Brazil, Mexico launch trade talks, official says

By Raymond Colitt

BRASILIA (Reuters) - Brazil and Mexico have launched negotiations to liberalize trade, Brazil's foreign trade secretary said on Monday, as the global economic crisis and domestic pressure push the two Latin American giants closer.

The move marks an about-face in trade relations between the two countries, which have long stood back to back -- with Mexico looking north to the United States and Brazil's integration efforts focussing on South America.

Now things could change. Mexico, whose economy is expected to contract nearly 7 percent this year due mostly to falling exports to United States, is looking to diversify its trading partners.

Brazil and Mexico already have a trade agreement on automobiles, which make up a large share of the $7.4 billion (4.6 billion pounds) in annual trade, according to the Brazilian ministry of industry and trade.

Brazil's government has come under pressure from its domestic farm lobby to open new markets, amid uncertainty over the outcome of the Doha round trade talks that could liberalize global farm trade.

"We took the first step," Foreign Trade Secretary Welber Barral said, referring to the first of several meetings between Mexican and Brazilian authorities late last week on trade.

The initiative followed Mexican President Felipe Calderon's proposal to deepen trade ties during a visit to Brazil in August. It was the easiest way for poor nations to develop their economies, Calderon had said.

"There is a lot of interest at the presidential level," Barral said.