Bolsonaro defends fast fight against inflation at Mercosur Summit

RIO DE JANEIRO, BRAZIL – Brazilian President Jair Bolsonaro defended today, December 17th, the fast combat to inflation that affects several countries. In Brazil, the National Wide Consumer Price Index (IPCA), which measures the country’s official inflation, was 0.95% in November and has accumulated 9.26% this year and 10.74% in 12 months (the highest accumulation since November 2003).

For Bolsonaro, inflationary pressures result from “international restrictions and restrictive internal measures arising from the pandemic and the shortage of supply in the world economy. “Fighting inflation is a task that has involved several economic policy tools and must be accomplished quickly. We need to protect consumption capacity, especially of the lowest income sectors, the most affected by the pandemic,” he said during the 59th Summit of Heads of State of Mercosur and Associated States.

Friday’s meeting ended the pro tempore presidency of Brazil, which led the bloc in the second half of 2021, the year in which the bloc turned 30 years old. Paraguay will hold the presidency in the first semester of 2022. The group comprises Argentina, Brazil, Paraguay, Uruguay, and other associated countries.

During the meeting, which took place by videoconference, President Bolsonaro regretted that the negotiations to revise the Common External Tariff (TEC) have not advanced. According to the Ministry of Economy, Mercosur’s average TEC is around 13%, against the average of 4% and 5% observed in the rest of the world. For the Brazilian government, tariff reduction is essential for the modernization of Mercosur.

The TEC functions as a uniform import tax among Mercosur members levied on products outside the bloc and aimed to stimulate competitiveness among the bloc countries. This mechanism prevents a product from entering one country, paying a lower tax, and being sent to another country within the same economic bloc without a tariff.

“We regret that we could not reach an agreement on this issue this semester, despite the efforts made by Brazil and our willingness to accept a lower reduction than the one we had initially planned. We still believe that this reduction will benefit our private sectors and our citizens, and for this reason, the issue will remain high on our agenda,” he said.

In November, the Brazilian government announced a 10% reduction in import tariffs for approximately 87% of the goods and services imported from outside the Mercosur to moderate inflation in the country. The measure will be valid until December 31st, 2022, and was adopted even without consensus among the bloc countries.

“It was an exceptional and temporary measure, under the Montevideo Treaty of 1980. At the same time, we continued the work to review the levels of the Common External Tariff, a priority goal of Brazil’s six-month presidency of Mercosur,” Bolsonaro said.

COVID-19 AND TRADE OPENING

During his speech, the Brazilian president said that his government remains committed to recovering from the economic and social effects of the covid-19 pandemic. He defended productive integration for the expansion of the pharmaceutical industry in the region, which was the central theme of the Mercosur Business Forum. “The pandemic has shown that we cannot remain dependent on imports from outside our region in a sector so fundamental to the lives of our populations.”

For Bolsonaro, Mercosur must insert the bloc’s countries in the world economy and expand integration in global chains. He cited the various fronts of external negotiations with extra-regional partners carried out during the Brazilian presidency of the bloc.

In the regional plan, contacts were reactivated with Chile, Colombia, Ecuador, Peru, and the Pacific Alliance, besides efforts for a closer relationship with Central America and the Caribbean, particularly with El Salvador and the Dominican Republic.

At the extra-regional level, progress was made in resolving pending agreements with the European Union and the European Free Trade Association, the continuation of negotiations with Canada, South Korea, and Singapore, and the exploratory dialogue with Indonesia.

During Friday’s summit, the presidents of the Mercosur countries adopted three presidential declarations on post-pandemic recovery, digital integration, and cooperation in security and defense.

In 2021, until November, Brazil exported about US$ 15.3 billion to the Mercosur countries and imported about US$ 15.5 billion. In 2020, Brazil exported about US$ 12.4 billion and imported US$ 11.9 billion to its bloc partners, with a surplus of about US$ 422 million.

With information from Agência Brasil