Political, Economic, and Financial Risks: Mexico and South Africa Automobile Industry

Political, economic, and financial risks in Mexico and South Africa

International automotive sector is increased associated to relocation and global mergers in terms of the emerging developing economies which is considered to be in grips of international price-wars. The entire industry is liable to imperfection in terms of competition which has led to great capacity, many rivals, and the redundancy not excluding an overlap. Furthermore, the entire industry is highly concerned considering the demand based on style, comfort, and safety, focusing on manufacturing aptitude and labor relations. In regard to this, the main objective of this paper is evaluating the political, economic, and financial risks that might face by two countries. Subsequently, the paper will include necessary stimulus provided by the two countries being evaluated. In addition to this, the currency exchange rate alongside the future trajectory of the prospected exchange rate will be evaluated (Finan et al., 2012). Lastly, different forms of foreign investment strategies alongside the disparities that exist in the automobile industry for the selected countries will be analyzed.

Political, economic, and financial risks in Mexico and South Africa

Mexico and South Africa’s political, economic and financial risks have drastically changes based on various economic reforms that have been imposed. The policy implementation systems for the two nations and other potential elements assess the countries development, specifically Mexico’s automobile sector. The policy making frameworks, that were established in 1949 comprises of five essential segments for instance military, citizens, government, communists party, and legislations that creates the entire policy making framework (Friedlaender; Winston; Kung, 2013). Initially, other potential regulations have been published based on the core committee name for each communist party, central military, and the state council which entirely formulate the policy making group. Economic reforms have led to the establishment of political reforms within the automobile sector (Pinolopi & Verboven, 2018).

For Mexico, driving these motor vehicles is far much dangerous, but many people think that the use of automobile vehicles are much safer, although the whole truth is that Mexican people are likely to have vehicles than being engaged in airplane crashes. Due to this, the government within the entire world might enforce consistent and rigid safety considerations that govern the production of the automobile vehicles hence providing unique build necessities like seatbelts so that they can ascertain passenger’s safety though it highly impacts people that are behind the wheel. In Mexico, it’s much harder importing automobile parts and also maintaining the entire business (John & Olga, 2013).

Automotive stimulus

Whereas in South Africa the automotive and vehicle segments have exported an entire growth in 2020 hence remaining to be functional based on performance and direction within the global marketplace, whilst the imports other new vehicles into South Africa are highly associated in strengthening the movements and economy in terms of exchange of Rand.  With the minimal political, economic, and financial risks different prospects might dampen for the importation of vehicles through OEM components for each import are considered to initiate growth with an increased rate of vehicle production for assisting increased exports of vehicles.

Automotive stimulus

The exchange rates and automotive stimulus impacts South Africa and Mexico auto competitiveness will estimate the competitive nature and exchange rates of each country. In Mexico the series of Mexican currency are arguably diverse which measures the exchange rate pressures in the US compared to bilateral exchange that have been employed in South Africa (George; Marchand; Albertine, 2016).

Currency exchange rates Regime and type of foreign investment strategies

Each aftermarket segments and imports substantially grow in line with every growing vehicle parks within the entire nation. Based on the significant upward momentum in terms of exports, liable to international impact of Covid-19 aside from weak domestic markets, hence it is signified that every automotive industry in South Africa exhibits a positive trade balance in 2021. Mexico and South Africa are potential examples of markets through combination of trade and regional liberalization. These nations consider FDI as developing or rather modernizing its domestic automotive sector.

Expected future trajectory

The future trajectory for the international economy, alongside foreign direct investment in South Africa and Mexico is known to be significant in terms of economic development for the nations similarly for South Africa and Mexico. The anticipated trajectory of FDI so the two nations have highly urged in opening of its economies for global capital, whereas the automotive sector is considered to be potential forefront for FDI compelled enhancement strategies whereby the two nations have taken over the automotive sector based on heavy capital investment, hence restructuring  and involving it with different networks all around.  

Difference in automobile industry

The Mexican automotive market comprises of concentrated and complex global network that incorporates cooperatives, joint ventures, assembly sites, and productions. Similar to South Africa, over capacity, rigid rivalry and technological investment are some of the potential components. The automobile industry within the country is highly driven which is located at the heart of mexico, but the increasing production is also noted in other neighboring nations (Kwoka, 2014). On the other hand, South African market has been compelled by the Mexican FDI. Aside from state sponsored programs observed, the country has highly tried in establishing indigenous auto-industry based.

Reference

Finan, William F. & Rappoport, Paul N (2012); “The international trade in automobiles: Explaining short-run changes in the import share of the United States market, 1979- 2012”, Journal of Policy Modeling, Volume 4, Issue 1, Pages 99-109

Friedlaender Ann F.; Clifford Winston; Kung Wang, (2013); Costs, Technology, and Productivity in the U.S. Automobile Industry, The Bell Journal of Economics, Vol. 14, No. 1. (Spring, 2013), pp. 1-20

Goldberg Pinolopi K & Frank Verboven (2018); “The evolution of Price Dispersion in the European Market, NBER Working Paper, 6818

Hoffer George; James Marchand; John Albertine; (2016), Pricing in the Automobile Industry: A Simple Econometric Model Southern Economic Journal, Vol. 43, No. 1. Jul., pp. 948-951

Humphrey John & Memedovic Olga (2013); “The Global Automotive Industry Value Chain: What Prospects For Upgrading By Developing Countries” By, UNIDO,

John E. Kwoka, Jr; (2014), “Market Power and Market Change in the U.S. Automobile Industry’, The Journal of Industrial Economics, Vol. 32, No. 4. June. pp. 509-522