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Vehicles free of tariffs between Brazil and Mexico

Vehicles free of tariffs between Brazil and Mexico

Posted by Jesus Mendoza on February 20, 2015

Brazil and Mexico said on Friday they advanced in talks over a soon-to-expire auto treaty that establishes a quota for trading light vehicles free of tariffs and their negotiators will meet again on Feb. 27 in Mexico City.

"The Brazilian and Mexican governments reiterate their interest in the rapid conclusion of these negotiations that will strengthen bilateral relations between Latin America's two largest economies," a Brazilian trade ministry statement said.

The deal that allows Mexico and Brazil to sell each other up to $1.64 billion worth of vehicles a year duty-free - exports above that limit pay tariffs of up to 35 percent - is due to expire on March 19.

The treaty calls for free trade in vehicles once it expires.

But Brazil wants to extend the quotas to protect its auto industry that is reeling from dwindling sales in an economic slump that is forcing car factories to lay off workers.

While Mexico is pushing for trade liberalization to bolster its flourishing auto industry, sources involved in the talks say the Brazilian government is seeking to reduce the quotas.

Mexican negotiators appeared more flexible on Friday and showed willingness to consider Brazil's proposal to renew quotas, a source close to the negotiations said.

"I believe Mexico will agree to an extension," said the source who asked for anonymity because the discussions are not public. "The system is very beneficial for Mexico. It is better to have quotas than to break the deal."

Output at Brazilian factories, most of them run by Fiat Chrysler, Volkswagen, General Motors and Ford, dropped 15 percent to 3.15 million vehicles last year.

Brazil's automakers association supports the renewal of the quota system for five years to give the industry time to plan its investments.

"We want stability and this system will bring us that stability," Luiz Moan, the head of the association, told reporters after the meeting in the Brazilian capital Brasilia.

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