Mexico Agrees to Renegotiation of ACE 55 with Brazil; Now Faces Argentina

Following up on the article published in the previous edition on Economic Complementation Agreement No. 55between MERCOSUR and Mexico (“ACE 55”), we reported that Mexico decided to agree to a renegotiation withBrazil. As a result, on March 19, 2012, Brazil and Mexico signed the Fourth Additional Protocol to Appendix II“On Commerce in the Automotive Sector between Brazil and Mexico” to ACE 55, agreeing to establishmaximum quotas or limits on annual importations of lightweight automotive vehicles for the period from March19, 2012 through March 18, 2015. Mexico chose to the ACE 55 Agreement and, as a result, allowed thisrestriction on free trade of automotive vehicles to continue, but establishing a direct assignment of import quotasmechanism which has been agreed to by Mexican assembly plants which will share up to 1.45 million dollars intariff free exports to Brazil in the first year. Nissan has already announced plans to accelerate investment in anew plant in Rio de Janeiro, an example of the problems that the restriction presents to the Mexican automotivesector. Now, Mexico is also facing pressure from Argentina to renegotiate the conditions agreed to by bothcountries for the automotive sector under the same agreement, based on the same arguments and strategyemployed by Brazil. Under ACE 55, Mexico currently has a $693 million dollar surplus in its balance of tradewith Argentina, and Mexico’s Secretary of the Economy has openly stated his opposition to any renegotiationwith Argentina.