Short review of the economic and trade relationships between Hungary and Latin America (1990-2004)
- 11 minutos de lectura
Las relaciones entre Europa y América Latina tienen historia secular. Después de la segunda guerra mundial estas relaciones cambiaron de modo substancial, especialmente durante los últimos veinte años que se denominó como el Nuevo Orden Mundial (a partir de 1989). Las integraciones económicas que surgieron durante este periodo también brindaron un terreno amplio de acciones tanto para América Latina, como para los miembros de la UE, y últimamente para los países de Europa Central y Oriental. En las siguientes páginas presentamos una breve introducción y análisis sobre las relaciones económicas y comerciales entre Hungría y el subcontinente (1990 -2004).
The relationships between Europe and Latin America have secular history. Although after the Second World War these relations substantially changed, especially in the last twenty years, from the beginning of the so-called New World Order (1989 –). During this period economic integration presented a wide range of possibilities mutually for Latin America as well as the member states of the EU, most recently for Central and East – European countries too. In this reflection we are revising and analyzing the Hungarian trade and economic chances in the subcontinent (between 1990-2004).
The relevance of Latin America
In spite of the differences and heterogeneity of the historical and other conditions (different languages, conquerors, aborigines etc.) of the region, the part below the Rio Bravo of the American Continent was denominated like “Latin – America” by Napoleon III. according to his foreign politics’ interest in the middle of the XVIII. Centuries. (Gissi, 1987) This name gives the impression of the homogeneity of the territory. Moreover, in general, the more than 20 million square meters of Latin America is treated like a coherent cultural landscape. What’s more, in different forums, like UNO, WTO, World statistics books etc. the region is mentioned also like connected territory, which has about 600 million populations (2009).
Despite of the fact of the cultural homogeneity of Latin America (Huntington, 1997), it is well known that in term of economy the region has a wide range of diversity. One hand, Mexico is one of the most important countries in Latin America of economic and trade aspects. It takes part of the Latin culture, but in the same time participating in the NAFTA (North American Free Trade Agreement) from 1994, one of the central economic regions of the world. On the other side of the continent, MERCOSUR (Common Market established in 1991, Treaty of Asunción) with the leadership of Brazil is the other economic pole of Latin America. The other members of MERCOSUR are Argentina, Uruguay, Paraguay, Venezuela and the associated members are the Andes regions’ countries, moreover Mexico as an observer country.
On the other hand, the CAN (Andean Community) has a defining role in the economic development of the Andean countries of South America too, in spite of the egress of Venezuela in 2006. The member states of the union are Colombia, Ecuador, Peru and Bolivia, and from the date of the subscription of the “Letter of Carthagena” (the foundation document in 1969) Chile also leaved the integration. In connection with the region we have to mention the G 3 (“Group of the Free”) a trade agreement between Colombia, Venezuela and Mexico. In connection to Central America and the Caribbean region are two important common markets: MCCA (1960) and the CARICOM (1962), the first is integrated by the Central American countries, the second by most of the Caribbean islands except Cuba.
Nevertheless, the above mentioned integration tendency in the continent is not capable to take away the segregations between sub regions, countries and landscapes. There are deep gaps between countries (development level, infrastructure, size, population etc.) whether they are in the same integration or outside of it. For instance, Brazil is the eighth most significant economy of the world with more than 180 million inhabitants, but its neighbor country Uruguay, of the same economic group (MERCOSUR), has much more less importance than the gigantic Brazil. The differences of life conditions are more significant in Central America or in the Caribbean region in comparison with other regions.
In spite of the economic diversity of the continent, altogether Latin American countries are producing 1.7 billion USD GDP, and the volume of imports in 2004 exceeded 460 thousand million USD. From that, the role of Latin America in the global international system is still significant.
Changing perspective of Latin American economy in the last twenty years
At the collapse of the dual world system, in Latin- America can observe the beginning of economic and political changes too, as well as in Central and East – Europe. One hand, these changes had a democratization process in several Latin – American countries (in Brazil from 1985, in Colombia from the early ‘90, than Argentina, Mexico, Chile etc.). On the other hand, in connection to this process in these societies were realized privatization, liberalization and deregulation of trade etc. In other terms the economic politics has changed of the “substitution of imports” for “export orientations”, at least, tried to do that in this way at various countries in the southern hemisphere of the American Continent, as well as Central and East Europe. (Rosas, 2001; Soros, 1999) In consequence of these changes during the ‘90 the inflation decreased in several Latin American countries in the region, and the GDP, and the international trade gradually increased.
