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UPDATE 2-Mexico wants Brazil to cede ground on auto trade deal
March 2, 2012 / 2:18 AM / 6 years ago

UPDATE 2-Mexico wants Brazil to cede ground on auto trade deal

* Mexico says expects car deal with Brazil next week

* Mexico says depends on Brazil giving something back (Adds comments from Brazil, Mexico)

By Adriana Barrera

MEXICO CITY, March 1 (Reuters) - Mexico hopes to reach a deal with Brazil next week to keep alive an automobile trade pact between Latin America’s top two economies, but Brazil is going to have to give some ground, Economy Minister Bruno Ferrari said on Thursday.

Brazil, which is stepping up trade measures and capital controls to try and shield its local manufacturers from a strengthening currency, has threatened to sink the countries’ decade-old automotive trade agreement.

Brazil wants to set an upper limit on vehicle imports from Mexico, as well as several other conditions, after a surge in car exports from Mexico.

Mexico raised its tone on Thursday, saying it would not simply submit to Brazil’s demands.

“Whatever Brazil is asking for, Mexico will be asking for from Brazil. This should be reciprocal,” Ferrari told a news conference.

Mexico is the third-largest exporter of cars to Brazil, outpacing Brazil’s auto trade with Mexico. Brazil said it wanted to suspend the countries’ auto trade deal early in February and demanded Mexico take more of its buses and trucks.

“We want to get this done with as soon as possible,” Ferrari said, pointing to an forthcoming meeting between officials from both sides in Mexico. “We should be reaching an agreement next week.”

Auto trade between the two countries reached about $2.4 billion in 2011, with Brazil on the losing end of a $1.7 billion deficit - more than double that of the previous year.

A surge in Brazil’s real currency is putting its manufacturers at a disadvantage to imports from other countries.

Brazilian President Dilma Rousseff slammed rich nations on Thursday for loose monetary policies that have unleashed a “tsunami” of cheap money that is “cannibalizing” poorer countries, such as her own.

Besides seeking a ceiling on Mexican imports, Brazil also wants Mexico to increase the locally or regionally made content of cars covered by the deal, complaining that a high percentage of parts in Mexican cars come from the United States.

“This is not a protectionist measure. Not in any way,” Alessadro Teixeira, a top commerce ministry official, told reporters in Brasilia.

The relatively weaker Mexican peso has boosted exporter profits, helping units of American, Japanese and European automakers such as General Motors, Nissan and Volkswagen export a record 2.1 million vehicles from Mexico last year.

Brazil and Mexico have had a rocky trade relationship, with disagreements undermining repeated bids to widen their trade accords to include more products.

“It is a shame that we have to sit down with Brazil and discuss this issue and we cannot talk about widening our trade,” Ferrari said.

“It is not about just signing deals, but sustaining them, respecting them. And agreements should not only be respected when they benefit the interested party, but always.” (Additional reporting by Jeferson Ribeiro in Brasilia. Editing by Diane Craft; Writing by Michael O‘Boyle; Editing by Ron Popeski)

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