The automotive sector fears a shift in investments to Mexico.
The National Association of Automotive Vehicle Manufacturers (Anfavea) said, in a note, that "the fear is not regarding the exchange of products, but regarding the risk that future investments from parent companies will end up going to Mexico, to the detriment of Brazil"; this Tuesday (19), the Jair Bolsonaro government announced that free trade in light vehicles, without tariffs or quantitative limitations, between Brazil and Mexico has come into effect.
Kelly Oliveira, reporter for Agência Brasil - The Brazilian automotive sector, which advocated for the renewal of the quota system for vehicle trade between Brazil and Mexico for another three years, said in a statement that "the concern is not about the exchange of products, but about the risk that future investments by parent companies will end up going to Mexico, to the detriment of Brazil - especially vehicles with higher added value". Yesterday (19), the government announced that free trade in light vehicles, without tariffs or quantitative limitations, between Brazil and Mexico has come into effect.
In a statement, the National Association of Automotive Vehicle Manufacturers (Anfave) stated that renewing the quota system would be a way to "protect the Brazilian industry, which is less competitive compared to the Mexican industry."
"That country has a lower tax burden, more efficient infrastructure, and greater scale, since it exports to the United States. This would also provide an opportunity for the two newly inaugurated governments to better discuss the rules of origin for parts used in car manufacturing, which still generates many doubts among automakers," the association highlighted.
The end of the quota system for light vehicles this year was foreseen in an agreement signed in 2015 by the two countries. As of yesterday, the list of exceptions, which provided specific rules of origin for auto parts, has also ceased to be in effect.
"The return to free automotive trade between Brazil and Mexico is an important step to deepen the commercial relationship between the two largest economies in Latin America," the Ministries of Economy and Foreign Affairs said in a statement on Tuesday (19).
Starting in 2020, free trade is also planned for heavy vehicles (trucks and buses) and their auto parts.
"Additionally, the Brazilian government has a strong interest in expanding free trade with Mexico to other sectors, both industrial and agricultural, including sanitary and phytosanitary matters, trade facilitation, and technical barriers to trade, as previously committed to in the negotiations of Economic Complementation Agreement No. 53 (ACE-53)," the statement says. "Within a dynamic of openness and leveraging the full potential of the two largest economies in Latin America, the Brazilian government intends to resume negotiations for a more comprehensive free trade agreement with Mexico, which have been stalled since 2017," it emphasizes.