Brazil, Mexico Begin Free-Trade Deal on Cars

March 20, 2019 at 2:46 AM

Brazil and Mexico, Latin America’s two largest national economies, have begun a free-trade agreement for light vehicles, Reuters reports.

The new pact applies to cars, SUV/crossovers and light-duty trucks with at least 40% local content. Mexico’s economy ministry says the content requirement will be calculated using existing formulas.

The ministry adds that Mexico’s trade surplus with Brazil tripled to $868 million last year. Reuters notes that Brazil’s domestic auto industry has for years been supported by subsidies and shielded by import tariffs. Auto industry group ANFAVEA told a local newspaper it would have preferred a three-year delay in implementing the free-trade deal.

Mexico has been looking for trade deals since President Donald Trump began threatening more than two years ago to scrap the North American Free Trade Agreement launched in 1994.

An updated version of NAFTA reached by Canada, Mexico and the U.S. at the end of November awaits ratification by all three countries. The U.S. House of Representatives, whose control has since shifted from the Republicans to the Democrats, promises a rigorous review of the so-called U.S.-Mexico-Canada Agreement.