Brazil and Argentina discuss Mercosur's common external tariff reduction, sources say

RIO DE JANEIRO/BUENOS AIRES-Brazil and Argentina have already initiated conversations aimed at the possible reduction of the common external Tariff (TEC) of MERCOSUR, said sources with knowledge of the matter to Reuters, although the progress of these treatatives depends on a definition in Political scene in Argentina, which will have presidential election this year. All sources, which are familiar with the subject, but are not authorized to speak publicly about the negotiations, said that changes in TEC should not occur in the short term. It is unclear how long it will take for a reduction to be implemented. "Mercosur is not useful unless it is a platform of integration with the world," said Horacio Reyser, secretary of International economic relations of Argentina, in an interview with a radio on Tuesday. "We have to go and export the products on demand in the rest of the world. In this we are aligned with Brazil. " The Ministries of Foreign Affairs of Brazil and Argentina did not comment immediately. One of the five sources, a Brazilian authority, said that TEC has not changed for 25 years and that the two countries agree with the need to revise it, in a process that was launched by Argentina and which will take until the end of this year. "It is a technical proposal for review. The works are beginning, and there is no substantive definition. It's starting, "said the source. On average, according to one of the sources, from the Brazilian government, the TEC of MERCOSUR for the importation of products that do not belong to the commercial bloc, is about 14%, and the desire of the countries would be a reduction of tariffs over the next few years until reaching a percentage of 5% to 6 %. "We want to take the fare to a global average. Today is well above and affects our competitiveness, "said the Brazilian source in a condition of anonymity. A third source, a diplomat in Argentina, told Reuters that the reduction of TEC will depend, in addition to the Argentine electoral scenario, of the success of the trade negotiations between MERCOSUR and the European Union, while another source, also Argentine, said that the Tariff reduction is a desire of the Government of the President of that country, Mauricio MACRI, but that the decline in the percentage should not occur in all sectors. President Jair Bolsonaro travels Thursday to Argentina, when he will meet with MACRI. The progress of the plans, however, depends on the political electoral scenario in Argentina. The country will have presidential elections in October, and among the candidates are MACRI and a plate headed by the former chief of staff of the presidency Alberto Fernández, who has as a candidate to Vice President Argentine Cristina Fernández de Kirchner. Foreign trade Brazil and Argentina discuss Mercosur's common external tariff reduction, sources say It is not yet clear how long it will take for a reduction to be implemented Port of Santos "We want to take the fare to a global average. Today is well above and affects our competitiveness, "said the Brazilian source in a condition of anonymity PHOTO: Dreamstime Reuters Posted on 05/06/19 at 18:36 RIO DE JANEIRO/BUENOS AIRES-Brazil and Argentina have already initiated conversations aimed at the possible reduction of the common external Tariff (TEC) of MERCOSUR, said sources with knowledge of the matter to Reuters, although the progress of these treatatives depends on a definition in Political scene in Argentina, which will have presidential election this year. All sources, which are familiar with the subject, but are not authorized to speak publicly about the negotiations, said that changes in TEC should not occur in the short term. It is unclear how long it will take for a reduction to be implemented. "Mercosur is not useful unless it is a platform of integration with the world," said Horacio Reyser, secretary of International economic relations of Argentina, in an interview with a radio on Tuesday. "We have to go and export the products on demand in the rest of the world. In this we are aligned with Brazil. " The Ministries of Foreign Affairs of Brazil and Argentina did not comment immediately. One of the five sources, a Brazilian authority, said that TEC has not changed for 25 years and that the two countries agree with the need to revise it, in a process that was launched by Argentina and which will take until the end of this year. "It is a technical proposal for review. The works are beginning, and there is no substantive definition. It's starting, "said the source. On average, according to one of the sources, from the Brazilian government, the TEC of MERCOSUR for the importation of products that do not belong to the commercial bloc, is about 14%, and the desire of the countries would be a reduction of tariffs over the next few years until reaching a percentage of 5% to 6 %. "We want to take the fare to a global average. Today is well above and affects our competitiveness, "said the Brazilian source in a condition of anonymity. A third source, a diplomat in Argentina, told Reuters that the reduction of TEC will depend, in addition to the Argentine electoral scenario, of the success of the trade negotiations between MERCOSUR and the European Union, while another source, also Argentine, said that the Tariff reduction is a desire of the Government of the President of that country, Mauricio MACRI, but that the decline in the percentage should not occur in all sectors. President Jair Bolsonaro travels Thursday to Argentina, when he will meet with MACRI. The progress of the plans, however, depends on the political electoral scenario in Argentina. The country will have presidential elections in October, and among the candidates are MACRI and a plate headed by the former chief of staff of the presidency Alberto Fernández, who has as a candidate to Vice President Argentine Cristina Fernández de Kirchner. The plaque with Cristina as the vice candidate appears in opinion polls ahead of Macri. "With MACRI, you can start the TEC review already at the beginning of next year. We have with Macri empathy of discourse, staff and in the opening measures, "said the Brazilian source, while stressing that the ideal, for the opening of the regional economy, would soon approve, before the outcome of the Argentine elections, the trade agreement of MERCOSUR with the European Union. Bolsonaro has publicly manifested himself against a victory of the plaque that counts with Cristina in the Argentine elections, pointing her as a setback and saying that Argentina can become "a Venezuela" if this occurs. He has also praised Macri and shown affinity with him, while denying interference in the internal affairs of the neighboring country. ECONOMIC OPENING The reduction of TEC is one of the paths sought by the Bolsonaro government to open the Brazilian economy and increase integration with other markets. Alongside the reduction of TEC, the government has plans already in the second semester to initiate the process of reducing the import tariff to BITS sectors (Information technology computing goods) and BK (machinery and equipment). "We will sometime in the second semester start the process of derecording these assets from 14 to 13%, after 13 to 11%, after 11 to 8% and after 8 to 4%," said the source to Reuters. "These are sectors that can go faster and individually. In the case of BIT and BK, we intend to take advantage of the exception window of these goods, "he added. The Minister of Economics, Paulo Guedes, already anticipates in an event at the National Bank for Economic and Social Development (BNDES) that the Government intended to make a gradual reduction in import tariffs. Instead of cutting 10 points at a time, the idea of the economic area is to reduce the import tariffs. "The opening of the economy has to be exponential, it cannot be linear, otherwise you break the Brazilian industry. We will lower average fare by 10%, being 1% in the first year, double in the second, triple in the third and quadruple in the last year, "he said.