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Dr Mike Adams
Regional Trade Policy
Department of Foreign Affairs and Trade
John McEwen Crescent
BARTON ACT 0221
By Email: mexico.study@dfat.gov.au
Dear Dr Adams
Re: Australia-Mexico Economic Relations Study
The Australian Film Commission (AFC) refers to the public invitation for
submissions in relation to a study into the economic relations between Australia and
Mexico. The AFC welcomes the opportunity to provide some brief comments, with
particular reference to the audiovisual sector.
The AFC is a statutory authority that aims to enrich Australia’s cultural identity by
fostering an internationally competitive audiovisual industry, developing and
preserving a national collection of sound and moving images, and making
Australia’s audiovisual heritage available to all Australians. The AFC has a
longstanding interest in the outcome of trade negotiations, as they affect trade in
audiovisual services and the development of the creative industries in Australia.
Mexican audiovisual market
In 2004 Mexico had the ninth highest share of box office revenues globally.
Revenue from the Mexican theatrical box office totalled US$505 million,
representing around 2.4% of the US$21 billion global box office takings. Australia
ranked eighth with 3.2% of global box office revenue or around US$670 million.
The Mexican cinema market relies heavily on films produced by US studios; see
Attachment A. Of the 274 first run films exhibited in Mexican cinemas in 2005, 25
were Mexican and 156 were from the United States. The remainder is made up of,
for the most part, European films as well as films from other Latin American
countries. Mexican films do not enjoy a particularly strong share of domestic box
office revenue. In 2005, revenue from Mexican films made up 5.3% share of the
local market.
In 2004, Mexico was the seventeenth most prolific film producing nation
worldwide. Mexico produced 36 feature films in 2003, 54 in 2004, and 53 in 2005.
In 2004, Mexican films comprised 4 of the top 100 foreign language films in the
USA grossing $US46.63 million at the US box office. Attachment B details the 12
Mexican films released theatrically in Australia over the last 30 years. The 1930s
and 40s represented the golden age of Mexican cinema when film was Mexico’s
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third largest export. The quality and quantity of Mexican films has since fallen
away. The Mexican government has recently made efforts to revitalise the Mexican
film sector with the introduction of an incentive whereby private individuals or
companies can use investment in domestic films to deduct up to 10% their annual
income tax obligations.
Mexico’s cinema market is growing. Mexico’s exhibition industry saw 2.6%
growth in overall admissions in 2005 and similar growth is expected this year. This
growth compares favourably to other South American markets such as Chile and
Argentina where admissions have fallen in recent years. In 2003, Mexico had the
highest rate of growth in cinema screens worldwide (at 16%). Leading exhibitors
are building over 300 new screens to add to Mexico’s approximately 3300 cinema
screens (in 2004).
Under Mexican film law only foreign language children’s films and documentaries
may be dubbed; all other films must use subtitling. Prior to the North American
Free Trade Agreement, Mexico had a screen quota of 50% for Mexican films, in
1997 the film laws were amended to a provide for a 10% quota although it is
understood that these quotas are not enforced.1
Australia has had limited success in exporting to the Mexican cinema market,
releasing 27 Australian feature films in Mexico over the past fifteen years; see
Attachment C. Differences in language and culture are natural barriers that restrict
audiovisual trade between the two nations.
The AFC has used film as a tool for cultural exchange with Mexico through the
Embassy Roadshow program. Embassy Roadshow is a travelling film festival that,
through Australian embassies, showcases a selection of contemporary Australian
films to people the world over. It is an initiative of the Australia International
Cultural Council managed by the Department of Foreign Affairs and Trade and the
AFC. In July 2004 the Australian Embassy in Mexico hosted some 400 attendees,
screening Australian indigenous films as part of the National Aboriginal & Islander
Day of Celebrations.
The Mexican television market is the fourth largest in the Americas after the US,
Brazil and Canada. The country’s two leading free-to-air broadcasters - Televisa
and TV Azteca, dominate the Mexican terrestrial television market accounting for
around 90% of the market in 2004. Both of these broadcasters have recently altered
their production strategies away from domestic production and towards purchasing
or licensing telenovelas (popular Spanish language television series productions)
from countries such as Venezuela, Columbia and Argentina where the cost of
production is considerably lower than Mexico. The United States, Spain and Latin
American countries are the main exporters of audiovisual content to the Mexican
television market.
Mexico has experienced significant growth in its direct to home subscription
television market. Pay television revenue is forecast to be valued at around $3
1
“Audiovisual Industry; Trade and Investment Barriers in Third Country Markets”, Solon Consultants,
1998 at:
http://www.obs.coe.int/online_publication/reports/00002413.pdf.fr
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billion by 2011.2 Mexico has also experienced growth in its recorded video market.
