Mercosur: What Is Expected from the Government

By the agreement of all Mercosur member countries, Brazil was authorized to apply its own regime of ex-tariffs for capital goods and information technology and telecommunications until December 31, 2021. However, this deadline is about to expire, and many companies that already use this resource and are interested in its continuation still do not know how this renewal will be carried out, which will also need the approval of the bloc.

The Brazilian government hopes to reach an agreement with the other partners of the bloc on how the procedure will be carried out by the scheduled date. However, there have been no concrete negotiations so far. It is worth remembering that the ex-tariff regime consists of a temporary reduction in the import tax rate on capital goods, information technology, and telecommunications as stipulated in the Common External Tariff (CET) when there is no equivalent national production. Therefore, its importance is fundamental because, in addition to attracting investments in capital goods and technology to the country, it enables increased innovation and has a multiplier effect on employment and income in different segments of the national economy.

In the last Mercosur summit meeting, one of the main points discussed was the Brazilian proposal to review the 10% import tax on the currently applied percentages. The Argentine government, on the other hand, presented a counterproposal to zero out more than 2,000 products considered important inputs for the industry. Unanimity is required for any changes to be made.

To strengthen Mercosur, it is necessary for relations among its members to be renewed, and its terms of tariff exemptions updated, as this is the only way it can interact with other economic blocs. In this case, it is also worth noting that, to sign agreements with other countries or blocs, there is an aggravating factor: not all Mercosur partners comply with minimum labor and environmental standards.

On the other hand, if Brazil were to engage in individual negotiations with the consent of other partners, it would weaken the bloc, opening the door to the entry of products from countries that engage in unfair practices, posing a serious threat to production and employment in the country. Furthermore, this option would practically turn Brazil into a supplier of low-value-added products, harming domestic companies in industrialized product segments such as steel, machinery, automotive, and pharmaceuticals, among others.

In other words, in these negotiations with Mercosur partners, it is necessary to consider, above all, the need to stop the current deindustrialization trend, integrating the national economy into higher value-added and more technologically oriented activities. After all, only segments with higher value-added can create jobs that absorb more qualified and better-paid workers.

What seems clear is that Brazilian negotiators for Mercosur are not taking into account the real needs of the country because there has never been any concern on the part of the current government to consult and listen to industrial and worker representatives. Therefore, what is expected is that the government, in the next Mercosur ministerial meeting, proposes a more in-depth evaluation of the CET and the negotiation policy with third countries. And that the Minister of the Economy, before participating in that meeting, listens to the demands and suggestions of industry and worker representative entities.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the manager of institutional relations for the Fiorde Group, composed of Fiorde International Logistics, FTA Transport and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: www.fiorde.com.br

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