Mexico and Brazil Delay Agreement on Heavy Vehicles

The Mexican Ministry of Economy informed that after talks with its counterpart in Brazil, the ACE 55 agreement that allowed trade of heavy vehicles between both countries will have a three-year transition. "Starting in July 2023, free trade between Mexico and Brazil will reign," said the Ministry of Economy on a statement. 

ACE 55 was an agreement between Mexico and the Mercosur bloc, Brazil, Argentina, Paraguay and Uruguay, signed in September 2002. The agreement set the foundations to establish a free trade agreement in the automotive sector while promoting the integration of regional supply chains in Latin America. It was expected that the full enforcement of free trade conditions would arrive on July 1, 2020. However, a three-year extension was agreed between Mexico and Brazil.

Both countries started in 2015 a negotiation process to expand ACE 55. The agreement will give companies additional time for heavy vehicle supply chains to adapt to the upcoming competition standards while maintaining their business under really "adverse" conditions set by the pandemic. 

The Mexican Ministry of Economy reported that both countries committed themselves to support automotive companies affected by COVID-19. Both governments will have a 30-month term, instead of 24, for already registered companies to export their products under ACE 55. Bilateral trade between Mexico and Brazil accounted for US$10.93 billion in 2019, with 42 percent coming from the automotive sector. The South American country is Mexico's seventh export destination.

ANPACT reported an annual 82.5 percent drop in exports in April and an accumulated 35.8 percent in the first four months of 2020 compared to 2019. President Miguel Elizalde mentioned that the low numbers are "due to the demand contraction in Mexico, the US and Canada, which indicates a decrease in economic activity. Let us not forget that heavy vehicles participate in different sectors".

Earlier this week, the Ministry of Economy published the Sectorial Economic Plan 2020-2024 which includes the guidelines for the economic development of the country for the remaining of President's López Obrador administration. The document clearly identifies an opportunity in exports. Moreover, to promote economic equality among regions and sectors, the federal government aims to close economic development gaps. "We aim to increase market diversification in exports and foreign direct investment in all regions," the document says.