Section 4. Overseas Business Expands Globally
Item 6. Latin America, Middle East, and Africa
Many Latin American countries promoted the development of domestic industry as an alternative to imports until the 1980s. With respect to automobiles, importing completely built units was generally prohibited and policies that encouraged domestic vehicle production with high local-content ratio requirements were adopted. As a result, TMC conducted small-scale complete knockdown production (kit production) of the Land Cruiser and other vehicles. Subsidiaries established in Latin America through the 1980s included Toyota do Brasil (TDB), which commenced production in 1959 as Toyota's first full-scale overseas production base, Tocars C.A., which began operations in Venezuela in the 1960s, and AYAX, a Uruguayan company that began operating in the 1980s.
The subsidies provided under industrial development policies of each country, however, resulted in weak industrial structures. A financial crisis erupted in Mexico in 1982, and a number of Latin American countries faced serious disorder as a result of excessive debt and hyperinflation. Countries in the region formed a succession of new governments starting at the end of the 1980s to overcome the crisis, and economic policies shifted toward liberalization. Between 1990 and 1992, major countries including Brazil and Argentina lifted the bans on import of completely built units, although they imposed high tariffs.
In response to these developments, in 1991, TMC made a test introduction of the Crown to the Brazilian market, followed by exports to Venezuela, Argentina, Peru, and Columbia. Import duties were at a high rate of 35 percent to 70 percent, and import vehicle types were limited, so TMC continued complete knockdown production in most countries with some exceptions. In the early 1990s, moves toward regional economic alliances gained momentum in several countries, and Brazil, Argentina, Paraguay, and Uruguay established the Common Market of the South (MERCOSUR)1 , a customs union, in January 1995. In 1996, four Latin American countries, including Colombia and Ecuador, established the Andean Community of Nations (CAN)2, a free trade zone.
TMC responded to these changes in the business environment by launching the Brazil and Argentina Business Preparations Department in 1993. As a result of investigations by the department, a decision was made to produce the Corolla in Brazil and the Hilux commercial vehicle in Argentina. In line with this policy, Toyota Argentina S.A. (TASA) was established as a joint venture with an equal equity contribution from Decaroli S.A in May 1994, and TASA began production in 1997.
In Brazil, the No. 2 Plant was constructed on a site acquired by TDB in 1990, and Corolla production began in 1998. TDB and TASA established a complementary supply system for completely built units and parts within the region pursuant to MERCOSUR.