I. INTRODUCTION Argentina lives in a democracy since 1986. Before this
year lived it under a military regime. In the nineties under the presidency of
Menem the country experienced a great increase in the liberalization of trade.
Argentina has a free market economic system. Due to the recent privatization
program, the State now has a very limited role in the economy. According to
the Competitiveness Report of the World Economic Forum Argentina is
classified as one of the most open, least protectionist countries in the world.
Its currency is convertible to the US dollars and there is total freedom for
moving capital internationally. Argentina has conducted one of the most
intensive privatization programs in the world. The telephone company,
airlines, most railroads, electric power production companies (including
hydroelectric power plants), the Argentine oil company YPF (bought by the
Spanish company Repsol) steel mills, ports, TV stations and most public
services were transferred recently to the private sector. Consistent with
Fundacion Invertir the combined value of privatized firms amounts more to
more than US$ 30 billions. Many foreign firms have participated in this
large-scale privatization program. Foreign investors do not need to seek any
kind of prior approval and are free to repatriate full amount of their capital
and earnings any time. Foreign and domestic companies are treated equally.
Under the law, they have access to all economic sectors and are eligible for
incentive program and state procurement. II. TRADE PATTERN It is hard
to state the type of trade that exists between Argentina and Brazil in the
automobile industry because both countries import and export cars of the
same brand and very similar models. Volkswagen produces some of its
model of cars in Argentina and some others model in Brazil. The reason for
this is to achieve economies of scale; each country specializes in a certain
model of car, by doing so they reduce the cost of each additional unit.
Another reason for specialization of production in each country is that it might
be cheaper to produce a certain model in either Argentina or Brazil. Several
companies as Volkswagen have invested in production facilities in Mercosur.
Additionally, joint ventures between local and foreign parts manufacturers
have improved quality. A report on Argentina auto parts/services announced
that local production in Argentina was estimated at $1.9 billion in 1997. From
1996 to 1997 the import market for automobile parts and accessories grew
by 30 percent to $2.2 billion. Imports from Brazil represent 35 percent of the
local import market. The gains in imports with exports from Brazil boost
employment in Argentina by a 30 percent and bilateral trade with Brazil as
well as nine fold growth in investments. (States-USA). See AUTO
PARTS/SERVECE table in appendix. In the period of July 1997-June 1998
Argentina exported wheat to the following countries: Brazil, Turkey, Egypt,