RIO DE JANEIRO, BRAZIL – On the 30th anniversary of Mercosur, the Southern Common Market, leaders of Brazilian industry, and that of the other countries in the trade group, are calling for the strengthening of the bloc. To achieve this goal, it is necessary to strengthen internal integration, expand trade agreements with strategic countries, improve competitiveness and economic stability.
The demands are included in a joint declaration of the Mercosur Industrial Council, formed by industrial entities from four countries of the bloc, to be signed today March 25th. The council members are the Brazilian National Confederation of Industry (CNI), the Argentine Industrial Union (UIA), the Paraguayan Industrial Union (UIP) and the Uruguayan Chamber of Industries (CIU).
The declaration lists four main points for strengthening Mercosur. The first is economic stability in the region for the resumption of growth. The second demand is the ratification of trade agreements with the European Union and the European Free Trade Association (EFTA) – formed by Iceland, Liechtenstein, Norway, and Switzerland – and the search for new agreements.
The document also calls for the acceleration of internal integration agreements stalled in the Mercosur countries’ Congresses, such as those liberalizing public procurement and facilitating trade between the bloc members. According to the joint declaration, this will strengthen free trade, the customs union, and the participation of the private sector in Mercosur.
The fourth demand consists in the implementation of measures that reduce costs for industry and increase competitiveness, especially for Brazil and Argentina, the last in the CNI’s competitiveness ranking. For the industrial entities, this measure is essential for the countries to attract investments and expand trade.
Challenges
According to the industrial entities, Brazil and the other Mercosur countries are going through a period of economic deterioration, reduction of industrial products, and increase of commodities (primary goods with international quotation) in the export agenda. The declaration suggests the implementation of “realistic” macroeconomic measures to stabilize the region economically, ruling out objectives that they consider “not feasible”, such as a single Mercosur currency or convergence of macroeconomic policies.
Regarding internal integration, CNI, one of the signatories of the document, cites non-tariff barriers and the delay to internalize commitments as factors that delay the customs union preached by Mercosur. In the case of the government procurement agreement, which frees the participation of companies from the four countries in public bids within the bloc, CNI points out that the text remains stalled in Congress, despite the commitment having been signed in 2017.
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On integration with other economic blocs and strategic markets, the industrial sector also defends the signing of effective free trade agreements with the United States and partnerships with Mexico, Canada, the United Kingdom and Central America. The document also calls for the deepening of agreements with the rest of South America. According to the Mercosur Industrial Council, the choice of new partners should be transparent, through public consultations and viability analyses.
In the case of Brazil, the CNI asks the country to do its homework and align the Transfer Pricing and Tax Agreements rule with the procedures practiced in most countries. For the entity, this would reduce the number of taxes on imports of services. Charged when companies of the same group in Brazil and abroad exchange goods, transfer pricing often results in manipulation of the amounts charged.
Mercosur Numbers
In 30 years of existence, Mercosur has brought positive results for the country. From 2011 to 2020, Brazil exported US$54.9 billion more than it imported from the other countries in the group, with a diversified export agenda, both in industrial products and food. In this period, the trade surplus is second only to China, to which Brazil exported US$ 158.3 billion more than it imported, but sales to the Asian country are concentrated in only a few products.
According to a CNI survey, each R$1 billion exported to Mercosur generates R$ 4.12 billion for the Brazilian economy. In relation to the salary mass, R$670 million in labor force are created for each R$ 1 billion exported to the other countries of the block, against R$450 million from exports to China.
Source: Mercosur Completed Trade Agreement with EFTA Countries, Says Bolsonaro
The regional bloc represents the first or second destination for the exports of seven Brazilian states: Amazonas, Ceará, Pernambuco, Mato Grosso do Sul, São Paulo, Paraná and Rio Grande do Sul.
Mercosur (in Spanish), Mercosul (in Portuguese), or Ñemby Ñemuha (in Guarani), officially Southern Common Market, is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994.
Its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member but has been suspended since December 1 2016. Associate countries are Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname.
Source: Agencia Brasil
For the full picture, see our Mercosur EU Trade Deal: Complete Guide.