Brazil, Mexico settle dispute over auto exports

Mexico and Brazil have modified their accord regulating bilateral trade in automobiles, including agreeing to cap the value of their vehicle exports over next three years, officials said.

Mexican Economy Minister Bruno Ferrari made the announcement at the close of meetings that had begun here Wednesday involving senior officials from both nations.

Under the new terms, due to go into effect Monday, the value of each country’s auto exports will be capped at $1.45 billion in the first year, $1.56 billion the following year and $1.64 billion in the final year.

Ferrari said the two sides had reached a deal to “save the trade accord”, which has governed the countries’ bilateral trade in vehicles and auto parts since 2003, as well as “restore (market) confidence.”

He added that at the end of the three-year period the ceiling will be removed and free trade in light vehicles will resume.

The Mexican official said there were no “winners or losers” in the negotiations because if the trade accord had been canceled the consequences would have been very difficult.

Both countries also agreed to promote efforts to strengthen trade relations, which have been shrouded in uncertainty due to Brazil’s concerns about a spike in Mexican auto exports in recent years.

According to figures from the Mexican Automotive Industry Association, or AMIA, Mexican auto exports to Brazil grew from 28,283 vehicles in 2007 to 147,535 units in 2011, an increase of 421 percent.

The biggest increase occurred from 2010 to 2011, when the number of exported Mexican vehicles jumped by 89 percent from 78,000 to 147,535, “which was what generated concern on the Brazilian side”, Ferrari said Thursday.

Even so, Mexico’s overall trade deficit with the South American giant amounted to some $21.71 billion between 2003 and November 2011.

The two countries also agreed to raise the amount of regionally produced components in their cars from a current level of 30 percent to 35 percent in March 2013 and 40 percent by 2016.

Brazil’s auto industry, like other manufacturing sectors in the South American country, has been battered by a strong real, while Mexican subsidiaries of General Motors, Nissan and Volkswagen posted strong export results in 2011 due to a weaker peso.

Source: SME Times – GAI


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