(Adds Argentina and Colombia agree to tax-free auto trade)
BRASILIA, April 7 (Reuters) - Brazil has agreed to allow imports of Colombian vehicles and car parts without a 30 percent industrial products tax (IPI) as part of a bilateral auto pact under negotiation during Mercosur trade talks with Latin America’s Pacific coast countries, a Brazilian government source said on Friday.
The source at the trade meeting in Buenos Aires said final details were still being worked out with Colombia, an increasingly important market for Brazil’s auto exports, which are helping the industry recover after a four-year downturn.
Non-Mercosur autos pay the IPI tax as well as another 35 percent import tax to be sold in Brazil.
“We have agreed to give the Colombian auto industry the same preferential treatment given to the Argentine industry,” the source said. “Their cars will not pay the 30 percent IPI tax.”
The agreement will help Brazilian exports to Colombia with reciprocal treatment that was still being worked out, the source added. The agreement with Colombia would begin on Jan. 1, 2018.
Separately in Buenos Aires, Argentina and Colombia agreed to eliminate taxes on their auto trade, allowing Argentina to sell Colombia up to 12,500 vehicles tax-free a year, rising to 42,000 in four years, officials from both countries said.
Brazil had been the world’s fourth-biggest car market, and auto output accounted for one fifth of industrial production and about 5 percent of GDP before a devastating 2015-16 recession ravaged its economy.
Spurred by strong exports that rose 73 percent in the first two months of this year and expectations of recovering sales, automakers in Brazil ramped up production in February.
Brazil’s auto exports have traditionally been concentrated in neighboring Argentina, but carmakers are pushing to improve access to markets such as Peru and Colombia. Industry group Anfavea says it is seeing increased sales across Latin America.
Foreign and trade ministers meeting in Buenos Aires on Friday discussed ways to bring the South American customs union formed by Argentina, Brazil, Paraguay and Uruguay closer to the free-trading countries of the Pacific Alliance that includes Chile, Peru, Colombia and Mexico. (Reporting by Anthony Boadle; Addition reporting by Alberto Alerigi in Sao Paulo; Editing by G Crosse and Leslie Adler)