The number of Mexican households equipped with a DVD player more than
doubled in 2004 to 5.1 million (a 24% household penetration rate). The number of
Mexican households with VCRs stayed stagnant at 10 million. Mexican consumers
spent around USD388 million in 2004 on recorded video content, of which 64%
comprised expenditure on DVDs.
Again, Australia has had limited success in exporting to the Mexican television and
recorded video markets with language and cultural barriers restricting audiovisual
trade between the two countries. Attachment D shows Australian Film Finance
Corporation funded audiovisual productions sold to Mexico since 2000.
Piracy is a problem in the Mexican audiovisual marketplace. The subscription
television market has suffered from the use of small satellite dishes to illegally
receive subscription programming. In 2004, the subscription television piracy rate
was estimated at 35%.3 Piracy in the recorded video market is also an issue. In
2004, the Motion Picture Association of America estimated the recorded film
(video and optical disc) piracy rate in Mexico was 65% with piracy losses valued at
approximately USD140 million.4 Despite Mexico’s international obligations to
implement certain standards for the protection of intellectual property as well
measures to address piracy as outlined in the North American Free Trade
Agreement and the World Trade Organisation’s Agreement on Trade-Related
Aspects of Intellectual Property Rights, The Office of the United States Trade
Representative (USTR) stated in its 2006 Foreign Trade Barriers Report that
copyright piracy remains a major problem in Mexico. Quoting figures from the
International Intellectual Property Alliance that attempt to quantify the proportion
of illegitimate recorded motion picture sales and unauthorised pay television
connections, the USTR reported stated that motion picture piracy represented 62%
of the total market in 2005.5
North American Free Trade Agreement
The North American Free Trade Agreement (NAFTA) entered into between the
United States, Canada and Mexico came into force on 1 January 1994. It is
understood that Mexico and the United States did not pursue an exemption for
cultural industries in negotiating the agreement because Mexico perceived an
advantage in having access to the Spanish language market in the US, and the US
generally pursues open markets for its cultural industries. Mexico did however,
apply several specific exemptions including in the areas of Spanish language
broadcasting and nationality restrictions for those working in the broadcasting
sector.6
2
“Upgrades and Mergers Drive Latin Pay TV Market”, Informa Telecoms & Media, 2006 at:
http://www.gii.co.jp/press/itm39534_en.shtml
3
Television Business International Yearbook, Informa Media, 2005.
4
http://www.mpaa.org/LatinAmericaPiracyFactSheet.pdf
5
http://www.iipa.com/rbc/2006/2006SPEC301MEXICO.pdf
6
K Acheson and CJ Maul, “International Regimes for Trade, Investment, and Labour Mobility in the
Cultural Industries”, Canadian Journal of Communications, Vol 19 Number 3/4, 1998.
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Canada negotiated a cultural exemption in the NAFTA. Annex 2106 of NAFTA
provides that as between Canada and the US, any measure with respect to cultural
industries and any measure of equivalent commercial effect taken in response, are
governed by the provisions of the Canada-US Free Trade Agreement. That
agreement exempts cultural industries from the provisions of the agreement and
provides for a right of retaliation (measures of equivalent commercial effect) in
response to actions that would have otherwise been inconsistent with the
agreement. Annex 2106 of NAFTA further provides that the rights and obligations
between Canada and any other Party with respect to such measures shall be
identical to those applying between Canada and the United States.7
The Most Favoured Nation Article 1103 in the Investment Chapter of the NAFTA
automatically makes arrangements made by any of the three countries with respect
to investment activities with other countries apply to member countries.
Whilst there are already some opportunities for audiovisual trade as a result of
Mexico’s growing audiovisual markets; such opportunities have natural limits
because of language and the existing congruencies in Mexico’s audiovisual trade
with the United States and Latin American countries.
Approach to potential negotiations
The AFC notes that in previous studies (most recently between Australia and Japan)
into the costs and benefits of trade and investment liberalisation8, the following
reference is made to audiovisual and cultural services:
Australia reserves the right to adopt or maintain any measure with respect
to the creative arts, cultural heritage and other cultural industries,
including broadcasting, film and other audiovisual services, entertainment
services and libraries, archives, museums and other cultural services
(Broadcasting Services Act 1992, Radiocommunications Act 1992). Specific
measures currently in place include local content quotas for television,
subsidies and favourable tax treatment for Australian films, and film co-
production arrangements with selected countries. Australia has made no
specific commitments, and has MFN exemptions, for audiovisual services in
GATS.
