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Uruguay frozen out of Argentine car market
Ward's Automotive International / April 15, 1996

By Larry Luxner

Argentina has been blocking imports of Uruguayan-made vehicles since January 1996, in what Montevideo calls "discriminatory" practices that violate the spirit of the four-nation Mercosur customs union.

A document submitted Apr. 1 to Uruguay's foreign and trade ministries by the Uruguay-Argentina Chamber of Commerce says the dispute represents "an episode of non-tariff trade barriers imposed by Uruguay's largest trading partners." Under Argentine rules, autos brought in from nearby Uruguay must bear certificates from the Argentine government proving the imports are necessary. Certificates previously granted to importers expired on Dec. 31, 1995; to date, no new ones have been issued.

"These [measures] represent discrimination against Uruguay, given that Argentine autos face absolutely no restrictions in the Uruguayan market, " says the chamber.

The flap between the two normally friendly neighbors comes just as the Uruguayan car industry begins to pick up. As we reported in February, at least four automakers including CitroŽn, Lada, Volvo and General Motors have announced plans to assemble in Uruguay for the larger Mercosur market, which also comprises Argentina, Brazil and Paraguay. Lamborghini is also studying Uruguay as a possible manufacturing site, along with Par

Thomas Andrew O'Keefe, president of Mercosur Consulting Group Ltd. in New York, says he finds it "interesting" that this issue has come up now.

"Argentina never considered Uruguay too much of a problem. A lot of Uruguayan production had always been earmarked for Argentina," he said. "The way things operate right now, any existing agreement that predates Mercosur is still in effect. That means also that when problems arise, they have to be resolved through direct bilateral negotiations."

He added that "this is almost exactly what Brazil was trying to do to Argentina six months ago," a reference to contentious import quotas imposed by the Brazilians on Argentine car exports. That issue was resolved in January, when Argentine Economics Minister Domingo Cavallo and Brazil's minister of industry, Dorothea Wernick, signed a bilateral agreement revising the Ouro Preto auto accord of December 1994.

That pact, which governs the Argentine-Brazilian auto trade until Dec. 31, 1999 -- after which a common Mercosur auto regime takes effect -- stipulates that finished vehicles and parts origina-ting in either Argentina or Brazil will have free access to the other's market, as long as imports are compensated for by exports to any market within or out of Mercosur. In addition, new vehicles must have at least 50% local content in order to qualify for duty-free trade.

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