A treaty between the two nations and auto manufacturers, which sets quotas on how many light vehicles Mexico and Brazil can sell each other, expires in March.
Auto trade between the two was then supposed to be fully liberalised, but Brazilian officials are now looking to extend the pact to avoid unlimited competition from Mexico.
"Our position is that Brazil must seek to renew the agreement while seeking adjustments in that agreement," Brazilian Trade Minister Armando Monteiro said in an interview.
Asked if one option might include reduced quotas, he said: "I would not rule out that possibility but I would prefer to say that something that I do not see is the chance of increasing the quotas."
A source familiar with the situation earlier said Brazil wanted to avoid a return to free trade on autos "because right now, the conditions aren't right for it".
Another source said Brazil wants a broader treaty with Mexico that would allow free trade between the two Latin American peers in areas where Brazilian goods are more competitive, citing Brazil's US$1.2 billion trade deficit with Mexico in terms of cars and auto parts alone.
Brazil would look to renew the car quo$tas while such a broader free trade treaty was negotiated, this source said.
Mexico, which last year passed Brazil to become the biggest auto producer in Latin America, says it wants the existing pact to run its course, and to be able to freely export vehicles to Brazil from March.
Brazil this week invited a Mexican government delegation to a meeting in Brasilia between Feb 20 and Feb 25 for talks to revamp the treaty.
Neighboring Argentina, which recently bought as many as nine in 10 Brazilian cars sold overseas, also imposed severe trade restrictions after a drop in foreign reserves, dragging Brazil's auto exports 40 percent lower to about 335,000 vehicles, the lowest since 1999.
Brazil remains one of the world's five biggest auto markets, with decades-old factories run by Fiat Chrysler, Volkswagen, General Motors and Ford.
The industry has struggled to improve productivity, which hit a decade-low last year as output dropped 15 percent to 3.15 million vehicles. Domestic sales fell 7 percent to 3.5 million vehicles.
Meanwhile, Mexico's auto sector has flourished in recent years, with new plants sprouting up across the country as manufacturers look to benefit from the country's proximity to the US market, and because of the nation's cheap wages and myriad free trade agreements.
Mazda's plant in Salamanca, Mexico.
