Mexico is now anticipating a new wave of transatlantic investment, too. A free-trade agreement with the European Union that dramatically reduces tariffs on autos and auto parts moving in either direction took effect in July. European carmakers and their suppliers are expected to take advantage of the accord to ramp up operations in Mexico. Renault, which pulled out of the country in 1986, will begin manufacturing the Scenic, a compact sport-utility vehicle, at Nissan's assembly plant in Cuernavaca in January, 2001. This will be the companies' first joint experience in manufacturing since Renault acquired operating control of the Japanese carmaker in early 1999.
Brazil is fast developing into an auto center that can match Mexico.
Lured by a market of 160 million consumers, GM, Ford, VW, and Fiat have been in Brazil for decades. But others piled in after the country conquered hyperinflation in the mid-1990s, sparking a consumer boom. Unfortunately for investors, the road in Brazil has been full of potholes. Domestic sales of cars and light trucks peaked at 1.9 million in 1997 but began to tumble as local interest rates surged in the aftermath of the 1998 Russian debt default. As a result, the industry now faces huge overcapacity.