Mercosur Countries Target Tax-Free Automobile Sales Within the Bloc

RIO DE JANEIRO, BRAZIL – The Mercosur countries are working towards an understanding on tax-free motor vehicle commerce within the bloc before taxes for the European Union are set at zero, which is expected for a period of fifteen years (after the agreement comes into force).

During technical discussions within the Mercosur Summit of Heads of State, held in Argentina this week, the argument used, according to sources, is that it makes no sense to establish free trade with European countries and have barriers within the bloc itself.

“This is a common view of both Brazil and Argentina,” pointed out a source. President Jair Bolsonaro himself mentioned, in his first speech leading the interim presidency of Mercosur on Wednesday, that the inclusion of cars and sugar in the customs union is one of the Brazilian administration’s priorities in the bloc.

Internally, the experts are discussing what the applied approach and timeline may be. The aim is to liberalize gradually, starting off “timidly” and accelerating over time.

However, the agreement is being built slowly. In addition to being a delicate issue within the bloc, the plan is to avoid announcing anything prior to the Argentinian elections, which will be held at the end of this year.

Approximately 69 percent of cars sold in Argentina are imported, mostly from Brazil. Between January and May, 107,000 vehicles were sent from Brazil to Argentina, 54 percent less than the 233,000 units in the same period last year.

The automotive market in Argentina has seen a considerable drop in the number of new license plates. In May, according to the association of local dealerships (Acara), 36,770 vehicles were sold. This figure is less than half of the 83,200 units over the same period last year.