First, it happened with Brazil. President Dilma Rousseff's government announced that it would cancel the ACE-55, signed between the Mercosur (Brazil, Argentina, Uruguay and Paraguay) and Mexico in 2002 to allow the free trade of light vehicles between the five countries. In 2011, the trade deficit between Brazil and Mexico was US$1.5 billion and the Brazilian government worried it would not stop increasing. Mexico did not want to lose the benefits of exporting to Brazil, the fourth main market in the world, and agreed to have limits until March 2015 and to increase local content. If a car is imported after the limits are reached, it will pay taxes as any other imported vehicle.
Afterwards, Argentina tried to negotiate the agreement with Mexico as well, but the North American country denied any limits to Argentina. President Cristina Kirchner – which has been accused by several countries of closing the country's borders to imported goods – was not satisfied and announced on June 26 that Argentina would suspend the ACE-55 with Mexico for the next three years. She understands that the trade between Mexico and Brazil, with limits and higher local content, will make Argentina buy even more Mexican vehicles.
According to the Mexican government, light vehicle exports to Brazil increased 90% in 2011 compared to 2010, but only 18% to Argentina. In total, Mexican exports to Brazil were 29.2% higher last year and 10.6% higher to Argentina. What Mrs. Kirchner did not take into consideration is that Brazil and Argentina import very different vehicles from Mexico.
Increased purchasing power has allowed Brazilians to drive more expensive cars. Models like the Volkswagen Jetta and the Honda CR-V were selling more and more. However, much of the growth was driven by Nissan: the March and the Versa were launched in Brazil last year and were very successful by offering more value for the money that locally produced compact cars weren't offering.
Although Argentina imports both the Jetta and the CR-V, the Mexican best seller was the Volkswagen Bora last year which is the previous generation of the Jetta with a facelift to give it some extra life along with a new one, named Vento in Argentina. Last year, 19,433 units were sold, making the sedan the 9th best seller in the Argentinean market. However, as its lifecycle approaches the end, sales this year are dramatically down. Between January and April, they total 1,555 units compared to 7,434 units during the same months last year. Brazil stopped importing the Bora in 2011, when only 302 units were registered.
The Chevrolet Aveo (11th in the 2011 sales ranking) has seen stable sales this year, but it is another example of a model that is not a novelty. It is not the previous generation of the Nissan Frontier, called NP300 in many South American countries. If we look at the new generations of these products, Argentina imports the Chevrolet Sonic from South Korea and the new Frontier from Thailand. The Mexican Ford Fiesta tends to be replaced by the Brazilian Fiesta as we expect the new generation to start being produced in Brazil next year.
Polk's light vehicle forecast of Mexican products in Argentina shows a decline of 27.4% in 2012, to 59,295 units from 81,644 in 2011. We anticipate total sales to be 824,000 light vehicles this year. In 2013, Mexican vehicles should recover (a growth of 10.4% compared to 2012), thanks to Nissan. As it happened in Brazil, we expect Nissan to improve sales in Argentina with Mexican products.
Nissan is re-organizing its operations in Argentina since it became independent from Renault, which caused some launch delays. The March was launched in May 2012 and the Versa is expected to come late this year – both arrived in Brazil in 2011. But the impact has a limit: Nissan's dealer network. There are 25 point of sales in Argentina, compared to Volkswagen's 24 just in Buenos Aires, the capital city. Volkswagen is the market leader, with a share of 20.9%.
Mexico has said Argentina's reasoning is "unsustainable" and it will complain to the WTO with 39 other countries that are not satisfied with Argentina's protectionism. However, Mexico had a presidential election on July 1st and Enrique Peña Nieto, the new president, will not be inaugurated until December. Economics were not part of the campaign, so it is unlikely there will be any major changes toward Argentina before 2013. With this scenario, Polk will not change its forecast for Argentina at this time.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, Polk (07.03.2012)