This reflects the position Australia has taken in the World Trade Organisation and
in recently negotiated bilateral agreements. Consistent with the AFC’s previous
consultations with DFAT, the AFC remains of the view that the above statement
should constitute Australia’s negotiating position in any consultation with Mexico
regarding an agreement of closer economic relations or trade liberalisation.
Australia should seek to have a broad exception for cultural industries from the
operation of any trade agreement. Ideally, such an exception should be based on the
exception in the Singapore-Australia FTA.
7
The Treatment of Cultural Measures in the MAI, 1996, OECD Document DAFFE/MAI(96)29 at:
http://www1.oecd.org/daf/mai/pdf/ng/ng9629e.pdf
8
Joint Study Into the Costs and Benefits of Trade and Investment Liberalisation between Australia
and Japan, April 2005 at:
http://www.dfat.gov.au/geo/japan/tef-study/
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The AFC would be strongly opposed to any proposal that the Australia-United
States Free Trade Agreement be used as a model for the development of a Free
Trade Agreement with Mexico.
The AFC welcomes the opportunity to comment on the study into Australia-Mexico
Economic Relations and looks forward to being involved in further consultations.
Should any further clarification or comment be required, please feel free to contact
me.
Yours sincerely
Kim Ireland
Director Policy, Research and Communications
Ph: +61 2 9321 6485
Email: kim.ireland@afc.gov.au
19 July 2006
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Attachment A: Mexican Theatrical Market
Top 10 cinema releases in Mexico 2003
1. Finding Nemo (US) USD17.1 million
2. X2: X-Men United (US) USD16.1 million
3. Bruce Almighty (US) USD13.9 million
4. The Matrix Reloaded (US) USD13.1 million
5. Hulk (US) USD 9.9 million
6. Pirates of the Caribbean (US) USD 9.6 million
7. The Return of the King (US/NZ/Germany) USD 9.2 million
8. Terminator 3 (US/Germany/UK) USD 9.2 million
9. Spy Kids 3D: Game Over (US) USD 9.0 million
10. The Matrix Revolutions (US) USD 8.5 million
Source: Variety International Film Guide
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Attachment B: Mexican films released theatrically in Australia 1977-2006
KNOWN
TITLE RELEASE DATE DISTRIBUTOR BOXOFFICE
SURVIVE 1/1/77 ROADSHOW $916,000
ERENDIRA 1/10/85 INDIES
VAMPIRE'S COFFIN 1/1/89 INDIES
TAREA, LA 21/5/93 NEW VISION $148,592
LIKE WATER FOR
CHOCOLATE 7/10/93 DENDY $3,811,508
CRONOS 7/9/95 INDIES
FRIDA -
NATURALEZA VIVA 15/12/95 POTENTIAL $64,569
MIRACLE ALLEY 30/5/96 PALACE $15,245
PERDITA
DURANGO 1/10/98 NEW VISION $63,090
AMORES PERROS 5/4/01 NICHE $210,358
Y TU MAMA
TAMBIEN 22/8/02 DENDY $1,147,674
CRIMES OF PADRE
AMARO 22/5/03 CTS $245,985
NICOTINA FORTHCOMING MADMAN
PAN'S LABRYNTH FORTHCOMING HOPSCOTCH
Source: MPDAA May 2006
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Attachment C: Australian films released theatrically in Mexico
Release
Title Date Distributor Type Region Country
Alexandra's
Project 23/4/04 Filmhouse Theat OS Mexico
Museum of Science and
Antarctica 31/7/92 Industry, Chicago, IL Theat OS Mexico
Babe 15/12/95 UIP/Universal Theat OS Mexico
Babe: Pig in the
City 19/3/99 Universal Theat OS Mexico
Better than sex 9/5/02 Gussi Theat OS Mexico
Blinky Bill 15/12/93 JVG Video Dist. Theat OS Mexico
Chopper 5/4/02 Unknown Theat OS Mexico
