SAO PAULO, June 27 (Reuters) - Argentina and Brazil have failed to reach an agreement extending a car trade pact before a June 30 deadline and will therefore revert to more liberal bilateral commerce while they work on alternatives, a Brazilian government official told Reuters.
"There is no definition. In principle a free trade regime will kick in as of Monday," said a Brazilian official on Thursday who is close to the negotiations but who asked not to be identified as he was not authorized to speak on the record.
Argentina wants to renegotiate the pact that currently sets limits on the auto trade, which makes up 50 percent of commerce between South America's two biggest economies. Brazil has said it is willing to temporarily extend the pact to avoid a jump in Argentina's trade deficit, but only under the current terms.
The pact allows Brazil to export just $195 worth of cars and auto parts free of tariffs for every $100 that Argentina sends in the other direction.
The best hope for a new deal may come when Brazil's President Dilma Rousseff and Argentina's Cristina Fernandez meet July 12 to discuss their bilateral agenda on the sidelines of a regional summit in Montevideo.
"It has been agreed there would be a comprehensive proposal regarding all pending issues in the relationship between Argentina and Brazil," said the Brazilian source. "Our stance is to keep talking."
In Buenos Aires a government source said Argentine officials had been discussing the automobile pact with their Brazilian counterparts and were confident a solution could be found to cover bilateral trade for another five years.
Economic relations between Argentina and Brazil have grown tense over the past year.
Trade barriers imposed by Argentina sank Brazil's exports to the neighboring market by 20 percent last year. Tensions rose in March when Brazilian mining giant Vale SA cancelled a $6 billion potash project in Argentina due to the deterioration of the economic climate there.
This month, Argentina revoked two train concessions owned by Brazilian logistics company ALL, accusing it of missing investment targets.