Bloomberg News

Mexico Car Industry Says Trade Limits Should Only Be Temporary

March 13, 2012

Mexico’s government should only accept temporary restrictions on trade after Brazil requested a cap on vehicle exports to Latin America’s largest economy, said 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 said today in Mexico City.

Mexican car exports to Brazil more than doubled in February to 25,562 units from 12,555 a year earlier, the industry association, known as AMIA, said today.

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 accord on car and truck shipments signed in 2002 after the nation’s trade deficit with Mexico in autos tripled last year. Mexico has said it is open to negotiating Brazil’s requests, while pushing to maintain the trade accord.

“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 a March 12 interview in London. “We’re trying to explore as many alternatives as possible in order to find an agreeable solution.”

The dispute comes as Brazil works to strengthen an industrial sector hurt by a stronger real, which has climbed 29 percent against the dollar since 2009, while the Mexican peso has appreciated 8 percent over the same period.

Trade Dispute

Last year, Mexico exported $1.7 billion 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 March 9, citing a letter dated March 8 from Brazilian officials to Mexico’s government.

Brazil’s Trade Minister Fernando Pimentel and Foreign Minister Antonio Patriota said March 12 that they would travel to Mexico today to seek changes to the 2002 trade agreement.

The Mexican government said in a letter dated March 7 that 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 generalized 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 percent of Mexico’s total car exports, according to AMIA.

Latin America’s second-largest economy registered a trade surplus with Brazil last year for the first time since the accord went into effect in 2003, Mexico’s Economy Ministry said in a Feb. 28 statement.

To contact the reporters on this story: Adriana Lopez Caraveo in Mexico City at adrianalopez@bloomberg.net Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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