Brazil wants to slash Mercosur’s Common External Tariff by 10%

After lowering import tariffs on machines, computers, and cell phones by ten percent, the Ministry of the Economy wants to extend the move to other goods jointly tariffed with Mercosur member countries. In an official note, the ministry said the Common External Tariff is outdated and too high under current standards.

“[We have been working for] the transversal reduction in our import tariffs, which should include the modernization of Mercosur’s Common External Tariff (CET), which dates from 1995 and no longer reflects the current production reality. We’re holding talks with our Mercosur partners for a ten percent reduction across all rates. This negotiation is based on principles of transversality, predictability, and gradualism,” the ministry declared.

The note came after a reaction from a segment of the Brazilian industry that regards the cut in the import tariff unveiled this week as a hindrance to a number of domestic manufacturers of capital goods (machinery and equipment used in production) as well as IT and telecom products. Brazil may adopt open trade measures as the Brazil cost (the cost for supporting companies in the country) lowered after a series of recent overhauls, the ministry pointed out.

Studies conducted by the Economy Ministry itself, the note reads, have found that the Brazil cost plunged over ten percent in the last ten years. The main measures listed were the approval of the Legal Mark for Sanitation, with some $10 billion saved yearly; the reform in Social Security, slashing more than $5.4 billion a year; and the reduction in the country’s benchmark interest rate, the Selic, with an annual reduction of $6.6 billion.

In the view of the Ministry of the Economy, the ten percent decrease in the Import Tax is in line with the agenda of overhauls and the improvement of the business environment. “We’re implementing the policy on the competitive insertion of Brazil into the global markets, as promised in our government program. This opening will be gradual, predictable, and transversal, and in proportion with the reduction in the Brazil cost. This is our commitment, to enable the strengthening of our production sector and benefit our consumers,” the statement reads.

The passing of more reforms will help further lower the Brazil cost in the coming years, the economic team argues. The ministry named other efforts that have helped domestic companies, like the reduction in commercial red tape and the approval of trade deals, chiefly between Mercosur and the European Union.