Exclusive: Brazil seeks to block return to free trade in autos with Mexico - sources

Thu Feb 12, 2015 5:16pm EST
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By Ana Isabel Martinez and Alonso Soto

MEXICO CITY/BRASILIA (Reuters) - Grappling with tumbling auto sales and weak economic growth, Brazil wants to derail a pact that would allow unlimited imports of cars from Mexico, sources familiar with the situation say, in a move that could stoke trade tensions between Latin America's largest economies.

    A treaty between the two nations and auto manufacturers, which sets quotas on how many light vehicles Mexico and Brazil can sell each other, expires in March. Auto trade between the two was then supposed to be fully liberalized.

    Brazil this week invited a Mexican government delegation to a meeting in Brasilia between Feb. 20 and 25 for talks to revamp the treaty.

    "Brazil will ask for the renegotiation of the treaty to maintain a system of quotas and not return to free trade, because right now, the conditions aren't right for it," said one of the sources.

    Another source said Brazil wants a broader treaty with Mexico that would allow free trade between the two Latin American peers in areas where Brazilian goods are more competitive, citing Brazil's $1.2 billion trade deficit with Mexico in terms of cars and auto parts alone.

    Brazil would look to renew the car quotas while such a broader free trade treaty was negotiated, this source said.

    Mexico, which last year passed Brazil to become the biggest auto producer in Latin America, says it wants the existing pact to run its course, and to be able to freely export vehicles to Brazil from March.

    "I'm ... going to put everything on the table so that we can return to free trade," Mexico's Economy Minister Ildefonso Guajardo said on Tuesday. "To have credibility, first you have to respect your accords."   Continued...

New cars are transported in a truck in Sao Bernardo do Campo April 29, 2014.  REUTERS/Paulo Whitaker