Brazil bypasses Mercosur and unilaterally reduces its external tariffs by 10%

RIO DE JANEIRO, BRAZIL – Brazil announced this Friday that it will apply a 10% reduction to the tariffs of 87% of all imported goods and services, which means that it is already adopting in advance an alteration that is still being discussed within Mercosur.

According to a joint communiqué from the Ministries of Foreign Affairs and Economy, the reduction will be in force until December 31, 2022, and was decided unilaterally and under Mercosur rules that allow “adopting measures aimed at protecting the life and health of people.”

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The reduction of the external tariff of the trade bloc that includes Brazil, Argentina, Uruguay, and Paraguay has been discussed for months. It has already been virtually agreed upon, although not formalized.

Argentina was the country that had the most significant resistance to these reductions. Still, a month ago, it was much more open, during a visit to Brasilia by its new Foreign Minister, Santiago Cafiero, who was received by his counterpart Carlos França.

At the end of that meeting, both ministers announced that they had reached an “agreement” for this 10% reduction, which would be consulted with Paraguay and Uruguay, which were already inclined to accept this change. Uruguay, however, has not yet formally agreed to the change.

Until recently, it was expected that the tariff reduction would be announced at the next Mercosur summit, scheduled for December and hosted by Brazil, which currently holds the six-month presidency of the bloc but so far has not set a date or place for this presidential meeting.

The maximum tariff on Mercosur imports is currently 35%, but an average of 12% is applied; Argentina was against reducing it until Cafiero’s visit to Brazil last October.

Until that time, the Argentine government advocated more moderate and selective reductions, arguing that this would allow domestic production to maintain its competitiveness vis-à-vis imports from other markets.

In the note announcing the unilateral decision of the Bolsonaro government on Friday (5), it was specified that Brazil “has worked intensively within Mercosur for the revision” of the tariff, which “in more than 25 years has never undergone a comprehensive reform process.”

The statement added that Brazil “remains fully committed to the ongoing Mercosur negotiations” and stressed that its decision “follows the parameters already agreed” with the other partners of the bloc.