Cars: Argentina and Brazil, separated by Mexico – 20/03/2019

Argentina and Brazil have renewed quite differently the car agreement they had with Mexico: while Argentinian negotiators agreed on a three-year extension of the quota system which has governed almost without interruption since 2003 with Mexico, on the Brazilian side, they have left aside the question of quotas and have agreed on an unrestricted free trade system.

This is the first significant negotiation within Mercosur since Jair Bolsonaro took office in Brazil. The bloc's two strong countries have separately maintained their negotiations with government officials (also newcomers to this field) of Andrés López Obrador, with very different results.

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What is under discussion in this agreement, besides the strictly commercial problem, is the flow of the millionaire investment required for the industry of the three countries to continue operating. Argentina and Brazil and Mexico do not have local automotive industry, but in the three countries, the sector is controlled by multinationals of American, European and Asian origin. The destination of an investment therefore depends primarily on commercial convenience or production costs. And on this last line, Mexico today has an advantage of no less than 30% compared to its South American competitors.

Argentina and Mexico have agreed to extend the bilateral agreement "ACE55" up to March 2022, with an import and export quota with a zero vehicle tariff up to $ 701 million.

In fact, it is a much higher amount than real trade: Argentina He exported about 10,000 vehicles to Mexico last year (4,000 Volkswagen Amarok, 3,700 Ford Rangers and a "much smaller" number of Renault Kangoo), while from the Aztec country, a wide variety of models, ranging from new Volkswagen Vento models to Honda and Nissan versions, import orders fell sharply. By the end of 2018, imports from Mexico had decreased by 21.7% over the previous year, while exports had collapsed by 30.6%, with a balance in favor from Mexico of $ 443 million, according to the specialized website T21. , from Mexico.

But the renewal of the agreement, according to the reading of local terminals grouped in the Association of Automobile Manufacturers (ADEFA), is good news: "It is a necessary commitment to strengthen the export profile of the sector ",said Luis Fernando Peláez Gamboa, director of ADEFA and car manufacturer Renault.

On the other hand, negotiations between the Mexican and Brazilian representatives baffled Brazilian terminal officials, who would not even have been informed of the progress of the negotiations until their conclusion. "The Brazilian terminals learned Monday night that the next morning, free trade began to reign with Mexico," said a local official, who had fluid contacts with his Brazilian colleagues.

However, Brazil requested that the "regional component "cars from Mexico rose from 35% to 40% currently, orA requirement that few Mexican terminals can today satisfy without having to make expensive investments before. For this reason, in the terminals speculate that this negotiation between the Bolsonaro and López Obrador governments has not succeeded, but could have a new chapter.