Pandemic Reveals High Tariffs and Importation Cost in Brazil

RIO DE JANEIRO, BRAZIL – In the dispute between countries to acquire supplies to tackle the novel coronavirus pandemic, Brazil was hit by high import tariffs and dependence on the foreign market in the medical-hospital sector.

Before zeroing the import tax on a number of goods, as of March 17th, the country applied an average tariff of 9.8 percent on imports of products in the sector, twice the average (4.8 percent) of 130 countries included in the World Trade Organization (WTO), according to data compiled by the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre/FGV).

Among the world’s leading economies, Brazil was second only to India, which had an average tariff of 11.6 percent. Considering all WTO members, only Argentina, Djibouti, Fiji, Malaysia, Nepal, Pakistan, the Salomon Islands, Sri Lanka, Tajikistan, and Venezuela charged tariffs higher than Brazil.

In the United States, the average tariff was 0.9 percent, while in the European Union it was 1.5 percent, disregarding measures taken after the pandemic. China, which makes up half of the world’s exports of personal protective equipment (PPE) for health, such as surgical masks, charged an average import tariff of 4.5 percent, according to the Ibre/FGV compilation.

According to researcher Lia Valls, the author of the survey, the high rate of Brazil’s average tariff on imports of medical-hospital products is part of the national tradition of being a closed economy, with the aim of protecting domestic production. Nevertheless, Brazil depends on imports. “It wasn’t protection that helped the industry grow,” Lia said.

As a result of Covid-19, the Ministry of Economy has so far zeroed tariffs on 313 medical-hospital products. “There are new applications being analyzed, in close coordination with the Ministry of Health and members of the CAMEX (Chamber of Foreign Trade). It is thus conceivable that the list will increase, depending on the outcome of these assessments,” said the Ministry.

With the reduction of tariffs, the average rate enforced by Brazil on imports of these goods must have dropped, but nevertheless, the costs to import these products from abroad have risen sharply, due to the sudden increase in demand by all countries, and the worldwide lack of production capacity, reported companies in the industry.

According to Cíntia Januária, director of the foreign trade area at Argument, a consulting firm specializing in imports and exports, purchases abroad are experiencing challenges such as a shortage of flights and delivery delays, which in many cases exceed 90 days.

“Even companies with great bargaining power have not been successful in their routine imports,” Januária said. Only the large imports brought in by the federal government have faced fewer issues, due to diplomatic efforts with producing countries, such as China, completed the executive.

For Renato Joiozo, business director of Descarpack, a national manufacturer of surgical gloves, syringes, and masks, the cost to import products and raw materials associated with the Covid-19 fight increased by up to 50 times in some cases.

“Air freight is extremely expensive, and there is only one airline operating on routes without risk of confiscation from other countries,” Joiozo said.

According to the executive, not even the 20-year relationship with direct suppliers abroad has prevented problems in importing raw materials, because “there is very little option at this time” around the world. “The payment of any product has to be advanced in China and the air shipment is increasingly scarce”.

Founded in 1990, with headquarters in São Paulo and a manufacturing plant in Santa Catarina, Descarpack, which has 200 employees, is currently investing in machinery and equipment to increase its production capacity by up to 300 percent and meet the high demand, said Joiozo.

Source: O Estado de S. Paulo