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NALs

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Musicqueen said:
From the Listin Diario today...it happened in Montevideo, Uruguay...

http://www.listindiario.com/cuerpos/republica/rep1a.htm

Do you guys that live in DR think this will be good for the country?

MQ
This will be benefitial more to the DR than the mercosur nations. A free trade agreement with those countries on the similar scale of the CAFTA agreement will benefit DR more so than the perpetrators of such agreements based on one simple thing called economy of scale.

For the non-economists out there, an economy of scale is the lower of cost per unit of production as production increases.

Mercosur is a large market area, ecompassing Uruguay, Argentina, Brasil, and Paraguay. The size of the Argentinian and Brasilian market is sufficient to grant the Dominican Republic more economy of scale and increase exports to Mercosur. The Uruguayan market is very small, even smaller than the DR, but since its part of the Mercosur it will simply marginally enhance the economy of scale of the DR towards that trade block.

Much how CAFTA will give bigger benefits to the DR and the other Central American countries with little gains to the United States, because there is more economy of scale in the American market due to its large size that Dominican companies would have a better chance of expanding beyond the contours of the DR and further enrich the country via higher sales volume and the taxation that follows every sale made.

Thus, yes, an agreement with Mercosur (or any market economy that is bigger than the DR) will be in the best benefit of the country and its economy.

-NAL
 
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Keith R

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Nal0whs said:
Mercosur is a large market area, ecompassing Uruguay, Argentina, and Chile which are three of the wealthiest Spanish speaking countries in the world.

NAL, you need to re-check your facts. The four MERCOSUR nations are Argentina, Brazil, Paraguay and Uruguay. Bolivia and Chile have only associate status -- a status not yet that meaningful in trade terms.

Regards,
Keith
 

Keith R

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Musicqueen said:
From the Listin Diario today...it happened in Montevideo, Uruguay...

http://www.listindiario.com/cuerpos/republica/rep1a.htm

Do you guys that live in DR think this will be good for the country?

MQ
MQ, I find it... puzzling. The DR has not yet fully digested the FTAs it negotiated with CARICOM, the Central American states and DR-CAFTA. And given the product/service profiles of MERCOSUR and the DR, I'm not sure what mutual advantage the two sides in it yet, beside political-symbolic.

I do suspect that this is one more sign (as if any more were needed, especially after the just-anounced separate accord between Peru and the US) that FLAA (ALCA) is dead, and a patchwork of bilaterals and subregional accords is all we're going to see for quite some time....
 

Keith R

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MQ, since you have Uruguayan roots, you may have have heard this one. My Argentine and Uruguayan friends joke that Brazil is the "MERCO" in MERCOSUR and the other three are the "SUR." Point being, the Brazilian market drawfs the others and the Brazilians have gotten more benefits than any single country. I think if there were true free trade negotiated between MERCOSUR and the DR, Dominican agriculture and what little industry it has left would be in serious competitive trouble from the Brazilians. My dos cheles
 

NALs

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Keith R said:
NAL, you need to re-check your facts. The four MERCOSUR nations are Argentina, Brazil, Paraguay and Uruguay. Bolivia and Chile have only associate status -- a status not yet that meaningful in trade terms.

Regards,
Keith
Brasil is also a member?! Interesting.

If so, then its even better since Brasil is the largest economy in South America, even more economy of scale than I initially thought!

-NAL
 

NALs

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Keith R said:
MQ, since you have Uruguayan roots, you may have have heard this one. My Argentine and Uruguayan friends joke that Brazil is the "MERCO" in MERCOSUR and the other three are the "SUR." Point being, the Brazilian market drawfs the others and the Brazilians have gotten more benefits than any single country. I think if there were true free trade negotiated between MERCOSUR and the DR, Dominican agriculture and what little industry it has left would be in serious competitive trouble from the Brazilians. My dos cheles
Actually Keith,

The biggest benefits has gone to Argentina and Uruguay as oppose to Brasil.

Why?

The economy of Brasil is much bigger than the economy of Argentina and gigantic compared to the economy of Uruguay. What does this means?

Uruguayan and Argentinian companies increased their market area in a much greater fashion than did Brasilian companies.

In other words, 3 million uruguayans and 20 odd Argentinians being opened to Brasilian enterprises is not as benefitial as 90 million Brasilians being opened to uruguayans and argentinian enterprises.

These free trade agreements always benefit more the smaller nation than the greater nation, due to economic of scale.

The more economy of scale available, the better the production and the more efficient it becomes to produce anything that has a lowering marginal cost as production increases!

-NAL
 

NALs

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Keith R said:
Hmmm, well, Nal, tell that to the Argentine and Uruguyuan businessmen. They're not yet as convinced as you are.
It's not about being convinced.

Enterprises in smaller nations gain much more from trade blocks and agreements than does enterprises in bigger nations by the sheer nature of economy of scale.

There are some industry that the DR cannot do because we have no economy of scale in such industry, such as car manufacturing. Anyone who attempts to form a Dominican car company will not survive because our market is not big enough to allow any lowering of costs as production goes up in such industry.

However, if (and this is occuring) the hypothetical DR car company is now able to sell its automotives to larger markets with no duty imposed, low transport costs, etc via a trade agreement between the two markets, then it becomes much more sensible and economically viable to create such company.

