Mexico, Brazil to Slash Vehicle Tariffs

Mexico and Brazil, Latin America’s top car producers, have reached agreement on slashing motor vehicle tariffs by well over half between them for the next two years, officials said Tuesday.

The agreement, hammered out during talks that ended Monday, would set an 8% duty. In the first year of the accord, there will be a reciprocal export quota of 40,000 vehicles for each country, said Eduardo Solis Sanchez, chief of trade negotiations for Latin America. The quota would increase to 50,000 autos the second year.

Brazil now levies average tariffs of 35% on vehicles imported from Mexico, while Mexico charges an average 20% tariff on Brazilian-made vehicles.

The deal also provides that if quotas are not met over two years, the remaining may be filled in a third year. The accord applies to trade in cars as well as trucks weighing up to 9 metric tons.

The accord will take effect once it receives the approval, expected in May, of the Latin American Integration Assn., a multilateral regional trade grouping.

“This agreement takes us back to the Brazilian market,” Solis Sanchez told local radio. “We are talking about agreements that could bring in between $200 million and $500 million.”

Mexico’s motor vehicle output in 1999 was about 1.5 million and Brazil 1.34 million. Argentina, Latin America’s No. 3 producer, trailed with an output of 304,000 motor vehicles.

Brazil and Mexico, Latin America’s largest and second-largest economies, respectively, could reach a broader free trade agreement by July.

Trade relations had been strained since 1997, when an agreement on Latin American economic integration was not renewed, resulting in protectionist measures by both nations.

Mexico’s auto industry suffered a setback earlier in the year, when Mexican trade officials annulled preferential tariff rates for the Mexican subsidiaries of German car maker Volkswagen and German-U.S. giant DaimlerChrysler. The firms had been charged a preferential 8% tariff on cars imported from Brazilian plants, but it was increased to 23%.