Brazil and Argentina seek to extend car pact for another year

martes 6 de mayo de 2014 17:46 GYT

By Alonso Soto and Anthony Boadle

BRASILIA May 6 (Reuters) - Brazil and Argentina plan to extend a key bilateral auto pact for another year, but the neighbors still have to agree the extent of duty-free car trade between them, Trade Minister Mauro Borges told Reuters on Tuesday.

Cars make up half the trade between the two countries and renewal of the auto agreement is crucial to restore trade volumes and help close widening gaps in their external accounts.

Last year both countries failed to reach an agreement on the amount of cars and auto parts that can enter each country free of tariffs, based on a formula known as "flex".

Authorities and business groups are meeting in Brasilia this week to set a new flex limit that would allow the car pact to be extended for another year.

"We have an initial understanding to extend the pact for 12 months, but we need to change the flex to give more comfort to the Argentinians," Borges said. "However, this cannot be a flex that lowers the volume of trade."

Previous flex rules that expired last year allowed Brazil to export $195 worth of cars and auto parts free of tariffs for every $100 that Argentina sent in the other direction.

Argentina has proposed to lower the flex to $130 worth of exports for every $100 of imports, which would reduce its deficit with Brazil, the world's No. 4 auto market.

Brazil is holding out for a higher flex limit, but sees Argentina's proposal as legitimate, Borges said.   Continuación...