Automotive

Brazil and Argentina announce new automotive deal

Sep, 09, 2019 Posted by Sylvia Schandert

Week 201937

The Minister of Economy of Brazil, Paulo Guedes, and the Minister of Production and Labor of Argentina, Dante Sica, announced the conclusion of the negotiations of the new Automotive Agreement between the two countries last Friday (09/06), signed under Economic Complementation Agreement Nº. 14 (ACE 14). The new protocol will indefinitely extend the term of the bilateral Automotive Agreement – previously expected to last until June 30, 2020.

“This is the first Automotive Agreement between Brazil and Argentina that will be permanently enforced. It is a measure that gives more stability, transparency, and predictability for the bilateral trade of products of the sector,” commented the minister Paulo Guedes.

In addition, the new instrument will improve market access conditions over the next ten years, with gradual increases in flex until June 30, 2029. It will also establish free trade in automotive products from July 1 of that same year, without conditionalities.

This way, Brazil and Argentina will achieve free trade in automotive products with each other before the free trade of such products enters into force between Mercosur and the European Union. “This reinforces the strategic character attributed by both countries to the bilateral relationship and the deepening of regional integration,” said Guedes.

Rules of Origin

To promote greater competitiveness and greater international integration of the automotive industries of both countries, the new agreement will update and modernize the rules of origin that will govern bilateral trade. For vehicles, assemblies and subassemblies, the new standards begin to apply as soon as the new agreement enters into force. Auto parts will start in 2027.

The new agreement will also establish preferential access conditions, with reduced Regional Content Index, for vehicles with new motorization (hybrid and electric), which will be valid for ten years starting January 1, 2020, and for cars in general, which will allow, for example, the trade of premium vehicles.

Main Destination

Argentina is the largest destination for Brazilian exports of automotive products. In 2018, the sector’s trade in products totaled US$13.4bn (a reduction of 9.8% over 2017), corresponding to 51.6% of total trade between the two countries. With exports of US$8bn and imports of US$5.3bn, trade in automotive products resulted in a US$2.7bn surplus for Brazil.

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