MercoPress. South Atlantic News Agency

Brazil tightens requirements for car imports: Argentina and Asia targeted

Argentine Ministry of Industry Debora Giorgi surprised by the same medicine

Brazil is tightening requirements for imports of cars in a move that sparked complaints from Argentina, its biggest supplier of the product. Imports to Brazil will need a special license that can take as long as 60 days to be approved, the Trade Ministry said in an e-mailed statement.

The requirements, which affect all of Brazil's trading partners, became effective May 10, the ministry said. Earlier a government official said the measure would also affect imports of auto parts. The ministry's announcement didn't impose requirements on auto parts.

“This type of behaviour goes against the natural discussions typical of the two biggest members of Mercosur and fundamentally affects the accord reached by the countries' two presidents to help balance the trade relationship,” Argentine Industry Minister Debora Giorgi said in an e-mailed statement.

Argentina sold to Brazil 3.7 billion US dollars in cars last year, up from 2.6 billion in 2009, according to the Trade Ministry. Argentina's auto parts sales to Brazil rose to 767 million USD last year from 582 million USD in 2009.

The moves will affect 50% of Argentina's trade with Brazil complained Giorgi. About 80% of Argentine vehicles and 65% of the country's auto-parts are exported to Brazil, according to a report by consultancy Abeceb.com published this week.

Besides Argentina the measure will mainly affect vehicles and auto parts coming from Japan, South Korea, the United States and Mexico. Obtaining import licenses, which were previously granted automatically, may now take up to two months.

The move is part of a broader effort by the administration of President Dilma Rousseff, who took office on Jan. 1, to get tough on a wave of cheap imports that have been eroding the country's trade balance.

In the first quarter of this year, car imports jumped 50% over the same period last year to 2.36 billion USD. Foreign-made vehicles make up 22.2% of new car sales in Brazil, up from only 13.3% two years ago.

The latest restrictions may also be retaliation against similar trade barriers previously adopted by Argentina, local media reported. Some 2,500 Brazilian tractors have been held up at the border with Argentina, the news site G1 reported on Thursday, citing an official with the automobile manufacturers' association Anfavea.

Brazil has become one of the world's top car markets with sales of 3.5 million vehicles last year. But the country’s strong currency, the Real, has prompted a flood of imported consumer goods, from hair driers to shoes, which cut the bottom line and market share of many manufacturers.

In early April, Brazil applied import tariffs on Chinese synthetic fibres and US-made chemicals.

Since October, Brazil's government has increased taxes on foreign inflows, imposed reserve requirements on banks' bets against the dollar and stepped up purchases of the greenback on the spot market to temper a 43% rally of the Real since the beginning of 2009. Argentina's peso weakened 15% against the dollar in the same period.

Finance Minister Guido Mantega in an April 14 interview said Brazil wouldn't allow the currency's appreciation to hurt the country's industry. “We want to have a strong industry in Brazil,” he said.