The deal has existed between the two countries since 2002. But Valor said Rousseff was concerned about Brazil's own large auto industry after its deficit in automobile trade with Mexico more than doubled in 2011 to $1.7 billion.
The decision would be announced in coming days, the paper said, citing officials working on the issue. The original agreement stipulates a 14-month notice period to end the deal, meaning tariffs on Mexican imports of automobiles and parts would only be applicable from early 2013.
Messages to a spokesperson from Brazil's trade and industry ministry were not immediately returned.
The newspaper said that until 2009, the deal had worked in Brazil's favor with higher exports to Mexico than imports but Mexico has turned the tide as it is now more competitive on cost.
Brazil's strong currency and high taxes and other costs have made many local manufacturers uncompetitive with imports. Some Brazil-based manufacturers who import models their companies do not produce locally are sourcing these increasingly from Mexico.
Brazil's imports of Mexican-made cars rose 40 percent in 2011 to more than $2 billion, which resulted in a $1.7 billion deficit once its own exports to Mexico summing $372 million were offset against that. The deficit more than doubled from $642 million in 2010.
Nearly 14 percent of Brazil's imported cars come from Mexico, which is second only to South Korea's 19 percent.
Brazilian officials brought up the issue with their Mexican counterparts at the World Economic Forum in Davos, Valor said. The Mexicans suggested adjusting the terms of the contract but the paper reported Brazil would only cancel the deal outright.
Brazil announced separate measures in May last year that were designed to slow imports of cars from Argentina and some other countries, drawing protests from Buenos Aires and elsewhere. (Reuters)
