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Brazil and Argentina in Search of a Fair Automotive Agreement

Brazil and Argentina plan to extend their Bilateral Automotive Accord, which regulates vehicle sales between the two countries, through March 1, 2006.

The agreement was set to expire on Sunday. January 1, 2006. According to the press office of the Brazilian Ministry of Development, Industry, and Foreign Trade, the decision was expected to be recorded officially by the general secretariat of the Latin American Integration Association (ALADI) by Friday, December 30.

After the round of negotiations that began in June of this year, the two countries decided to maintain the bases of the agreement signed in October, 2001, having as one of its principal items the institution of a mechanism, known as trade flex, to compensate exports.

This measure determines that for each US$ 100 in exports in trade between the two countries, a country can import US$ 110.50 in goods from the other without the payment of import duties.

Depending on factors related to economic circumstances (such as the exchange rate, for example), trade flex can favor one of the two countries.

When the agreement took effect in 2001, the mechanism was more favorable to Argentina than to Brazil; at present, the situation has been reversed.

According to the Ministry’s press office, the current treaty has led to a situation in which 63% of the automobiles sold in Argentina are manufactured in Brazil, while only 2.8% of the vehicles sold in Brazil are imported from Argentina (mainly medium-sized and utility vehicles).

On the Brazilian side, the negotiations in the Brazil-Argentina Automotive Work Group are coordinated by the Ministry’s secretary of Production Development, Antonio Sérgio Martins Mello. The Argentinean delegation is headed by Argentina’s undersecretary of Industry and Trade, José Diaz Pérez.

Beginning January 9, the two countries are expected to continue their negotiations to decide the direction vehicle trade between the two countries should take in 2006. According to the ministry, Brazil’s intention is to lift the Mercosur in the world rankings of automobile production and sales.

Agência Brasil

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