LATIN AMERICAN SPECIAL — Foursome in trading bloc

Billed as “the next international trade opportunity,” Canadians are beginning to pay attention to the new Mercosur trading bloc — the trade initiative of Argentina, Brazil, Uruguay and Paraguay — and the four countries’ future potential within the North American Free Trade Agreement (NAFTA).

Its content is renewal, privatization, and economic and political change. Once in place, there will be no internal trade barriers, allowing free circulation of goods and services. Imports and exports have increased and the challenge Mercosur is facing is to demonstrate to the international investment community that the business risks are moderate and the opportunity is great.

The four countries are striving to have the Mercosur agreement in place and working by the end of 1994. It is an ambitious objective (NAFTA gives itself 15 years) and much has been accomplished. Each of the member countries is working on a program of privatization. Political and economic stability are the focal points.

Uruguay

The smallest country in South America, Uruguay lies between Brazil and Argentina and covers a land area of 176,215 sq. km. The capital city and seat of government and cultural activities is Montevideo, where 45% of the country’s three million people reside.

As a developed nation, the people of Uruguay enjoy free primary, secondary and university education. Primary school is compulsory. The country boasts a 95% literacy rate.

The official language of Uruguay is Spanish; however, a general knowledge of English is common in commercial and government circles. French, Portuguese and German are also spoken to some degree.

Foreign investors in Uruguay can expect the following: completely free exchange markets; absolute freedom for the flow of capital in and out of the country; legal protection of bank and tax secrecy; no personal income taxes and no agreements obliging it to give tax information to foreign governments; and legislation protection for off-shore companies.

As the third most important source of foreign revenues, the tourism industry brings 1.3 million visitors per year into Uruguay. Business and other travelers spend $350 million per year during their visits.

The textile industry is the country’s number one exporter, primarily of woolen goods, with foreign sales of $436.7 million in 1990; beef production is the second largest export, with 95% of the country’s production sent to foreign markets; 85% of Uruguay’s rice production is exported. Paraguay

A climate of business assurance has been created in Paraguay with the implementation of a series of political and economic measures. Free competition has been established and elimination of state and private monopolies is being studied.

Paraguay, with a population of 4.5 million, is a landlocked country about the size of California, situated in the heart of South America. It is bounded by Bolivia, Brazil and Argentina.

There are large areas of fertile soil as well as natural pastures for cattle raising. Abundant agricultural products include cassava, sugar cane, soy beans, corn, cotton, bananas, oranges, sweet potatoes and wheat. The major industries are cement, meat products, sugar, hides and skins, tang oil, coconut products, cotton products, soft drinks, alcoholic beverages, textiles, lumber, cigarettes and matches.

Cotton fibers were once the largest export followed by soy beans, but this is changing. The greatest proportion of these exports were once destined to Brazil with a large portion to the Netherlands.

Most imports come from Brazil and the U.S., and consist of machinery, appliances, motors and transport and accessories.

The subsoil of Paraguay is still virgin with much information unknown, although the existence of iron, copper, manganese, niobium, bauxite and radioactive minerals has been confirmed. Other resources include timber, iron ore, limestone, kaolin, gypsum and fish.

Brazil

Brazil is a country with a market economy that continues to offer excellent investment opportunities as a direct result of an ample availability of energy capacity, manpower, infrastructure, enormous geographic area and high technology products, in addition to its numerous natural resources. A privatization program began in 1990 and continues, albeit slowly. State companies in telecommunications, electricity, petroleum and mining are expected to be sold in the near future.

Brazil is the fifth largest country in the world by land mass and has the sixth largest population in the world, estimated at 154 million in 1992. It is a country with a young population — about 50% are under the age of 35. Soya and iron ore continue to be the largest exports of natural products, followed closely by coffee. Brazil is the eleventh largest vehicle manufacturer worldwide. In industrial transport materials and boilers, apparatus and mechanical instruments are the most important exports. Canada’s traditional exports to Brazil have been turbines/turbo propellers, potash, copper, zinc, wheat, live cattle and livestock genetics. However, the opening market has resulted in increased demand for value-added and manufactured products. These include newsprint/paper products, electronic data processing equipment and software, communications equipment and specialized industrial machinery.

The capital of Sao Paulo is the second largest city in the world, with 16 million inhabitants. The official language of Brazil is Portuguese. Many possess a working knowledge of either English or French.

Argentina

Argentina has developed an open-door policy to foreign capital in the past four years. The country has undergone a remarkable turnaround under the leadership of President Carlos Menem. Price stability has brought renewed investment and growth. The real GDP growth for 1993 is estimated to be 6.5% and a good deal of investment is coming from abroad.

The current situation of economic stability, fixed exchange rate and interest in a tourism sector enables investment possibilities in Argentina. Membership in Mercosur has lead to an improvement of internal market conditions. In size, Argentina is comparable to Ontario, Manitoba and Saskatchewan put together; the population is 33.6 million.

The country has tremendous mining potential, sharing the same Andes range with Chile, where so many Canadian mining companies are now investing. The Argentine government recently liberalized the mining industry. Agriculture and livestock are by far the most important sources of income in the country. Oil production in Argentina is outstanding and able to supply up to 90% of local needs. Foodstuffs and refrigerated storage are two of its most important industries. Other increasingly developing areas are textiles, iron-ore exploitation, steel production, motor vehicles and heavy industry. Exports to Canada include raw hides, skins and leather, fresh fruits, nuts and melons, prepared vegetables, fruits and nuts. The main imports from Canada are plastics and plastic articles, machinery and mechanical appliances. There is a need for oilseed products, satellite systems for

telecommunications, data transmission and television broadcasting services, telephone equipment and establishment of an efficient tourist industry. Spanish is the official language and Italian is spoken extensively. English is considered the second language and is widely spoken by the business community and in major tourist centres.

— From a recent issue of “The Canadian Ibero American Trade Report,” published in Toronto.