Government representatives from Brazil and Argentina met last week to define new rules for automotive trade within the Mercosur region, but failed to reach any firm agreement.
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Though Mercosur is a free trade area (Brazil, Argentina, Paraguay and Uruguay), an automotive programme for the years 2001-2005 set common external tariffs on vehicles of 35% and parts of 14-18% although Brazil unilaterally reduced the external tariff it charged by 40% between 2002 and 2005.
Trade within the region is not free. There are quotas on imports into Uruguay and Paraguay while trade between Brazil and Argentina is governed by a so-called ‘flex’ arrangement designed to keep volume at a balanced and proportionate level.
Under the current arrangement, Brazil can export US$2.60 of vehicles and equipment to Argentina for every US$1 imported.
According to the Brazil-based automotive newsletter, AutoData, this ‘flex’ arrangement is likely to remain in force until the middle of this year, at which point a new agreement should come into force. AutoData said that Argentina is pressuring Brazil to define ‘flex’ on a company basis.
This would benefit Argentina as it would require OEMs to manufacture in both countries. In recent years most have focused their investments on Brazil, the larger market.
Further meetings are scheduled for coming weeks.
