February 18, 2012 / 5:35 PM / 6 years ago

Brazil wants more domestic parts in cars-report

RIO DE JANEIRO, Feb 18 (Reuters) - Brazil wants to increase the amount of locally made parts in cars built by its auto industry, one of the main reasons it is seeking to end a free-trade agreement with Mexico, the Estado de S. Paulo newspaper reported on Saturday.

Brazil’s government wants to prevent the industry from turning into a vehicle-assembly business that gets most of its inputs from abroad, the paper said. The Brazilian auto industry is the largest manufacturing sector in the country, the world’s sixth-largest economy.

Brazilian manufacturers, which include General Motors , Ford, Fiat and Volkswagen are required to make vehicles with Brazilian content equal to 65 percent of the sale price, Estado said, citing Sindipecas, the country’s autoparts manufacturers’ association.

In 2011, Ford increased its autoparts imports in Brazil by 21 percent and Volkswagen by 32 percent over the previous year, the paper reported. Officials with Ford and Volkswagen’s Sao Paulo offices were not immediately available for comment.

Cars produced in Mexico that enter Brazil and other members of the Mercosur trade group under an automobile free-trade pact, are likely not meeting the minimum 50-percent Mexican content rule required under that agreement, Estado reported.

Ending or changing that accord is seen as essential to saving Brazilian automanufacturers who face cheap imports from Asia and other countries and have seen their share of Latin America’s auto industry decline as the country’s real currency has strengthened against the dollar.

The Brazilian government has already increased taxes on imports and offered economic incentives for automakers to build plants in Brazil.

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