Brazil intends to modernize MERCOSUR, to improve competitiveness – Trade secretary

RIO DE JANEIRO, BRAZIL – Brazil has made efforts to reform and modernize MERCOSUR so that members may benefit from greater integration and competitiveness in the global economy, the Ministry of Economy’s special secretary of Foreign Trade and International Affairs Roberto Fendt Júnior said yesterday, April 28th.

Tthe secretary attended the opening of the 12th National Meeting on Foreign Trade in Services (ENASERV 2021) held by the Brazilian Foreign Trade Association (AEB), in partnership with the Ministry of Economy. The topic of his lecture was the importance of services in the expansion of Brazilian foreign trade and accession to the Organization for Economic Cooperation and Development (OECD).

Bureaucracy

According to Fendt Júnior, after evaluating the cost and benefits of the Ministry of Economy to reduce the bureaucratization of the sector, the decision was taken to definitively disconnect the Integrated System of Foreign Trade of Intangible Services and other operations, which required the provision of information by private operators.

The measure is part of the broad process of debureaucratization, facilitation, and improvement of the business environment promoted by the federal government.

“It should also be emphasized that the measure did not hinder the gathering of data for public policy design purposes, statistical disclosure based on international standards, and tax inspection, given the existence of data already presented to the federal government through exchange contracts and other accessory tax obligations. The goal was simply to relieve companies from the task of having to fill out countless forms with information that was already available to the government,” he concluded.

According to the secretary, the inclusion of services in processing regimes for export and agreements to prevent double taxation are one of the lines related to increasing the productivity of Brazilian products and services abroad, which the secretariat has been working to address the growing link between the services sector and other productive segments.

He considers that it is necessary to promote the Brazilian network of agreements with qualitative improvement of the clauses to be negotiated, including strategic markets in terms of foreign trade and investments, especially the United States, the United Kingdom and Germany.

“Brazil currently maintains a network of agreements to avoid double taxation with 33 countries. Although it includes some trade partners from important economies such as France, Italy, Japan and Mexico, this network does not yet include agreements with the United States, United Kingdom and Germany, important destinations or origins of investments in trade involving Brazil. Currently structured, the Brazilian network of these agreements, covers the equivalent of 60% of Brazilian exports and 55% of imports.”

Pandemic

The secretary pointed out that 2020 was marked by the impacts of the pandemic on the economy and international trade, affecting both supply and demand worldwide.

Global GDP (Gross Domestic Product) is estimated to have fallen by 3.3 percent for the year, according to the IMF. World Trade Organization (WTO) data show that international trade in goods fell 7% in value; world exports of services declined by 20% and travel services fell 63%.

For the secretary, this occurred as a result of lockdowns, with restrictions on the movement of people and a drop in consumer income, which drastically affected the transportation of people and goods between countries and the provision of services.

According to Fendt, in this context, Brazilian foreign service revenues posted a 17% drop to U$28.5 billion from 2019 to 2020. Brazilian expenses with the acquisition of services posted a 30.2% reduction to a total of U$48.4 billion in 2020.

“The year posted the lowest values for foreign trade in services since 2009, also a year of international crisis. Both in revenues and expenses the main reduction was in travel, with a drop of U$3 billion, equivalent to 49.2%, and U$12 billion, equivalent 63.3% respectively,” he advised.

Trade policy in regard to services

Regarding trade policy, the secretary said that the federal government is committed to increasing Brazil’s integration into the international economy. From the services standpoint, the vision translates into a number of measures, such as the engagement of the executive branch in negotiating chapters of services trade agreements, following international best practices.

“The result, we believe, will be greater legal security, predictability, better access for Brazilian service providers abroad and foreigners in Brazil. Among the countries with which we are negotiating commitments are the European Union, EFTA [European Free Trade Association], Canada and Korea,” he highlighted,

According to him, the commitments made in the agreements signed and under negotiation have the potential to improve Brazil’s access to high quality services at lower values, with positive impacts on adjacent chains.

According to the secretary, currently the added value of services represents between 25% and 40% in the content of exports in most economies of the OECD and G20. In Brazil, the percentage is around 38%, according to a survey by the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO).

The secretary also pointed out that for some countries – but not for Brazil – the foreign participation in value-added services already exceeds the domestic participation. According to him, the growing use of foreign services as inputs in exports, replacing domestic services and inputs, leads the services value chains to become increasingly international.

Another important aspect that has been studied, as he pointed out, is the loss of industry’s share in global GDP in relation to the services sector; in the case of Brazil, the process is becoming increasingly accentuated.

“Obviously we are aware of the phenomenon, but the fact is that the revitalization of Brazilian industry necessarily goes through the services sector, which has the capacity to promote innovative solutions to increase the competitiveness of Brazilian industry. We can export more services combined with industrial production, as we also do through our agricultural production.”

According to the secretary, services also play a key role in job generation, since in most economies of the world it is, “by far”, the sector employing the most.

“In Brazil, according to Caged data, until March 2021, the services sector has led the creation of formal jobs. It has led activities such as information, communication, financial, furniture, commerce, motor vehicle and motorcycle repair, and civil construction,” he said.

Diversified agenda

The executive-president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro, argued that the meeting has a diversified agenda for the development of the sector and, for this reason, this edition adopted as one of the themes the technology of foreign trade in services, which needs to evolve. “Our participation in the world trade of services is only 0.46%. It is very small, if we consider that Brazil today is the 12th-largest GDP in the world. There is still much room to grow,” he stated.

The president of the Brazilian Trade and Investment Promotion Agency – Apex-Brasil, Sérgio Ricardo Segovia Barbosa, stated that the institution currently supports around 400 domestic companies in its sectorial projects, aiming at the development of global business for the services sector, “with promising results of over U$600 million in services exports,” he pointed out.

According to the president of the National Confederation of Commerce (CNC), José Roberto Tadros, the evolution of business activity in the face of technological development is enabling the service sector to advance. “Now is the day of the digital, which increases commercial relations in a fast way and stimulates the reduction of bureaucracy, facilitating commercial integration among people,” he said.

For SEBRAE’s CEO Carlos Melles, within the services sector there is a fundamental challenge that relates to micro and small companies. “We are 99% of the companies in Brazil and in the chaining process, much of the exporting, especially of manufactured goods, is done by micro and small companies. It also exports, but it is the chain of the promotion and export chain. Today, we are more than 55% of the jobs with portfolios generated in Brazil,” he indicated to show the relevance of micro and small businesses in the national economy.

Source: Agência Brasil

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