The government recently published Decree 969/2012, which suspends for three years Economic Complementation Agreement 55 - an agreement with Mexico regulating trade in the car industry.

The agreement has regulated trade in the automotive sector between the Mercosur countries (Argentina included) and Mexico since 2002. Its main objective was to achieve free trade among the signatories. As a result, cars manufactured in Mexico could be imported duty free into Argentina and vice versa.

Over the past few years, the bilateral trade balance with Mexico in the car industry has shifted increasingly against Argentina, widening the trade deficit. Consequently, the government had been trying - to no avail - to renegotiate the agreement with the purpose of redressing this imbalance.

When in March 2012 Mexico and Brazil announced a successful renegotiation of their bilateral agreement, which included quotas and an increase in the regional content of cars, the Argentine government felt excluded. This situation, plus Mexico's stance against the Argentine government's protectionist policies (which included supporting a claim filed by more than 20 countries against Argentina with the World Trade Organisation), prompted the Argentine government to retaliate by suspending the agreement.

As a result of this suspension, Mexican cars imported into Argentina will be subject to a 35% duty (and the same will apply to Argentine cars exported to Mexico).

This suspension is yet another example of Argentina's increasingly protectionist and unilateral trade policies.

For further information on this topic please contact Esteban P Rópolo at Baker & McKenzie SC by telephone (+54 11 4310 2200), fax (+54 11 4310 2299) or email ([email protected]).