Of course, this is a highly simplistic example and, of course, there are other factors that would influence the profitability of a Dominican car company. In fact, it would be very hard to initiate a car company is just about any price range due to better efficiency in production from Japanese and to a certain extent, Korean manufacturers. Not to mention that the global automotive industry is extremely competitive and you never want to enter an industry that has too much competition due to issues with market share and the lower probability of making good profits if any at all. Unless, of course, the automotives being offered are automobiles that drive on solar energy alone, while reaching the average speed, torque power, etc of similar gas based or hybrid models, in such case then it is sensible to enter the car industry since the product would be highly popular in energy strapped countries bleeding due to high energy costs and thankfully, most high consumption and wealthy economies are in this category.

However, putting all of that aside and assuming easy market entry and the sort, economy of scale would allow more benefit to the Dominican car company that it would offer to the foreign car company that would be able to expand much less into the much smaller Dominican market.

With the case of the Argentinian and Uruguayan, the same should have occured, albeit, I am aware that Argentina and Uruguay (Argentina until recently) had/have respectively, high labor costs compared to Brasil. Uruguay is the only one that has high labor costs compared to Brasil at the moment, Argentina, thanks to the crisis and devaluation of currency now has a labor force with a comparable cost to that of Brasil and Argentinian companies should have benefited from any free trade agreement between much smaller Argentina and much greater Brasil.

I would like to know in what sector these enterprises which did not "do well" are located in? What companies were these exactly? Are the income statements, balance sheet, etc readily available for the general public to view and where?

-NAL
 

Texas Bill

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NalOws, by what level of reasoning do you use---

the "economy of scale" reference as pertains to the DR.
That reference in economics pertains to an "Industrialized" economy and not to an agrarian economy such as exists in the DR with reference to exports.
I find it incongruous that the DR could compete with any industrialized economy since, at present, virtually all it's exports consist of agricultural products and those confined to tobaco, sugar, bananas, melons and certain other agricultural products of an "organicaly grown" nature. There is, of course, the export of textile products. But I'm not sure just how long that will last with China taking such a large cut into the US market.
Until and if the DR becomes intensly industrialized, this theoritical "economy of scale" is ineffective and useless as an arguing point.
Let's face it, the DR is and will be for many years to come, what is refered to as a "User Nation". I cannot forsee any movement from that stamp in the international scenario. To embrace any other symbolism is futile at this point in history.
I'm not trying to be sarcastic, just practical as to DR's future in the world economy.

Texas Bill
 

NALs

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Texas Bill said:
the "economy of scale" reference as pertains to the DR.
That reference in economics pertains to an "Industrialized" economy and not to an agrarian economy such as exists in the DR with reference to exports.
I find it incongruous that the DR could compete with any industrialized economy since, at present, virtually all it's exports consist of agricultural products and those confined to tobaco, sugar, bananas, melons and certain other agricultural products of an "organicaly grown" nature. There is, of course, the export of textile products. But I'm not sure just how long that will last with China taking such a large cut into the US market.
Until and if the DR becomes intensly industrialized, this theoritical "economy of scale" is ineffective and useless as an arguing point.
Let's face it, the DR is and will be for many years to come, what is refered to as a "User Nation". I cannot forsee any movement from that stamp in the international scenario. To embrace any other symbolism is futile at this point in history.
I'm not trying to be sarcastic, just practical as to DR's future in the world economy.

Texas Bill
TB, DR is not an agrarian economy. Services and industry form a bigger share of the national GDP than does agriculture, it's not the 1960s Dominicana anymore!

And, even in agriculture, economies of scale also applies, depending on the situation.

In order to make this happen, the yields on a per hectare basis would have to be increased, but economies of scale can be achieved in agriculture as well.

However, Mexican subsistence farmers have been one of the biggest loosers in the NAFTA agreement. Cheaper agricultural products from the United States have flooded the Mexican market. However, to be fair, much of the comparative advantage US farmers have over Mexican farmers is due to the wonderful subsidies they receive from their goverment, often times knowing they are undercutting farmers of developing nations.

In fact, the one thing most developing nations have a favorable comparative advantage, absolute advantage, and could develop very good economies of scale via exports is in agriculture, but much of this is not done due to subsidies in US and Europe.

These subsidies also lead to over production, which is dumped on international markets depressing global prices of these commodities to such low prices that many developing countries are not able to take advantage of this, otherwise, profitable wealth machine they got.

This is certainly the case between west African nations that grow very good cotton, but are being undercut by American cotton farmers due to the subsidies. BTW, the average net worth of American cotton farmers is over $1 million, try comparing that to the average wealth of those West Africans who don't have a job because their only hope for survival is not profitable, though it could be.

The recent WTO talks were meant to destroy those subsidies, in order to allow free market to work and give developing countries a chance to progress via the one thing most developing countries know how to do best, but it appears that these talks are falling apart.

Having said all of that, there are Dominican enterprises that can take advantage of greater economies of scale due to freer trade with larger markets and thus, those companies (non-agricultural) would increase their exports, which in time would surpase those agricultural exports that lead today.

Remember, economies scale is the lower of cost on a per unit basis as production increases. Production can only be increased if there is a market big enough to cause such economies of scale.

Both, Canada and Mexico benefits tremendously (more than they have lost) due to the economies of scale the US market offers, due to its size. Additionally, American companies are benefitting from the new economies of scale being present in emerging market of China and the large middle class of India.

-NAL
 

Musicqueen

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Funny!

jruane44:

Haven't been able to talk to him about this yet...

Wait till I come back from being with him for 2 WHOLE WEEKS...only 10 more days!!! :classic:

MQ