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backLATINtalk February, 2012

Brazil stance threatens trade pact

South American nation wants to rework auto-industry import rules.

Attempts to forge a free-trade agreement between Brazil and Mexico are jeopardised by the South American nation's push to rework rules on auto-industry imports, Mexican economy minister Bruno Ferrari said.

Brazil asked to revise a deal on car and truck shipments after the nation's deficit with Mexico in auto exports tripled last year. Mexico is "quite concerned" and "very surprised" by Brazil's request, Ferrari said in a telephone interview from Washington.

"Suddenly, Brazil came out with this issue that we didn't know about a couple weeks ago," Ferrari said.

Mexican and Brazilian leaders agreed in 2010 to begin discussions on a free-trade agreement. Since then, Mexican officials have said Brazil's tariff barriers have complicated discussions and Brazil's stance is too rigid. Ferrari said Brazil's request to rework auto-trade rules may jeopardise the talks that had been scheduled to take place at the end of this month.

Brazilian President Dilma Rousseff spoke with her Mexican counterpart Felipe Calderon on February 3 to "clear up relevant points" on the nations' automotive trade, Brazil's government said in a statement. Brazil is working to strengthen an industrial sector hurt by a stronger real, which has climbed 5.1 per cent against the Mexican peso and 7.8 per cent against the dollar in the past two years.

Brazil last year raised a tax on cars with a high content of imported components to protect jobs as the real's strengthening triggered a surge in shipments from China and elsewhere. Total trade between Mexico and Brazil was $8.5 billion (Dh31 billion) in 2011, 15 per cent higher than in 2010, according to preliminary data for the period from Mexico's Economy Ministry. Commerce has tripled in the last decade, the data show.

Brazil's deficit with Mexico in trade of cars, trucks, buses and light commercial vehicles was $1.55 billion last year, compared with $524 million in 2010, according to Brazil's Trade Ministry.

- $8.5b: total trade between two countries in 2011
- $1.55b: Brazil's deficit with Mexico (vehicle trade)
- 5.1%: Brazilian real climbed against Mexican peso

Source: GulfNews.com - GAI

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