According to reports on 19 March 2012 the Mexican government has resisted the Brazilian government’s request to significantly limit car imports for the next three years in talks initiated after Brazil threatened to walk away from a long-standing agreement that provides preferential tax treatment for bilateral automobile trade.
The Brazilian government is keen to revise the agreement because of a widening trade deficit with Mexico in the automobile sector. Mexican car exports to Brazil rose by 40% in 2011 to USD2bn, while Brazil exported just USD372m worth of vehicles to Mexico last year.
Brazil is also seeking to make more restrictive requirements on the use of local components. Presently, to benefit from the agreement, manufacturers must ensure a vehicle contains at least 30% locally-made components. Under Brazil’s proposals, this would be increased to 35% immediately, and to 45% after one year – a proposal Mexico has also dismissed as being excessively prohibitive.