The Mexican financial crises in 1994-1995, the so-called “tequila effect” had its influence all over Latin American countries (Brazil, Argentina etc.). It was the end of the 90’s economic growth of the region witch started again in 2003 after eight years of depression. From this year, after an international inversion of available funds in the Mexican economy was reactivated. Gradually, from 2004 in the five most developed Latin American countries the GDP grew was 5.5% per year, and also the export grew substantially. The prices stabilized and the state budget had a relatively positive balance.
If we consider the importance of Brazilian and Mexican economy of the world (eighth and ninth largest economies respectively) the advances of the Latin American economic development was very important not only for the region, but for the whole economic system of the planet.
Relationship between EU – Latin America
In consideration of the above mentioned characteristics of the Latin American subcontinent (referring especially economic blocs) this region is treated by the EU like particularly seeded territory. Latin America is considered like the “extension of Europe”, not only by the historical and cultural background of the relations between the two region (migrations of the European countries, like Spain, Portugal, France, Italy, Hungary, Poland etc.), but also by the tendency of the actually evolving trade and economic relationships. Breakthrough in the development of the relations occurred in the midst of the 80’, then the EEC changed its “bilateral politics” to “sub – regional community politics”. All this happened because of the previous impact of the trade relations realized with the CAN and the San José Group. From that time the bilateral relations getting passed to a multilateral dialogue in political, economic and trade level with the regional economic groups. (Rodríguez, Valderrama, 1999).
Actually, the relations between EU – Latin America has tree pillars, one hand, economic cooperation (in a sense of economy), political dialogue (every two years EU – Latin America summits, Rio Group – EU summits from 1986 and the San José dialogue with Central America) and reinforcement of the trade relations.
The confirmations of the economic relations, originated in the 60’ are reinforced from the adhesion of Portugal and Spain in the EU (1986).
On the other hand, there are two important levels of the relations of an arrangement aspect. The first one is bi-regional level, in the two years’ summits. The second in sub-regional level organizing around specific topics with the MERCOSUR, the CAN and the MCCA. Moreover, with other countries who are out of the mentioned groups, like Chile and Mexico, the EU steel continuing bilateral contact.
Relations (diplomatic, trade and economic) between Hungary and Latin America in the last decades.
Hungary, like newly integrated country to the EU, actually has a new frame for its relations with Latin America, but in fact, the manner of the communication with the southern part of the western hemisphere is steel based on the heritage of the past.
First of all, Hungary established his fore relations in Latin America with Argentina in the 1870’. At the very start of the twentieth Century, after a long silence, Hungary gradually had several diplomatic partners in the region. Although during the communism era, the bilateral relations with Latin American countries were flourished in the ‘60 – ‘70. At that time, there were existing relations almost with all Latin American countries, especial attention to the diplomacy and trade. (Molnár, 2001).
These relations were determined by tow important characteristics. One hand, there were dictatorships in both area in a lot of Latin American countries as well as in Hungary witch was a similarity between them and in this manner they could understand each other easily (for instant, through the centralization in general one represented was denominate to materialize the diplomatic relations). On the other hand, the Latin American countries could not pay the high technology of that time produced by the most developed countries of the world. So they bought the Hungarian product, witch had a relatively good quality, but in accessible price for them.
In this way, at that time Hungary could sell with profit to Latin American market a wide range of products, like buses (Ikarusz), medicament, medicament stock, machinery, surgical instruments (MEDICOR), educational instruments, energetic and agricultural instruments etc. So, that period is denominated like the golden age of the Latin American – Hungarian relationships, especial attention to the 5-6% export participation in Hungarian trade (nowadays hardly reach 1% the export to Latin American countries).
The reason of this decline is the changing economic structure that characterized both regions Latin America and Central Europe (Hungary). Though, the balance of the Hungarian import up to 2003 more or less showed a continuity growth: in 1990 more than 200 million USD, and in 2003 more than 500 million USD, in spite of the drop in 2000 and 2001. But in 2004 the import index returned to the 1990th level while the export increased over 250 million USD. (Scherczer, 2003).
The perspectives of trade and economic relations of Hungary with the region
The external relations of Hungary after the fall of communist system are determined by the so-called “economic diplomacy”, which means a fundamental role of trade relations with the rest of the world. In this sense the external relations with Latin America, are also structured by the importance of economic issues, while the traditional trade relations with Latin America has changed only its volume but not in the structure of the products. In the new system and new challenges to Hungary in his external relations according to the foreign policy of the EU, Latin America is a priority region.
In Latin America as well as in Hungary during the last twenty years appeared a new participant of the market and economic field: the multinational firms which turned into protagonist of the international economic system. What’s more, actually, they are determinant in 80-90% in the Hungarian – Latin American relations too. In this way the previous “state diplomacy and relations” are in course of change.
