Brazil Wants to Anticipate in Five Years Mercosur’s No-Tariff Policy

Mercosur Brazil will recommend bringing a zero tariff policy forward for imports between Mercosur and Colombia, Peru and Chile. The proposal will be announced during the 46th Mercosur Summit in Caracas, Venezuela, this Tuesday, July 29.

According to Antônio Simões, Deputy Secretary-General for South and Central America and the Caribbean at the Foreign Ministry, Mercosur already has reduced import tariff agreements in place with the three countries. Now Brazil wants to make full exemption effective as of the end of this year, a move that was not expected until late 2019.

Simões went on to explain that Brazil’s interest in rushing its plans is due to an increase in the flow of trade with the three countries and the fact that it involves manufactured products. In 2002-2013, trade has grown 300% with Colombia, 389% with Peru, and 200% with Chile. “This trade is strategic because it involves manufactured goods, which are highly value-added and lead to more formal jobs,” he said.

As soon as Mercosur approves the proposal, the next step will be calling meetings with each of the three countries, which have already hinted that they are interested in pursuing such trade liberalization, Simões said. Since Colombia, Peru, and Chile are part of the Pacific Alliance trade bloc – which also includes Mexico and Costa Rica – the issue of tariffs will be discussed in a meeting with the Alliance before December. Mercosur also has trade liberalization agreements in force with Bolivia and Ecuador.

The 46th Mercosur Summit also marks Paraguay’s return to the regional bloc following its suspension in 2012. At that time, the other Mercosur members (Argentina, Brazil and Uruguay) objected to the rush ousting of then president Fernando Lugo, who was allowed only two hours to argue his case over allegations of poor job performance.

It was in this political setting that Venezuela gained entry into Mercosur. The admission was pending only an endorsement from the Paraguay Congress, but the suspension canceled Paraguay’s right of say and vote.

Bolivia President Evo Morales will also attend the Mercosur Summit. Bolivia is an associate member of the regional bloc in the process of getting full membership.

Paraguay Is Back

The presidents of the five Mercosur member countries – Argentina, Brazil, Paraguay, Uruguay and Venezuela – are set to meet today in Caracas, capital of Venezuela, the country that currently holds the bloc’s rotating chair. This will be first meeting to be attended by the representatives of all five nations, thus marking the return of Paraguay to the summit meetings of the group.

Paraguay had been suspended from Mercosur from June 2012 to 2013. The other members at the time (Argentina, Brazil and Uruguay) questioned the promptness with which Paraguay’s Congress removed then-President Fernando Lugo, who was given no more than two hours to defend himself from the allegations of poor performance in office.

It was in this political context that Venezuela became an official member of the bloc. The country’s admission was only pending approval by the Paraguayan Parliament, but the suspension canceled its right of say and vote.

At the summit, the 46th of its kind, the agenda includes the dispute of the Argentinian government over the so-called vulture funds, which raises the country’s risk of having to declare its second debt moratorium in 13 years. This would aggravate the domestic economic crisis even further, and also make a negative impact on the bloc’s member countries, not least on the trade agreement with the European Union, another topic for the meeting.

The government of Argentina – the next nation to hold Mercosur’s rotating chair – sent to New York a team of economic analysts in an attempt to further negotiations with the US court, which issued a ruling favorable to the vulture funds. Now Argentina must pay creditors US$ 1.4 billion before any further negotiation is conducted over the debt.

Also as part of the agenda, the heads of state are to discuss Brazil’s proposal to bring into effect in 2014 rather than 2019 the no-tariff policy in the trade between Mercosur and Colombia, Peru and Chile. The conflict in the Gaza Strip is another issue to be addressed, as its death toll has reached over a thousand people, most of whom civilians.

According to the Brazilian Foreign Ministry, the five Mercosur countries account for 72 percent of the territory and 70 percent of the population of South America. They also hold 80 percent of the continent’s GDP, and 58 percent of direct foreign investments and 65 percent of the trade overseas.

ABr

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