Brazil and Mexico renew auto deal

Brazil's automotive agreement with Mexico, which would expire next week, has been renewed for another four years, the Brazilian government announced Monday (Mar 9). Under the new deal, the trade in light vehicles between the two countries may reach $1.56 billion, with no import taxes charged.

“We expect this deal to bring about more balanced results,  from which we'll work to create the conditions for free trade,” said Armando Monteiro, Brazil's minister of Development, Industry and Foreign Trade, in Rio de Janeiro. He noted that the latest dollar hikes against the real comes as a result of the current “political movement”, and that, after the current period of volatility, exchange rates are expected to grow steady, much to the convenience of Brazil.

“We'll have competitive exchange rates, which should provide Brazil with more competitiveness in its exports,” Monteiro said. According to him, “the US economy grew stronger and rises in the interest rate are expected in the US market, leading to larger flow of resources into that country. This has driven down a number of currencies,” the minister explained. In one year, the real has lost over 40% of its value.

Monteiro argued, however, that high exchange rates are beneficial to the national industry, as imported goods become more expensive. He added that the Brazilian balance of trade will be benefited not only by the low value of its currency, but also by other factors, like a better outcome in the “oil account, and a better agricultural crop, in spite of the lower prices.”

Translated by Fabrício Ferreira