Mexico Moves to Expand Trade with Argentina & Peru

SourceMex Economic News & Analysis on Mexico, June 14, 2006 | Go to article overview

Mexico Moves to Expand Trade with Argentina & Peru


Mexico is moving quickly to expand trade relations with two South American partners, Argentina and Peru, partly filling the potential loss of trade with Venezuela, which recently announced plans to withdraw from the Group of Three (G-3) agreement with Mexico and Colombia (see SourceMex, 2006-05-17).

In mid-June, the Mexican and Argentine governments completed negotiations to expand their economic-cooperation accord in effect since 1999. The original accord eliminated tariffs only on a few product categories, prompting officials from the two countries to enter into negotiations in 2004 to expand their agreement to include a broader range of products.

Under the expanded accord, Mexico and Argentina will completely eliminate tariffs on 1,460 products, accounting for 60% of bilateral trade. The move is expected to especially benefit the automotive sector, but also covers agriculture products, chemicals, machinery and tools, plastics, rubber, metals, and electrical goods, said Mexico's Secretaria de Economica (SE).

The SE said the expanded accord would help boost bilateral trade, which surpassed US$1.8 billion in 2005. The trade balance favored the South American country, with total Argentine exports to Mexico surpassing US$1 billion.

The expanded economic-cooperation agreement with Argentina is Mexico's second comprehensive accord with a member of the Southern Cone Common Market (MERCOSUR). Mexico signed a similar tariff-reduction accord with Brazil in 2002 (see SourceMex, 2002-06-19).

The economic-cooperation accords with Argentina and Brazil are more limited than free-trade accords, which include a wider range of tariffs and other areas such as protection of intellectual property.

Argentine accord another a step for MERCOSUR integration

Mexican and Argentine officials said the expansion of the agreement is another step to consolidate Mexico's status as an associate member of the Southern Cone Common Market (MERCOSUR). In 2004, MERCOSUR voted to accept Mexico and Venezuela as associate members of the bloc, joining Chile, Peru, and Bolivia (see NotiSur, 2004-04-23, and SourceMex, 2004-08-04).

"Without doubt this agreement is one of many steps in the effort to negotiate a full free-trade agreement between Mexico and MERCOSUR," said Alfredo Chiadria, Argentina's trade and international economic relations secretary. Chiadria led the Argentine delegation in negotiations with Mexican counterparts, led by Angel Villalobos, deputy secretary for international commercial negotiations.

Villalobos said the recently negotiated agreement would create more opportunities for Mexico to remain in contact with Argentina and other trade-bloc members. "We are building up our qualifications to eventually join MERCOSUR," said the Mexican trade official.

MERCOSUR, which also includes Uruguay and Paraguay as full members, voted in late 2005 to accept Venezuela as a full member effective the end of 2006 (see NotiSur, 2005-12-02). Venezuela said its decision to withdraw from the G-3 agreement with Mexico and Colombia was partly to put all its efforts into joining MERCOSUR.

Mexico seeks full trade accord with Peru

In June, Mexico also concluded its fifth round of negotiations with Peru to expand their economic-cooperation agreement into a full trade agreement. "Through this negotiation, Mexico and Peru are seeking a broad opening of their markets within a legal framework that promotes the free flow of goods and services, investment, and clear and transparent rules," the SE said following the conclusion of negotiations.

The two countries have not specified a target for completion of an agreement but have already developed an important economic relationship. In 2005, Peru ranked 10th among Mexico's trading partners in Latin America and the Caribbean, said a recent report from the Asociacion Latinoamericana de Integracion (ALADI). …

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