Exclusive: Brazil wants to renew Mexico auto quotas, avoid free trade

Thu Feb 12, 2015 8:26pm EST
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By Ana Isabel Martinez and Krista Hughes

MEXICO CITY/WASHINGTON (Reuters) - Grappling with tumbling auto sales and weak economic growth, Brazil wants to renew an auto quota pact with Mexico that is set to expire in March, a move that could stoke trade tensions.

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, but Brazilian officials are now looking to extend the pact to avoid unlimited competition from Mexico.

"Our position is that Brazil must seek to renew the agreement while seeking adjustments in that agreement," Brazilian Trade Minister Armando Monteiro told Reuters in an interview.

Asked if one option might include reduced quotas, he said: "I would not rule out that possibility but I would prefer to say that something that I do not see is the chance of increasing the quotas."

A source familiar with the situation earlier told Reuters Brazil wanted to avoid a return to free trade on autos "because right now, the conditions aren't right for it".

    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.   Continued...

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