MercoPress. South Atlantic News Agency

Brazil justifies import licences for the auto sector, and insists they are not targeted on Argentina

Industry and Foreign trade minister Pimentel says Brazil is an open economy

Brazilian Development, Industry and Foreign Trade minister Fernando Pimentel justified trade barriers imposed last week on the import of cars, a measure which was strongly criticized by the Argentine government.

In a column published in the O Estado de Sao Paulo Sunday edition, Pimentel said measures are a result of the soaring trade deficit in the automobile sector and should not be seen as reprisal against Argentina, as has been interpreted by the government of President Cristina Fernandez and Brazilian manufacturers.

“It is undeniable that the Brazilian private sector is facing difficulties for the export of different produce to the neighbouring country”, admitted Pimentel.

The minister attributed these frictions to the fact that the bilateral trade relation is so “voluminous and consolidated” and pointed out that Brazil has insisted in a ‘negotiated solution’ to trade obstructions.

Argentina has been imposing import delays in several sectors such as shoes, food, home equipment and farm machinery, to ensure an overall trade surplus and in response to local manufacturers’ demands to protect the domestic market.

Pimentel said that the Brazilian deficit in the automobile sector reached 1.9 billion US dollars in the first four months of 2011 compared to 1.11 billion the same period a year ago. This includes imports from Argentina, Asia, the US and the EU.

That is why it was decided ‘to impose non automatic import licences’, which according to Pimentel have the purpose to monitor ‘with precision’ the auto imports’ process.

The non automatic licensing system which is also applied by Argentina is “a legitimate instrument” contemplated by the World Trade Organization, WTO.

The minister said the decision does not mean in practical terms a restriction on imports and will not compromise Brazil’s foreign trade “because licences will be awarded before the 60 days time limit”.

“We are an open economy country, with advanced administrative and customs systems which ensure that produce from any country in the world can have access to the domestic market”, underlined Pimentel.

The imposing of non automatic licences for the automobile sector was announced by Brazil last Thursday, freezing the import of at least 2.000 Argentine vehicles that were in the common border ready to cross.

Brazil is Argentina’s main market for its booming car and auto-parts industries and any interruptions could have severe consequences for the economy and full employment.

A meeting between Pimentel and his Argentine counterpart Debora Giorgi is scheduled for sometime this week but both sides have to agree on the location and Ms Giorgi said she wants the non automatic licensing system lifted for Argentine auto exports.

Argentina has sustainedly argued that the bilateral trade surplus has always been favourable to Brazil and demands a more balanced relation. This controversy has generated repeated rifts and government officials meetings.

However Brazil is also concerned that with the over-valued Real currency, and one of the world’s leading auto markets, it is loosing ground to more competitive models from Asia, particularly Korea and China, whose exports have multiplied several times in the last few years.