Economy

Brazil and Mexico set agreement on free trade of heavy vehicles

The agreement comes into force progressively and it will be fully completed by 2023

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  • Brazil and Mexico already benefit from free trade in the commercial exchange of automobiles; light commercial vehicles and their auto parts;
  • It is undoubtedly another step towards greater integration of Brazil into the main global and regional value chains, strengthening economic integration between the two largest economies in Latin America ”, Brazil’s Foreign Trade Secretary, Lucas Ferraz, told Valor Econômico newspaper.

Brazil and Mexico reached a political agreement on the free trade of heavy vehicles (trucks and buses) on Thursday, 25. According to a joint note from the Ministries of Economy and Foreign Affairs, the agreement comes into force progressively and it will be fully completed by 2023.

A progressive reduction schedule will start from 1st of July, with a preference import margin of 20% from the beginning of next month (or from the data on which the agreement comes into force), 40% from July 2021, and 70% from July 2022. Full liberalization will then be applied in July 2023. In the case of heavy vehicle auto parts, free trade will begin immediately.

“It is not, therefore, a postponement of free trade for heavy vehicles. It is a question of finally establishing solid bases for it to happen in a consistent, progressive and with immediate effects. It is undoubtedly another step towards greater integration of Brazil into the main global and regional value chains, strengthening economic integration between the two largest economies in Latin America ”, Brazil’s Foreign Trade Secretary, Lucas Ferraz, told Valor Econômico newspaper.

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The negotiation conclusion, according to the secretary, occurs “in the midst of a complex world economic situation due to the pandemic of the new coronavirus” and highlights the countries’ commitment “to expand and strengthen bilateral trade.”

Brazil and Mexico already benefit from free trade in the commercial exchange of automobiles, light commercial vehicles and their auto parts. “It is estimated that, by promoting free trade also in trucks, buses and their auto parts, the new agreement will generate a significant increase in Brazilian exports to Mexico in the coming years,” says the note. The agreement is currently undergoing a legal review process.