Mexico Reaches Auto Trade Accord With Brazil image

Mexico and Brazil reached a deal to limit the number of vehicle exports from Mexico to Brazil, fixing an export quota for the next three years to save a decade-old trade agreement between Latin America’s two dominant economies.

Mexico agreed to limit car exports to Brazil to roughly $1.55 billion a year for three years, Mexico’s Economy Minister Bruno Ferrari told reporters.

“We achieved an agreement that is incremental, and an agreement that is temporary,” Ferrari said. “In other words, I think it’s something very beneficial for the industry.”

The deal caps Mexican exports at 2010 levels, but allows the level of duty-free exports to rise to $1.64 billion over the next three years.

The two sides also agreed to raise the proportion of auto parts sourced from Latin America by car makers in Mexico over a five-year period.

The moves comes after weeks of talks that reflected Brazil’s concern over a spike in auto imports in 2011.

Latin America is the second biggest customer for Mexico’s exports of cars and light vehicles, taking more than 15 per cent of the total.

In 2011 Mexico’s car sales to Brazil totaled $2.1 billion. Mexico shipped 134,000 units to Brazil last year compared to 53,000 units a year in 2009, leading to a trade surplus for Mexico of $696 million.

Exports within Nafta (North American Free Trade Agreement) amount to 70 per cent of Mexico’s total, though the volume was more or less flat year-on-year in the first two months of 2012.