Mexico’s government should only accept temporary restrictions on trade after Brazil requested a limit to vehicle exports to Latin America’s largest economy, according to Eduardo Solis, president of Mexico’s Automobile Industry Association.
“The agreement could be for one, two or three years, but after that period we have to ensure a return to free trade,” Solis told Bloomberg News in Mexico City.
Go deeper with GlobalData
Mexican car exports to Brazil more than doubled in February to 25,562 units from 12,555 a year earlier, industry association AMIA, said.
The jump in shipments threatens to stoke a trade dispute between Latin America’s two largest economies.
Brazil asked Mexico in February to revise an agreement on car and truck shipments signed in 2002 after the nation’s trade deficit with Mexico in vehicles tripled last year. Mexico has said it is open to negotiating Brazil’s requests while pushing to maintain the trade accord, Bloomberg said.
“It doesn’t make sense for Mexico or for Brazil” for the accord to be dissolved, said Mexico’s undersecretary for competitiveness, Jose Antonio Torre, in London this week. “We’re trying to explore as many alternatives as possible in order to find an agreeable solution.”
Brazil’s auto sector has been hurt by a stronger real, up 29% against the dollar since 2009, while the Mexican peso has appreciated 8% over the same period.
Last year, Mexico exported US$1.7bn worth of cars to Brazil through the trade accord, known as ACE 55, according to Mexico’s economy ministry.
Brazil’s government asked Mexico to limit auto exports to about $1.4 billion for the next three years, Reuters reported on 9 March, citing a letter dated 8 March from Brazilian officials to Mexico’s government.
Brazil’s trade minister Fernando Pimentel and foreign minister Antonio Patriota said earlier this week they would travel to Mexico to seek changes to the 2002 trade agreement.
The Mexican government said in a letter dated 7 March it would be willing to accept quotas based on 2011 car sales to Brazil plus an additional percentage increase.
“In international forums, there is a generalised agreement that protectionist measures contribute to the current environment of uncertainty and economic deceleration,” Mexico’s government said in its letter. “As a result, the measures that your government proposes go against not only bilateral agreements between Brazil and Mexico but also to agreements we’ve subscribed to in multiple occasions on the multilateral level.”
Sales to Brazil in January accounted for 7% of Mexico’s total car exports, according to AMIA.
Mexico registered a trade surplus with Brazil last year for the first time since the accord went into effect in 2003, Bloomberg noted, citing a Mexican economy ministry statement.
