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President Donald Trump signs the USMCA that he had initiated. Trump is flanked by then-Mexican President Enrique Peña Nieto (left) and Canadian Prime Minister Justin Trudeau (right). (Photo: US Government)
The Hotel Ibis Cartagena Marbella in Colombian convention and resort city Cartagena. Ibis is the brand with most hotel rooms in South and Central America. (Photo: Ibis)
In Latin America, government corruption is seen as a big problem by at least 85 percent of the population in Costa Rica and a whopping 96 percent in Peru, according to Transparency International. Click to enlarge.
Wednesday, September 25, 2019
Trade Talk

Business Leaders & USMCA: Lukewarm Outlook


USMCA, top hotel chains in Central & South America, corruption gets worse.

 

BY LATINVEX STAFF

 

Ten months after the signing of the US Mexico Canada Agreement on free trade (USMCA), business leaders in the US and Canada are lukewarm on the outlook for their companies, while Mexican business leaders are more upbeat, according to a new survey.

 

While only 52 percent of US business leaders and 55 percent of Canadian business leaders expected their companies to trade more internationally within five years, a whopping 76 percent of Mexican business leaders believed so.

 

“Given the frequently strained and angry diplomatic relations between the three countries – and the unsettling effects of the US-China trade war – we see this as encouraging,” TMF Group says in a report on the survey results.

 

TMF Group is a Netherlands-based based professional services firm which used US-based Wakefield Research to conduct an online poll among 1,500 participants between August 23 and September 3. All were full-time business professionals with purchasing responsibilities, drawn equally from the three USMCA countries

 

In general, Mexican business leaders are far more upbeat about everything from USMCA passage to the economic and investment and trade outlook than their US and Canadian counterparts.

 

The USMCA, signed by the three national leaders on November 30, 2018, is a flagship initiative for US President Donald Trump. During his 2016 election campaign he was a frequent and forceful critic of the existing North American Free Trade Agreement (NAFTA), which was implemented in January 1994 and resulted in trade jumping fourfold between the US, Canada and Mexico to $1.1 trillion.

 

NAFTA created the world’s most comprehensive free trade agreement covering the largest single market and the first between developed nations and an emerging economy. “High levels of economic integration and seamless crossborder supply chains have become the norm,” TMF says.

 

“NAFTA has been central to the modernization of the Mexican economy,” the survey report says. “Talk of scrapping it altogether has been unsettling for Mexican citizens and businesses. Any replacement could easily have been much worse.”

 

Despite Trump’s criticism of NAFTA and his own version, US and Canadian business leaders don’t see much difference.

 

Slightly more than a third of Canadian and a quarter of US respondents expect USMCA to make no difference to incoming trade and investment, while only about half of respondents expect to see stronger incoming trade and investment activity. About a quarter of US and Canadian respondents expect no general effect on the economy (good or bad) over the next two years.

 

“Political uncertainty aside, big gains from USMCA were always unlikely,” TMF says, pointing to projections from the US International Trade Commission of a 0.35 percent ($68.2 billion) increase in real GDP and 176,000 extra US jobs (0.12 percent). “NAFTA has already eliminated most tariffs in North America. The removal of non-tariff barriers offers more marginal gains.”

 

However, the introduction of a new ‘sunset’ clause is a substantial cause of uncertainty. The parties must reach unanimous agreement during a complex process of frequent reviews or else USMCA will expire automatically after 16 years. This was a significant sticking point (along with the tougher local content rules) during negotiations, with Canada and Mexico strongly opposed to an original US proposal of just five years, TMF points out.

 

Another major difference between NAFTA and USMCA is that the rate of vehicle components made in the region goes from 62.5 percent to 75 percent.

 

USMCA needs to be approved by the House of Representatives where the Democrat majority has concerns about employment rights, enforcement, intellectual property and environmental protections.

 

“Democrats have little incentive to hand the president a big political win so close to the 2020 election. It could be 2021 before US ratification is completed,” the report says.

 

The survey shows that only 56 percent of US business leaders expected USMCA to be ratified compared with 60 percent in Canada and 88 percent in Mexico.

 

In Canada, ratification has been delayed by the planned federal election scheduled for October 21, although there is broad support for USMCA.  Mexico’s Senate approved the USMCA in June.

