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Brazil eyes auto trade deal with Mexico in April

BRASILIA: Brazil hopes to reach a provisional trade agreement with Mexico before April 17 that would lower, but not eliminate, tariffs on car imports between the two countries, Brazil's foreign ministry said on Friday.

"We see from the Mexican side a liberalisation, which gives us the hope that we can reach this agreement before April 17," said Jose Antonio Marcondes de Carvalho, Latin America integration chief at the Ministry of Foreign Affairs.

Carvalho added that Brazil and Mexico, Latin America's first and second largest economies, respectively, would also reach a broader free trade agreement by July when the provisional auto accord would be institutionalized.

Carvalho's comment come on the heels of three days of negotiations between Brazilian and Mexican trade officials in Brasilia. The next round of meetings are set for April 17 to 19 in Mexico City.

Mexican Trade Minister Herminio Blanco said on Wednesday that the provisional auto accord would allow Mexican and Brazilian car makers a reciprocal export quota of 60,000 vehicles for each country with an import tariff of 8 percent.

Brazil levies average tariffs of 35 percent on cars imported from Mexico while Mexico charges an average 20 percent tariff on Brazilian-made vehicles.

Carvalho declined to offer specifics on the proposed deal. He further clarified that Brazil was not considering eliminating its tariffs, despite hopes expressed by Blanco on Thursday.

"The assumption of the agreement is that there would be a reduction in tariffs on either side," Carvalho said, when asked whether Brazil would consider eliminating its import tariffs.

Trade relations between Latin America's largest economies have been strained since 1997, when an agreement on Latin American integration was not renewed, resulting in protectionist measures by both nations.

Mexico's auto industry was dealt a setback near the beginning of the year, when trade officials annulled tariff exemptions for the Mexican subsidiaries of German carmaker Volkswagen and German-U.S. giant DaimlerChrysler AG.

The firms had been charged a preferential 8 percent tariff for cars imported from their Brazilian plants but that was increased to 23 percent.

In 1999, Mercedes Benz Mexico imported some 1,400 cars from Brazil, or more than 50 percent of its local sales. Volkswagen de Mexico imported more than 21,000 units of its popular Pointer, or about 17 percent of local sales.

Other companies that could benefit from a deal are General Motors, Ford Motor Co. and Renault. -Reuters