8. Productive Integration in South America and Its Insertion into GVCs: The Automotive Industry

It is important to notice that the insertion of countries into different levels of the GVC is connected to a set of functions performed by companies through their supply and production contracts. Being that so, Cruz-Moreira and Fleury (2003) systematized an industrial modernization typology where it is possible to better understand the hierarchy of activities hired companies can be responsible for within a value chain:

1. OEA (Original equipment assembly): Maquiladoras: (a) they receive specifications about products and productive processes; (b) receive unfinished input and components; (c) perform simples assembly activities; (d) return the product to the client for other processing; 2. OEM (Original equipment manufacturer): Full package suppliers: (a) they receive specifications about the product; (b) develop specifications about the production process; (c) manage buying and logistics; (d) deliver finished products with the client’s logo; 3. ODM (Original design manufacturer): Full package suppliers with design capacity: (a) they perform design activities and product specification; (b) either produce or outsource their production; (c) manage the supplier’s chain; (d) eventually decide about commercialization; 4. OBM (Original brand manufacturer): Full package suppliers with their own brand: (a) they perform creation and branding activities; (b) perform design and product specification activities; (c) manage the supplier’s chain; (d) decide about commercialization processes; 5. GB (Global buyers): Global buyers: (a) they do not produce; (b) perform creation and branding activities; (c) perform design activities and product specification; (d) outsource production; (e) manage the supplier’s chain; (f) decide about commercialization processes. According to Cruz-Moreira and Fleury (2003), in order to reach superior levels, companies need to develop learning processes that allows them to promote innovation and to strengthen their competences. Other researchers believe that upgrading, in this context, can be achieved by improving (1) processes and (2) products, developing new competences and functions—known as “functional upgrading” (3), or even using acquired knowledge for sector diversification.

WTO. International Trade Statistics. (Several Years). International Trade Statistics is a yearly journal published by OMC with indexes providing a world trade panorama.

The definition of automotive industry products comes from the classification Standard International Trade Classification (SITC) 781, 782, 783, 784 and 7132, including: 781—Passengers automobile and other vehicles mainly created to transport people (except vehicles designed to public transportation), including trucks and race cars; 782—Automobile vehicles to transport merchandise and for special uses; 783—Motor vehicles (n.e.p.); 784—Parts and accessories for automobile vehicles and tractors; 7132—Piston engines with internal combustion, for propelling vehicles; Other transportation equipments (SITC group 713, 785 and 786 division, except sub-group 7132) includes: 713—Piston engines with internal combustion and its parts (n.e.p.); 785—Motorcycles and bicycles with or without engine; 786—Tows and semi-tows; other vehicles (non auto-propelled); transportation recipients specially designed and equipped.