 

ACCOR, MARRIOTT LEAD IN CENTRAL AND SOUTH AMERICA

 

French hotel group Accor accounts for the largest hotel room presence in the Central/South America region, followed by Marriott International, according to census data from US-based hospitality research firm STR released at the SAHIC Latin America Hotel Tourism & Investment Conference in Quito, Ecuador this month.

 

Accor’s portfolio covered 58,937 rooms as of June 30, 2019, while Marriott accounted for 22,709 rooms. The companies also lead the development pipeline with 19,877 and 8,389 rooms under contract, respectively. Under contract covers the in construction, final planning and planning phases of the pipeline.

 

The three largest brands in the region all fall under the Accor umbrella: Ibis (22,715 rooms), Ibis Budget (9,553 rooms) and Mercure (8,098 rooms).

 

“The CSA landscape is dominated by independent properties, but we have seen a great deal of new brands entering the marketplace as the region is increasingly viewed by major companies as an opportunity to grow their global footprint,” Patricia Boo, STR’s area director for Central/South America, said in a statement. “Our database shows that over the last 10 years, the number of branded properties in the region has increased 7 percent. Economy and midscale brands, specifically, dominate not only existing supply, but also the development pipeline.”

 

TOP 10 HOTEL FIRMS
Ranked by room count in Central/South America region.

 

Parent Company

Parent Co. Rooms

Brand

Brand Rooms

Accor

58,937

Ibis

22,715

Marriott International

22,709

Ibis Budget

9,553

Wyndham Hotels & Resorts

17,878

Mercure

8,098

InterContinental Hotels Group

14,736

Sheraton

6,580

Choice Hotels International

12,326

Novotel

5,855

Hilton

11,021

Intercity

5,535

Radisson Hotel Group

6,145

Ibis Styles

5,257

IntercityHotel

5,535

Wyndham

5,004

Minor International

5,061

Holiday Inn by IHG

4,997

Best Western International

4,636

Radisson

4,576

Source: STR 500

 

 

CORRUPTION GETTING WORSE

 

An overwhelming majority of Latin Americans think their governments are not doing enough to tackle corruption and that corruption levels have increased in the past 12 months across the region, according to the largest ever survey on corruption in the region from Germany-based Transparency International.

 

The Global Corruption Barometer (GCB) surveyed more than 17,000 citizens in 18 countries across the region between January and March 2019.

 

The results show that more than half of all citizens think corruption is getting worse in their country and that their government is doing a bad job at tackling it. Venezuela is the worst (87 percent say it got worse the past 12 months), followed by the Dominican Republic (66 percent) and Peru (65 percent). Mexico is the best, with only 44 percent believing corruption is getting worse.

 

Participación Ciudadana, Transparency International’s chapter in the Dominican Republic, points to the fact that more than 300 cases of corruption between 1983 and 2013 were followed by only one conviction.

 

“The Lava Jato scandal is a powerful example of such impunity,” Transparency says, referring to the Car Wash probe in Brazil that unveiled the world’s largest corruption scandal involving both state oil company Petrobras and construction giant Odebrecht.

 

Odebrecht confessed to paying approximately $92 million in bribes in the Dominican Republic alone, and dedicated an entire department to managing bribes there and in 11 other countries. The company also admitted to inflating the value of several construction contracts, many of which were two to three times higher than the original quotes.

 

“Despite these admissions, the government reached an agreement with Odebrecht that allowed the company to continue operating in the Dominican Republic in exchange for a fine,” Transparency International says. “The prosecution argued a case that implicated only six people and excluded some of the largest construction contracts. To date, no one has been held accountable for Lava Jato in the Dominican Republic. The government has yet to question those convicted of the scandal in Brazil or investigate campaign financing from Odebrecht.”

 

When asked whether corruption in government is a problem in their country, an overwhelming majority of people in Latin America (85 per cent) said corruption is a big problem. Only 13 percent said corruption is no problem or a small problem.

 

The GCB found more than one in five people who accessed public services, such as water and electricity, paid a bribe in the preceding year. This equates to approximately 56 million citizens in the 18 countries surveyed.

 


© Copyright Latinvex


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