End of Brazil–Colombia deal threatens key vehicle export market

Brazilian vehicle shipments to Colombia, Brazil’s third-largest export destination, grew by 55.2% in the year to date. The increase is no coincidence: the bilateral agreement between the two countries, which allowed the annual sale of up to 50,000 vehicles from Brazil without import tariffs, ended on 30 September.

According to the president of Anfavea, Igor Calvet, the surge in shipments to that country was influenced by the anticipation of the agreement’s expiry, which had been in force since 2017.

“What we have now are still 11,000 vehicles from the remaining quota of the first two years of the agreement, which may be used, in Brazil’s view, until the end of 2026. There is still a legal discussion, mainly from the Colombian side, that this remaining volume should be used by the end of this year,” he said on Wednesday (8), during a press conference presenting September data for the sector.

In any case, the remaining uncertainty is whether Brazilian vehicles, which will now be taxed at 16.1%, will remain competitive in the Colombian market or be replaced by vehicles from other countries that already have free trade agreements with Colombia.

“There are markets, such as the United States, China, and Korea, that already have free trade agreements with Colombia,” said Calvet. “We will become a less preferred partner for Colombia than other markets.”

It is still not possible to assess how competitive Brazil will remain in the wake of the surtax that took effect at the end of the agreement between the two countries. However, any taxation tends to reduce Brazilian exports. “We hope negotiations advance, because it is an extremely important market for Brazil. Other countries, if we do not act quickly, will gain preferential access to the Colombian market,” stated the Anfavea president.

Brazil’s automotive industry has been feeling the effects of monetary tightening, identified as a factor that has slowed the sector’s production pace. In the quarter ending in September, vehicle production fell 0.8%, after increases of 10% in the previous two quarters, raising concerns about the year’s performance. A drop in exports, until now the sector’s best indicator, could become another sign of slowdown if it materializes.

From January to September, Brazilian vehicle exports rose 51.6%, totaling 430,800 vehicles, already surpassing the total shipments of 2024 (398,500). Shipments to Colombia year to date accounted for almost 10% of the total.

In the most critical scenario, in which Brazil loses competitiveness and stops exporting to Colombia, the risk is a proportional decline in the sector’s total exports.

Source: Valor Econômico

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