Mexico's And Brazil's Auto Industries Couldn't Be More Different Right Now

Times are good for the Mexican auto industry. But in Brazil, they aren't so great.

As Dudley Althaus and Rogerio Jelmayer report at The Wall Street Journal, the difference between the two Latin American countries comes down to exports. They label Mexico a "stellar export platform," sending cars to resurgent North American market.

Brazil, on the other hand, sells most of its cars inside Brazil and exports mainly to neighboring Argentina, whose economy is reeling.

The numbers, according to Althaus and Jelmayer, are stark: Mexico exports 83% of the cars its makes, while Brazil keeps 85% within its borders.

It might seem odd at first to consider that a large domestic market could be a liability for a nation's auto industry, but when you think about, export markets provide flexibility. Back in 2011, as the U.S. auto market was starting to recover from the 2009 economic downturn, Michigan's Oakland Press noted that foreign carmakers operating in the U.S. were doing a far better job of exporting vehicles than the Detroit Big Three.

"[M]anagement of Detroit's automakers decided it was too complicated to maintain the export business and gradually abandoned it," the publication's Joseph Szczesny argued. "The decision was short-sighted and foolish and ultimately robbed General Motors, Ford and Chrysler of some important insights into the evolving global market."

It now looks like Brazil may be falling victim to the same dynamic.

Meanwhile, Mexico is on track to become the biggest exporter of cars to the U.S. by 2015, as the Associated Press's Adriana Gomez Licon reported earlier this year. Interestingly, the cars being exported are manufactured largely by Japanese automakers. Japan is currently one of the largest exporters of vehicles to the U.S.

Car companies doing business on a global scale are attracted to Mexico's low labor costs and proximity to the U.S., the Licon pointed out.