Brazil will apply non-tariff trade barriers on cars in an effort to protect domestic manufacturers, the government said on Thursday, in a new example of escalating protectionism in South America.

The move comes as Brazil's currency is near its strongest level in a decade, placing pressure on President Dilma Rousseff to shield local factories. Obtaining import licenses for vehicles, which were previously granted automatically, may now take up to two months, the trade ministry said.

The barriers will affect auto producers from Japan, South, Korea, Mexico and the United States -- but particularly Argentina, which is the source of roughly half the vehicles imported into Brazil.

Senior Brazilian officials have privately accused Argentina of intentionally delaying imports by revoking automatic licenses for Brazilian farm equipment and other products.

They said they would retaliate unless goods between the two neighbors, which are part of the frequently troubled Mercosur trade bloc, began flowing more freely.

Argentina was quick to respond. Industry Minister Debora Giorgio said Brazil had acted impetuously and without prior warning, adding that the measure would affect about half of bilateral trade.

A Honda Motor Co <7267.T> spokeswoman said their business wouldn't see much impact as the cars they sell are mostly manufactured in Brazil. Honda sold 126,400 cars in Brazil in 2010 of which 15 percent were imported.

A spokesman for South Korea's Hyundai Motor Co <005380.KS> said the company didn't expect the new measures to apply to its exports to Brazil. The company sold 125,000 cars last year of which 32,000 were assembled in Brazil.

Officials at Toyota Motor Corp. <7203.T> and Nissan Motor Co. <7201.T> said they were looking into it.

Brazil has also increased tariffs and stepped up customs controls for other goods in recent months to slow down a wave of imports from China. Manufacturers have been battered by the overvalued real currency, and have demanded protection from the Rousseff's government, which took office on January 1.

BOOMING CONSUMER MARKET

About 80 percent of Argentine vehicles and 65 percent of the country's auto parts are exported to Brazil, according to a report by consultancy Abeceb.com published on Thursday.

Brazil has seen a dramatic increase in car imports. In the first three months of this year, they jumped 50 percent from the same period in 2010 to $2.36 billion.

As its economy has grown rapidly, Brazil has become one of the world's top car markets with sales of 3.5 million vehicles last year. Foreign-made vehicles now make up 22.2 percent of new car sales, up from only 13.3 percent two years ago.

A Brazilian government source said earlier on Thursday that car parts would also be subject to the barriers but the trade ministry said parts would not be affected by the measures.

Some 2,500 Brazilian tractors have been held up at the border with Argentina, the news site G1 reported on Thursday, citing an official with the automobile manufacturers' association Anfavea.

In early April, Brazil applied import tariffs on Chinese synthetic fibers and U.S.-made chemicals.

(Additional reporting by Guido Nejamkis in Buenos Aires; Writing by Raymond Colitt and Reese Ewing; Editing by Gary Hill, Kieran Murray and Ramya Venugopal)

South Korea Argentina Japan China