Argentina and Brazil have renewed their trade agreement, according to reports from Reuters and other regional media source. The terms of the agreement remain the same. Argentine finance minister Francisco Cabrera was quoted as saying, "It will continue with the same terms, which is very good for Argentina." Brazil's national association of vehicle manufacturers, Anfavea, issued revised industry projections on 7 July, following the release of another disappointing month for the region. The group has revised its forecast for the sale of light, medium and heavy duty vehicles, including trucks and buses, to 2.08 million units in 2016, a 19% decline; production is now forecast to drop 5.5% to 2.3 million units. The group expects exports to increase by 21.5% for the year, however, and reach 507,000 units.
Significance: The trade agreement had been set to expire at the end of June 2016; negotiations had begun earlier in the year, with Brazil looking to increase its exports to Argentina and Argentina preferring no change. Earlier reports also indicated that Brazil had exceeded its quota. The terms continue to allow Brazil to export USD150 in vehicle value for every USD100 it imports from Argentina. Argentina's most significant trading partner is Brazil, and the difficulties in the Brazilian market have reduced Argentina's exports. Production is also down in Brazil, as the country remains in recession. The reduction in Anfavea's expectations for the Brazilian market remain more optimistic than the IHS Automotive forecast for light vehicles. We forecast Brazil's production of light vehicles will drop by 15.3% in 2016, to 1.97 million units. We also forecast that light-vehicle sales will drop by 24%, to 1.88 million units.
