SAO PAULO, July 4 (Reuters) - Brazilian vehicle exports to Argentina are expected to plunge this year, and the industry could face threats from rising imports following a free trade agreement between the European Union and South America’s Mercosur trade bloc, a major industry body said on Thursday.
At an event in Sao Paulo, Brazilian automaking group Anfavea said auto exports to Mercosur trade partner Argentina would likely fall by 28.5% to 450,000 units in 2019, sharply down from the previous forecast of a 6.2% fall.
Brazil’s central bank has cited economic uncertainty in Argentina, Brazil’s third largest export market, as one of the main reasons why exports will struggle this year and why net trade will be a drag on overall economic growth.
While 2019 forecasts for domestic auto consumption and total production were left unchanged, Anfavea president Luiz Carlos Moraes said Brazil’s automaking sector will need to specialize on what it does best and quickly reduce inefficiencies due to greater competition from the Mercosur-EU accord.
Carmakers “don’t have to specialize in everything. We’ll concentrate on what we do best,” Moraes said.
Last Friday, the EU and Mercosur concluded two decades of talks to reach agreement on a landmark trade deal. While much of Brazil’s economy is still highly protected, the current administration of President Jair Bolsonaro has made economic liberalization a cornerstone of its agenda. (Reporting by Alberto Alerigi Jr.; Writing by Gram Slattery; Editing by Sandra Maler)