d to seek any kind of prior approval and are free to repatriate full amount of their capital and earnings any time. Foreign and domestic companies are treated equally. Under the law, they have access to all economic sectors and are eligible for incentive program and state procurement. II. TRADE PATTERN It is hard to state the type of trade that exists between Argentina and Brazil in the automobile industry because both countries import and export cars of the same brand and very similar models. Volkswagen produces some of its model of cars in Argentina and some others model in Brazil. The reason for this is to achieve economies of scale; each country specializes in a certain model of car, by doing so they reduce the cost of each additional unit. Another reason for specialization of production in each country is that it might be cheaper to produce a certain model in either Argentina or Brazil. Several companies as Volkswagen have invested in production facilities in Mercosur. Additionally, joint ventures between local and foreign parts manufacturers have improved quality. A report on Argentina auto parts/services announced that local production in Argentina was estimated at $1.9 billion in 1997. From 1996 to 1997 the import market for automobile parts and accessories grew by 30 percent to $2.2 billion. Imports from Brazil represent 35 percent of the local import market. The gains in imports with exports from Brazil boo

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