Auto Trade tension between Brazil and Mexico

By Adina Moloman

Sources: Reuters, Wards Auto, Financial Times

This month there was an attempt by Brazil to break the accord at the World Trade Organization on a long-standing bilateral auto accord with Mexico.

Their motive is a automotive trade deficit of $1.7 billion in 2011 with Mexico, more than double comparing to the previous year, 2010.

Brazil sends a letter to the Mexican Foreign Minister and to the Economy minister to halve the number of cars it exported last year to Brazil and reduce their value from $2.4bn to $1.4bn and also Mexico should liberalize trade on heavy vehicles, a measure that could help Brazilian exports to Mexico.

Not only the Mexican authorities sow this inacceptable, but also they are not pleased to “negotiate” such measures via mailing.

To protect their local production in Brazil by entering cheap imports is considering an increase of 30 percentage points on car imports.

Such increase is translating for companies in paying up to 55 per cent of this particular tax on some imported cars, in case they are not accomplishing with new Brazilian requirements such as whether the car’s chassis was assembled in Brazil or whether its engine and transmission were manufactured also in the country.

Many analysts are seeing this as a measure in order to support the economy during an international crisis by protecting the internal market.

The situation is still tense between these two countries with an important manufacturing and distribution market, which not only will affect the trade between them but also could hit on Auto Mexico Manufacturers and their auto parts providers. The same thing could happen to Brazil auto manufacturing industry.