Mexico, Brazil Agree On Automobile Free Trade Pact

Despite problems, Mexico and Brazil reach deal on free trade for light vehicles and most auto parts beginning on Jan. 1, 2007.

SAO PAULO, Brazil (AP) – Brazil and Mexico have reached an agreement to allow free trade in light vehicles and most auto parts starting on Jan. 1, 2007, according to the Brazilian Trade and Development Ministry.

The deal ends somewhat-contentious negotiations between the two countries. Mexico had complained that free trade in the automobile sector only benefited Brazil, which has seen its trade surplus with Mexico swell in recent years.

Brazilian auto exports to Mexico rose to $2.4 billion in 2005, the latest data available, from $1.3 billion in 2002.

Mexico is expected to close 2006 with a trade deficit of $1.3 billion in Brazilian autos and auto parts, according to analysts.

The ability of Mexico and Brazil to forge a deal despite the imbalances stands in stark contrast to Brazil's negotiations with Argentina, which pulled out of a similar free-trade deal.

Brazilian Trade Minister Luiz Fernando Furlan told the local Agencia Estado news service that the Brazil-Mexico pact could ''perhaps serve as inspiration'' for Argentina to reach a similar deal.

Free trade in autos between Brazil and Argentina had originally been scheduled to be implemented Jan. 1, 2006, but Argentina backed out, citing imbalances with Brazil in production, investments and market share.