Mexico-Brazil FTA: Still a Dream?

Latin Business Chronicle, 5/1/12

When Mexican president Felipe Calderon met with Brazilian president Luiz Inacio “Lula” da Silva in Cancun in 2010, the leaders of Latin America’s two largest countries announced plans to begin negotiations on a comprehensive free-trade agreement between Brazil and Mexico.

A few months later, a delegation of Brazilian officials traveled to Mexico to begin preparatory work for a hypothetic reduction of tariffs on all goods traded between the two countries. “We want to partner with Brazil,” Calderon said. “The strongest economies in Latin America are Brazil and Mexico. Imagine what we can do together; imagine if we complement each other.”

Two years later, that sort of optimism has been drowned out by a dispute over the fate of “ACE 55,” the Economic Complementarity Agreement that established rules for gradually deregulating automotive trade between Brazil and Mexico back in 2003.

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Brazil won’t budge on auto demands with Mexico-official

Reuters, 3/14/12

Brazil and Mexico resumed talks to save a decade-old auto trade deal on Wednesday, but a Brazilian official told Reuters Latin America’s top economy was unlikely to back down from its demands.

Brazil is threatening to pull out of the trade deal, signed in 2002, after Mexican exports jumped almost 70 percent in 2011. Mexican-made cars are contributing to a glut of imports to Brazil that is worrying Brazilian manufacturers who are battling a strong local currency.

Brazil wants Mexico to slash its auto exports to Brazil by more than a third to about $1.4 billion a year. Mexico rejected that demand, saying it was willing to limit exports for several years at 2011 levels.

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Mexico Car Industry Says Trade Limits Should Only Be Temporary

Bloomberg-Businessweek, 3/13/12

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.

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Mexico Rejects Brazilian Proposal On Auto Exports

Fox Business, 3/12/12

Mexico’s government rejected a proposal by its Brazilian counterparts to limit its exports of cars to Brazil to $1.4 billion a year, reported the local financial newspaper Valor Economico, in its Monday edition.

Last week, Brazil made its request in a letter sent to the Mexican government, a Brazilian government official, who asked not to be identified, told Dow Jones Newswires.

According to the report, which didn’t disclose its sources, Mexico’s rejection will be formalized later this week. Brazil’s trade ministry officials were not immediately reached for comment earlier Monday.

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Brazil May Face Mexico Resistance On Auto Quotas -Report

Nasdaq, 3/1/12

Brazil may have trouble getting Mexican authorities to agree to quotas for auto shipments in order to narrow the South American country’s trade deficit with Mexico, Valor Economico newspaper reported Thursday.

Brazilian President Dilma Rousseff recently said she wanted to renegotiate a trade deal that exempts cars made in each country from the trade partner’s import taxes. The move came after Brazil’s trade deficit widened to $1.5 billion last year as Brazilian appetite for cars led to a surge in imports at the same time that high costs made Brazilian exports less competitive.

Brazil will likely be able to convince Mexico’s government to amplify the trade accord to include heavy trucks–which Brazilian authorities think should help narrow the trade gap–and to boost local content requirements, Valor said, without saying where it got the information.

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Mexico Not Seeking To Renegotiate Auto Pact With Brazil

The Wall Street Journal, 2/8/12

Mexican government and auto industry officials said they aren’t seeking to renegotiate an auto and auto-parts trade pact with Brazil, although the country has sent a delegation to the South American country to discuss Brazil’s dissatisfaction with the agreement.

The trade deal known as ACE 55 has been in effect since 2003, the statement said, and during that time trade between Mexico and Brazil in the auto sector has grown to more than $2.5 billion last year from about $1.1 billion in 2003. “Given the importance of ACE 55 for bilateral trade, the Mexican government will not seek to renegotiate it,” said the statement, which was issued late Tuesday.

While Brazil wants out of the current agreement because of a growing deficit in the auto trade with Mexico in recent years, Brazil had been running notable trade surpluses under ACE 55 in the first six years of the agreement, said the joint statement from the Mexican ministries of Economy, Foreign Relations, and three groups representing the light vehicle, heavy vehicle, and auto parts industries.

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Brazil may break car agreement with Mexico due to deficit

The Washington Post, 2/2/12

Brazil may end a decade-old automotive trade pact with Mexico and start charging tariffs on cars imported from that country as it battles a growing trade deficit in the sector, the government and local media said Thursday.

The 2002 agreement for the import and export of cars and parts with Mexico “is being reviewed,” said trade secretary Tatiana Prazeres, according to the Ministry of Development, Industry and Foreign Trade’s press office.

The end of the agreement would mean that Mexican cars sold in Brazil would have a 35 percent import tax and an “industrial production tax” of up to 41 percent slapped on them.

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Mexico Favours Brazil Trade Pact

President Felipe Calderon

BBC, 8/16/2009

“Trade enriches economies,” said Mr Calderon during a meeting of business leaders in Sao Paulo.

The comments came as he embarked on a three day visit to Brazil, when he will meet President Luiz Inacio Lula da Silva and visit oil firm Petrobras.

Brazil and Mexico are Latin America’s largest economies. Mexico already has trade deals with the US and Canada.

“I offer to put the idea [of a trade agreement] out there before different industries, and political and social groups,” said Mr Calderon.

The two nations are responsible for around 70% of all economic activity in the region.

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