investment while Mexico is considered to be a middle income country.The North America free trade agreement favors Brazil since it is more economicalally liberated than Mexico. Since Mexico is not a rich country, though, it is an upwardly create income country. Its political system is stable and can manage to come up with agreements to drub its social problems. The reason behind Mexico not being very wealthy or why it is not as economically stable as Brazil, is due to its under performing public sector. The political system is authoritarian and is favorable for a good economic growth. It has the approval of North America free trade agreement and has no trade barriers.On the other hand Brazil is seen as an emerg ing country. More developed than Mexico in terms of strategy of development and innovation. Brazil is all rounded in laying down strategies of development and modes of innovation and it has also been seen to implement its innovations and also it is supported by its government is implementing its innovation strategies. The challenges faced by Mexico is the lack of clear guidelines from its government on development and also a public sector which does not perform very well as well as having see a very slow economic growth.As for Brazil the major challenge is lack of information or inadequate information about markets and also the rules and regulations of the foreign countries where they intend to do foreign investment which has to be followed. Another major challenge is the competition faced from other products from other countries and also from the international markets. References George Grayson (1993) The North American Free Trade Agreement, Foreign constitution Association press ,U. S Global compact (2007) brazil wage gap, retrieved on eleventh november, 2008, available at http//74. 125. 113. 104/search?q= hoardUBYFdiNhlXYJwww. jussemper. org/Resources/Labour%2520Resources/WGC/Resources/WagegapsBra2005. pdf+wage+rate+mexico+and+brazil&hl=en&ct=clnk&cd=1&gl=ke John Sloan (1994) Public policy in Latin America A Comparative Survey, University of Pittsburgh Press, Pittsburgh Robert Gwynne (2005) industrialization and urbanization in Latin America, Routledge press, London Paul Krugman and Maurice Obstfeld (1997) external Economics Theory and Policy, Addison Wesley publishers, New York. bastard Dickens (1992) Global Shift The internationalisation of Economic Activity, McGraw Hill publishers, New York.