MEXICO CITY -- Mexico's government reached an agreement with Brazil on the free trade of light vehicles, subject to a 40 percent regional content requirement, paving the way for more open commerce between Latin America's two biggest economies.
Since 2012, Mexico's fast-growing auto sector has had to contend with curbs in trade with Brazil and Argentina, whose governments have sought to protect local manufacturing.
Mexico has been seeking to diversify trading partners since U.S. President Donald Trump warned of the possible death of the North American Free Trade Agreement (NAFTA) that has underpinned Mexico's foreign trade for a quarter-century.
Mexico's economy ministry said the country racked up a trade surplus in the auto sector with Brazil worth $868 million last year, three times the total recorded in 2017.
Brazil's auto industry is protected by subsidies and import taxes. Antonio Megale, president of automotive sector trade group Anfavea, told newspaper O Estado de S. Paulo he would have preferred to delay the free trade agreement by three years.
General Motors announced new investments in Brazil on Tuesday. Carlos Zarlenga, GM's top executive for South America, said the Brazilian industry was competitive and benefited from its scale, but noted that taxes were so high that 50 percent of the automaker's revenue in the country was spent on taxes.
Argentina deal
In addition to the Brazil agreement, Mexico has renewed auto trade quotas with Argentina for the next three years, after which there will be free trade, the ministry said.
In the first year the auto trade quota between Mexico and Argentina would increase by 10 percent, followed by a five percent increase in the second year, then another five percent in the third and final year.
