Foreign Direct Investment in Latin America and the Caribbean 2017

164 Chapter III Economic Commission for Latin America and the Caribbean (ECLAC)
Figure III.10 (concluded)
C. Trade balance
75
50
25
0
-25
-50
-75
-100
-125
-150
-175
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
United States
Canada
Mexico
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations Commodity Trade
Statistics Database (COMTRADE).
Close to 50% of exports and imports of automotive products in North America
are related to light vehicles (i.e. passenger vehicles and light commercial vehicles)
(see figure III.11). The United States is the main destination market, while Canada
and Mexico are the first and fourth largest markets of origin, respectively. Autoparts
and components for the automotive industry are manufactured and assembled in all
three NAFTA countries, and these parts can cross the borders of member countries
up to eight times before they are finally assembled in one of the three (Wilson, 2017).
As a result of this deep commercial and manufacturing integration, up to 40% of the
content of a vehicle manufactured in Mexico could have been originally made in the
United States (CAR, 2016).
The relocation of auto manufacturing activities has also led to a geographical
reorganization of the supply chain. Manufacturers have encouraged suppliers to
locate as close as possible to their assembly plants in order to optimize response
times, mitigate logistics costs and manage risk. Again, Mexico has benefited from the
arrival of a great number of world-class suppliers, who in turn have enjoyed greater
proximity to their end-clients, lower costs and a favourable financial and commercial
environment (see figure III.5). The local production chain has thus been strengthened,
as has Mexican value added to vehicles manufactured in the country. Moreover, many
suppliers have established production capacities that exceed local demand and have
therefore channelled their surpluses to export markets, which in turn has increased
the intense cross-border trade of automotive parts and components and strengthened
Mexico’s position in the North American motor vehicle sector.
Between 2006 and 2015, suppliers invested US$ 48.4 billion in North America,
through which they generated the capacity required to meet the needs of the expanding
production of new vehicles. Of the total invested, US$ 44.4 billion were deployed in
the construction and expansion of plants in the United States, which was 13 times
more than the amount invested in Mexico (US$ 3.4 billion), which in turn was markedly
above the investments made in Canada (US$ 580 million) (Sedgwick, 2016). In short,
automotive production in North America has moved from Canada and the mid-west of
the United States to the south-east of the United States and to Mexico.