Dark City 16/10/98 Videocine Theat OS Mexico
Head On 11/6/99 Quimera Films Theat OS Mexico
Heatwave 31/12/85 Theat OS Mexico
Japanese Story 31/12/04 Gussi Theat OS Mexico
Lantana 27/9/02 Arthaus Theat OS Mexico
Columbia TriStar / Buena
Me Myself I 30/11/00 Vista Theat OS Mexico
Moulin Rouge 24/8/01 Unknown Theat OS Mexico
Napoleon 31/8/97 Unknown Theat OS Mexico
Ned Kelly 26/3/04 UIP Theat OS Mexico
Oscar and Lucinda 20/6/98 20th Century Fox Theat OS Mexico
Paradise Road 18/7/97 20th Century Fox Theat OS Mexico
Piano, The 11/2/94 Gussi S.A. Theat OS Mexico
Proof 31/12/92 Instituto Mexicano Theat OS Mexico
Rabbit Proof
Fence 18/7/03 Buena Vista Theat OS Mexico
Shine 7/3/97 Buena Vista Theat OS Mexico
Museum of Science &
Solarmax 31/7/02 Industry, Chicago Theat OS Mexico
Strictly Ballroom 16/9/93 Columbia TriStar Theat OS Mexico
Swimming
Upstream 29/8/03 Unknown Theat OS Mexico
Until The End Of
The World 17/10/92 Indefilms Theat OS Mexico
Young Einstein 12/4/90 Warner Bros Theat OS Mexico
Source: Nielsen EDI
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Attachment D: Sales of Film Finance Corporation funded projects to Mexico since 1 January,
2000
Type Title Buyer Rights
DO AIRSHIPS,THE A & E TELEVISION NETWORKS TV
ART FROM THE HEART CANAL 22 PAY
BATTLESHIPS, THE A & E TELEVISION NETWORKS TVA
I WITNESS: THE ART OF
GEORGE GITTOES CANAL 22 TV
LITTLE KILLERS TV AZTECA PAY
RENZO PIANO - PIECE BY
PIECE CANAL 22 C
PRODUCTORA Y
COMERCIALIZADORA DE
FE ANGEL BABY TELEVISION TVA
BOOK OF REVELATION,
THE GUSSI S.A. ALL-F
CANDY FILMHOUSE ALL-F
CHOPPER QUALITY FILMS S.A TH,HVA
CRACKERS TELEVISA PAY
CUBBYHOUSE GUSSI S.A. ALL-F
PRODUCTORA Y
DOING TIME FOR PATSY COMERCIALIZADORA DE
CLINE TELEVISION TV
EXCHANGE LIFEGUARDS TELEVISA PAY
FISTFUL OF FLIES CANAL 22 TVA
FLOATING LIFE CANAL 22 TV
GODDESS OF 1967, THE GEMINI FILMS ALL-F
HARD WORD, THE GUSSI S.A. ALL-F
HEARTBREAK KID, THE PCTV (MEXICO) PAY
IDIOT BOX PCTV (MEXICO) PAY
IN THE WINTER DARK PRODUCTORA & COMERCIALI TVA
JAPANESE STORY GUSSI S.A. ALL-F
LANTANA ARTHAUS FILMS S.A DE C.V ALL-F
LOVE SERENADE PCTV (MEXICO) PAY
METAL SKIN CANAL 22 TV
NO WORRIES CANAL 22 TV
PARADISE FOUND GUSSI S.A. ALL-F
PAWS TELEVISA TVA
PEACHES IMAGE ENTERTAINMENT DVDA
SOUND OF ONE HAND
CLAPPING, THE PROTELE PAY
SPIDER & ROSE CANAL 22 TV
STRANGE PLANET PCTV (MEXICO) PAY
SUBTERANO QUALITY FILMS S.A HVA
PRODUCTORA Y
COMERCIALIZADORA DE
TO HAVE AND TO HOLD TELEVISION PAY
TRACKER, THE CONSTELLATION TV
TWO HANDS QUALITY FILMS S.A TH,HVA
VISITORS QUALITY FILMS S.A ALL-F
WOG BOY, THE TELEVISA PAY
YOU AND YOUR STUPID CINEMA VIDEO E TV LTD HVA,VO
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MATE D
MS MARKING TIME TELEVISION METROPOLITANA TV
OCEAN GIRL 1 XEIPN CANAL ONCE TV
OCEAN GIRL 2 XEIPN CANAL ONCE TV
OCEAN GIRL 3 XEIPN CANAL ONCE TV
OCEAN GIRL 4 -
PRODUCTION LOAN XEIPN CANAL ONCE TV
OCEAN GIRL ANIMATION
SERIES CORP NOVAVISION TVA
ON THE BEACH NEGRO Y AZUL HVA
WAYNE MANIFESTO, THE SECRETARIA DE EDUCION TV
TM BLACKJACK TELEVISA FREET
HEROES MOUNTAIN - THE
THREDBO STORY NOT ADVISED TV
Rights codes:
ALL-F All rights
C Cable
DVDA All forms of DVD distribution
DVDS DVD sell-thru
FREET Free to air TV
All forms of home video (may include
HVA DVD)
PAY Pay TV
TH Theatrical
TV Free to air TV
TVA All forms of television
VOD Video on demand
Source: Film Finance Corporation Australia
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