Brazil-Argentina agreement to boost auto trade by US$13 billion, says government

Auto trade between Brazil and Argentina is expected to increase by R$66.8 billion (US$13 billion) by 2040 due to an agreement under which technical certificates for vehicle safety parts issued here will be recognized and vice versa.

The estimate comes from the Foreign Trade Secretariat (Secex) of the Ministry of Economy.

Reducing bureaucracy and costs must make trade more dynamic and encourage the expansion of assembly plant capacity. In this way, R$29.1 billion more investment is expected in the same period, the government calculates.

“It’s as if we were making an [trade] agreement,” compared Foreign Trade Minister Lucas Ferraz in an interview with Valor.

Technical certifications are trade barriers, and their elimination leads to an increase in the volume of exports and imports. This is a similar effect to that seen after trade agreements.

Previously, car manufacturers in Brazil needed a green light from the National Transportation Secretariat (Senatran) if they wanted to sell cars, such as braking systems and seat belts. To sell in Argentina, they had to obtain similar certificates from the local government.

The process took about three months and was expensive. For example, it was necessary to repeat crash tests with a dummy in the vehicle.

“We turned what used to take three months into something immediate,” the secretary said. For 80% of the safety elements, the certificate of one of the countries is enough.

The mutual recognition agreement (ARM) between Brazil and Argentina initially applies to small cars with up to eight passengers and pickup trucks.

Future plans include expansion to buses and trucks and auto parts. Safety standards are not the same in Brazil and Argentina, but both countries adhere to international standards. That is why it was possible to negotiate the MRA.

In the agreement’s first year, mutual recognition will apply only to models manufactured in Brazil or Argentina.

In the second year, imported vehicles will be approved, provided they come from assemblers based in one of the two countries. Only in the third year will all vehicles be approved.

Trade between Brazil and Argentina totaled US$23.8 billion in 2021. As it stands, the portion covered by the MRA represents 20% of that total.

The agreement will cover 40% of bilateral trade when additional segments are added.
Negotiations on the agreement began in 2018 and were concluded last July

The support of the private sector in both countries was fundamental to the conclusion of the talks.

Another factor that helped overcome the different political alignments in the two countries was the excellent dialogue between the technicians of the two governments.

The minister said the MRA had addressed a structural problem in bilateral trade. At present, however, there are difficulties of a cyclical nature.

Because of the dollar shortage, Argentina is applying for non-automatic licenses, making it difficult for imported products to enter the market. In addition, Brazilian exports have been paid 180 days late, Ferraz said.