By the influence of the multinational firms’ interest the Hungarian export to Latin America has changed instead of the traditional products presences: machinery and manufactured products are more than 80% of the total export.
However, the Hungarian trade relations (90% of total trade) in Latin America are focused on four countries. Brazil, Mexico, Argentina and Chile are the main partners of Hungary in the region (the rest of trade relations, 10% is distributed between the other countries).
I. Table: Export-import in millions of US $ between
Hungary and Latin America from 1990 until 2004.
Sources: Búzás (2005), MTA.
In 2004, the most important Hungary’s partner in Latin America was Brazil with a total trade balance of more than 200 million USD. From the Brazilian part, there were traditional export products, like coffee, orange, tobacco, iron etc. From the Hungarian part, there were exports by traditional state firms, like Agroinvest, Medicor and Metrimpex, but here are also some other smaller Hungarian enterprises in Brazil, like BG Market (wine trade company) Medimpex (medicaments). In Hungary invested several Hungarian originated Brazilian businessmen and in 1990 was founded the Brazilian Hungarian Trade and Industry Chamber for the better communication between the interested organization.
Mexico is the second most important market for Hungary after Brazil, and is in the first 30 most important trade partner in the world. Some years ago, the trade turnover hardly exceeded the 5 million USD. After the political and economic changes in both countries, the trade turnover raised over 100 million USD per year. In 2004 the Hungarian export was 120 million USD, the import 57.3 million USD, witch shows the positive balance of the exchange for Hungary. The most significant influence on these issues comes from the IBM company (computer technique) and other car factories, like GM, Opel.
In relation to Argentina, during the financial crises in the last 90’s, the trade relations with Hungary got down stunningly. The import was 16.9 million USD, and the export 9.3 million USD in 2004. There are different problems in the relations. One hand, there is a lack of knowledge of possibly trade partners, on the other hand there are a fear of the instable financial situation of the country. A special problem is the product structure: the Argentinean and Hungarian products are of the same area, which means a concurrence more then complementarities among them.
With Chile, the bilateral relations are limited, but in course of evolution. In 2004 the export had an amount of 5.8 million USD, while the import 1.6 million USD. Now days the most part of the Hungarian export to Chile is based on machinery (61%) and other manufactured products (bulbs, lighting technology, herbicides, plastics, semiconductors etc.). The imports based on deep-frozen fish and fruits.
The future of the trade relations could develop toward products, like wine, textiles, machinery, paper industry, cosmetics and a new field of the tourism.
Further possibilities and conclusions
Without doubt, Hungary like member state of the EU has a wide range of possibilities to extend his relations in different levels with Latin America. Within the EU’s framework, like ministerial and other meeting between Latin America – EU, Hungary has to looking for its own way in the trade relations with the subcontinent’s countries. These attitudes could illustrate for instance with the EU – MERCOSUR relations, where officially organized multilateral summits are the forums for the political, economic and trade dialogues. However, in spite of the multilateral meeting, bilateral dialogues resolve the specific and most important questions between the represents of the member states, even in the same brakes of the multilateral meeting (Molnár, 2003).
Of course, the experiences and programs of the existing EU – Latin American relations could offer several possibilities to developing Hungary’s relations with the subcontinent. For instance, there are programs, like allinvert, atlas, ulure, alis, alfa etc. for small and middle companies with the goal of the step up of competitiveness in the Latin-American countries. These possibilities are opened to all EU firms.
On the other hand, in several Hungarian forums (Universities, MTA, Ministry of Foreign Affaires etc.) drowned up the object to follow the construction of relations with Latin America in different levels like diplomacy, politics, trade and economy too. According to the framework of the EU, Hungary could return to the region with traditional products like machinery, electricity meters, medicaments etc., but could introduce new products too, like biotechnology, informatics, spare parts, foods (wines, champagnes) and services. But it is important to remark the possibilities presented by the above- mentioned multinational firms too, like the Mexican case shows (IBM).
Moreover, should be necessary to apply other marketing methods for the trade relations, like the development of logistic centers, for the reductions of costs, for example, the Argentinean logistic centers in the EU, which serves in the provision of different countries. Other useful method could be the cooperation between the Central European counties in term of Latin American business relations (the development of regional trade relations). There are also other possibilities in applying market research, mediators, cultural relations and so on.
To complete, in connection to the cultural aspects, we can’t forget the presents of almost 200 thousands of Hungarian (o with Hungarian origin) migration in Latin America. This fact has an enormous possibility to grow all range of relations with the region.
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