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UPDATE 2-Argentina to ask Mexico to overhaul auto trade pact
March 20, 2012 / 8:52 PM / 6 years ago

UPDATE 2-Argentina to ask Mexico to overhaul auto trade pact

* Argentine move follows similar step by Brazil

* Trade deficit with Mexico nearly tripled in 2011

* Auto sector trade deficit about $1 bln last year (Adds details on companies involved, sector’s trade deficit)

BUENOS AIRES, March 20 (Reuters) - Argentina will ask Mexico to renegotiate a bilateral trade accord on the automobile industry, following Brazil’s lead as it seeks to improve its trade balance, the government said on Tuesday.

Argentina’s center-left government has tightened controls on imports and foreign-exchange purchases in recent months to bolster its waning trade surplus, which is key to boosting international reserves used to pay debt.

The South American country wants to modify the 2002 auto accord with Mexico “because it is not beneficial to Argentina in its current form and should be reworked to strike a better balance very quickly,” Industry Minister Debora Giorgi said in a statement. Argentina’s overall exports to Mexico fell 23 percent last year while imports from the country jumped 39 percent, according to the INDEC national statistics bureau.

The trade deficit with Mexico widened to $1.59 billion in 2011 from $590 million a year earlier. The automotive sector alone registered a $995 million trade deficit in 2011, Giorgi’s office said.

The companies likely to be most affected by altered trade terms include Volkswagen, the Renault-Nissan alliance , Honda and Chrysler, which is controlled by Italian automaker Fiat SpA.

Some companies operating in Argentina import luxury vehicles from Mexico, where labor costs remain below those of Argentina and Brazil.

Last week, Mexico yielded to pressure to cut auto sales to Brazil to an average of about $1.55 billion over the next three years, bowing to Brazilian concerns about its ailing industrial sector.

Brazil made its demands after the value of Mexican car exports jumped by around 70 percent in 2011 to $2.4 billion, aggravating a glut of cheaper imports that are hurting Brazil’s manufacturers, stung by an appreciation in the real currency.

The quota is the latest in a string of efforts by the Brazilian government to protect its industry. (Reporting by Helen Popper and Hilary Burke; Additional reporting by Alejandro Lifschitz and Krista Hughes; Editing by Dan Grebler and Jan Paschal)

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