MercoPress. South Atlantic News Agency

Mexican president-elect Peña Nieto brings up trade issues during visit to Brazil

Peña Nieto, “instead of limiting trade we should widen it”

Latin America’s two largest economies should be expanding rather than curbing trade flows, Mexico’s President-elect Enrique Peña Nieto said in veiled criticism of a Brazilian restriction on Mexican car imports.

Brazil modified an auto pact with Mexico in March to slap a quota on surging imports of Mexican-made cars, a move that many saw as a return to protectionist policies of the past.

Mexico agreed to cut its auto sales to Brazil to about 1.55 billion dollars a year between 2012 and 2014. Vehicles within quota can enter Brazil tax free; those above quota are subject to a 35% tax.

Brazil ran up a trade deficit with Mexico largely due to the imports of Mexican cars, causing tensions in their trade ties.

The solution to the commercial dispute, Peña Nieto said after a meeting with Brazil’s President Dilma Rousseff, is to increase commerce, create new incentives and achieve a more balanced trade by increasing Brazilian exports to Mexico.

“That’s the way to go: instead of limiting trade we should widen it,” Peña Nieto insisted with reporters.

The statements follow on a Wednesday report from Reuters that Brazil is considering raising the quota, potentially allowing Mexican exporters to sell around 350 million dollars worth of additional vehicles to the Brazilian market annually.

A spokesman for Brazil’s Trade Ministry did not confirm or deny the report, but said no negotiations were under way with Mexico on the issue and, in any case, such talks would not happen until Peña Nieto takes office on December 1.

Latin America’s two largest nations are trying to beef up their two-way trade, which amounts to just 2% of their total foreign trade.

Brazilians have been buying up more expensive cars manufactured in Mexico, where the auto industry produces top of the line models aimed at the US market, while Brazil’s industry has focused on the expansion of the popular consumer market with cheaper models.

Even Rousseff and two members of her cabinet, Finance Minister Guido Mantega and Trade Minister Fernando Pimentel, ride in Mexican-made Ford Fusions, government officials said.

Brazil resorted to the quota after the value of Mexican car exports jumped 70% in 2011 to 2.4 billion dollars, aggravating a glut of cheaper imports that hurt Brazilian manufacturers.