Brazilian government wants to cut MERCOSUR’s common external tariff by 10%
RIO DE JANEIRO, BRAZIL – After reducing by 10% the import tariffs on machinery, computers and cell phones, the Ministry of Economy intends to extend the benefit to the other products jointly taxed with MERCOSUR countries.
In an official statement, the Ministry of Economy said the Common External Tariff (TEC) is outdated and high by current standards.
“We are working for the across-the-board cut in our import tariffs, which includes the modernization of MERCOSUR’s Common External Tariff (TEC), dating back to 1995, which no longer reflects the current productive reality. We are negotiating a 10% cut in all tariffs with our MERCOSUR partners. The bases of this negotiation are the principles of transversality, predictability and gradualism,” said the Ministry.
The announcement came after an adverse reaction from the highly protected Brazilian industry, which complained that the measure announced on Wednesday, March 17th, affects several domestic manufacturers of capital goods (machinery and equipment used in production) and computer goods and telecommunications. According to the Ministry of Economy, Brazil may introduce measures to open trade because the so-called “Brazil Cost” (bureaucratic and tax cost to maintain companies in the country) decreased with a number of recent reforms.
According to the announcement, Ministry of Economy studies have shown that the Brazil cost has dropped by more than 10% over the past 2 years. The main measures highlighted were the approval of the Sanitation Legal Framework, with annual savings of R$56 (US$10) billion; the Social Welfare reform, with a reduction of over R$30 billion per year; and the cut in the SELIC (the basic interest rate) in recent years, with an annual reduction of R$37 billion.
According to the Ministry of Economy, the 10% cut in the TEC is compatible with the reform agenda and with the improvement of the business environment. “We are implementing a policy for Brazil’s competitive integration into global markets, as pledged in our government program. This opening will be gradual, predictable, transversal and proportional to the reduction of the Brazil Cost. This is our commitment, to enable a stronger productive sector and benefit our consumers,” stressed the announcement.
For the economic team, the approval of additional reforms will help to further reduce the Brazil Cost in coming years. The Ministry mentioned other measures which have helped domestic companies, such as the reduction of trade bureaucracy and the approval of trade agreements, particularly between MERCOSUR and the European Union.
Source: Agencia Brasil
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