Tags: Brazil | Mexico | Auto | Exports

Brazil Seeks to Curb Mexico Auto Exports

Friday, 09 March 2012 02:27 PM

Brazil is pushing Mexico to slash its auto exports to Latin America's biggest economy to about $1.4 billion a year as it attempts to shield its own struggling industry from a strong currency.

The export quota, proposed in a letter to Mexico's government dated March 8, is one of a several Brazilian demands to rework a bilateral automotive trade deal and fans a dispute that has stirred tensions between the two regional giants.

Brazil said the proposed quota — to be applied for the next three years — was the average annual value of Mexican auto exports to Brazil in the last three years. It would represent a major cut from what Mexico exported to its southern trading partner last year.

Brazil also said in its letter to Mexican Foreign Minister Patricia Espinosa and Economy Minister Bruno Ferrari that Mexico should liberalize trade on heavy vehicles, a move that could favor Brazilian exports to Mexico.

Mexico's auto exports to Brazil in 2011 were worth more than $2 billion, according to Brazilian trade data, up from just under $1.4 billion a year earlier. Automotive trade between the two nations resulted in a $1.7 billion deficit for Brazil in 2011, more than double the previous year's.

Brazil said in its letter that the two sides had agreed to define the terms of the revised deal by Friday, although a government official in Brazil said there was scope for further talks next week.

"There's still some room for negotiation, but it's very small," the official said on condition of anonymity. The official described talks so far as "difficult," adding that there was a chance the auto trade deal could be canceled.

The Mexican government was not immediately available for comment.

In a separate letter dated March 7, also seen by Reuters, Mexico said it was prepared to consider limiting its exports to Brazil on the basis of last year's export figures — "plus a percentage" to be negotiated.

The Brazilian demands also stipulated that Mexico should agree that 35 percent of its automotive parts conformed with a formula for a "regional content index" and that it should rise to 45 percent over four years.

Neither the formula nor the "region" were defined in the letter, but the demand could upset the United States and other trade partners that provide components for Mexico's auto factories.

Mexico said earlier this week it was waiting for a response to an invitation to restart the talks from Brazil, which has stepped up trade measures and capital controls to try to shield its local manufacturers from a stronger real.

Brazil's economy grew just 2.7 percent in 2011 as soaring business costs and uncompetitive industries hurt what had been one of the world's most dynamic emerging markets.

The biggest drag on Brazil's economy continues to be industry, which contracted 0.5 percent in the fourth quarter compared with the previous quarter.

Manufacturers have blamed most of their problems on Brazil's currency, which has strengthened about 40 percent since the depths of the financial crisis in 2009 and by about 5 percent this year.

© 2018 Thomson/Reuters. All rights reserved.

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