Brazil’s Proposal of Mercosur Fund for Business Ready for Launching

A meeting by Mercosur leaders The Fund for Small and Medium Companies of the Mercosur, proposed by Brazil, should be launched during the Summit of Heads of State of the Mercosur, scheduled to take place on January 16, in Salvador, in northeastern Brazilian state of Bahia.

The fund will count on US$ 100 million to be used as guarantee for financing from a future public and private network of accredited banks in the four countries of the bloc – Brazil, Argentina, Uruguay and Paraguay.

The funds should be administered by a committee including representatives of the governments of all four countries. Brazil should invest the largest volume of funds.

Participation should be the same as that of the Fund for Structural Convergence of the Mercosur (Focem) – 70% from Brazil, 27% from Argentina, 2% from Uruguay and 1% from Paraguay. However, each country should have the right to 25% of the total, for use in loans to small and medium companies involved in productive integration projects with neighboring nations.

"We are seeking stimulation for small and medium companies to develop initiatives for productive integration," explained the director of the Mercosur Department at the Brazilian Foreign Office (Itamaraty), minister Bruno Bath.

Another theme sped up by Brazil during its temporary presidency of the group, which should be announced in Salvador, is the end of the double incidence of the Common External Tariff (TEC), considered fundamental for the establishment of a future customs union.

Today, a product from outside the Mercosur, subject to the TEC, pays the import tax on traveling from one country to the next, which makes the circulation of goods economically unviable.

Negotiations for the end of dual taxation are not yet finalized, but until the last minute Brazil should try to solve the most problematic question: the formula for redistribution of customs revenues. "This is the most complex term, but understandings are progressing," guaranteed Bath.

The largest resistance is from Paraguay, which depends greatly on customs revenues and needs guarantees that the fees that should stop being levied will be reimbursed somehow. "The negotiation is focused on the specific case of Paraguay," said Bath.

The end of dual taxing is included in the agreement that established the Mercosur, and enactment is scheduled for 2009. If approved at this summit, it should be implemented in four phases, considering tariff levels, starting in January.

If approved at the Common Market Council, to meet on the eve of the summit, the heads of state of the Mercosur should also announce the creation of a forum for tax matters for dialogue and exchange of knowledge in the area, and of a fund for family farming in the Mercosur.

Such a fund should finance cooperation projects between governments, currently banked by the International Agricultural Development Fund under the Food and Agriculture Organization of the United Nations (FAO). The fund should count on US$ 300,000, also following the same contribution quotas as the Focem for each nation, plus another US$ 15,000 per country.

Apart from majority participation in the funds of the Mercosur, Brazil plans to double, voluntarily, starting in 2010, its quota of the Focem to US$ 70 million.

The proposal, anticipated by Brazilian Foreign Minister Celso Amorim, in an audience at the Senate, should be taken to the Common Market Council, as it depends on adaptation in the fund, as its legislation does not forecast voluntary contributions apart from the pre-established quotas.

ABr

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