MercoPress. South Atlantic News Agency

Uruguay alert to the extent of Brazil recent measures on auto imports

President Jose Mujica, a stinging feeling, but there should be no major concern

Uruguayan president Jose Mujica admitted a certain ‘stinging feeling’ following the recent Brazilian decision to increase import taxes on vehicles by 30%, which could also have an impact on Mercosur partners.

“I think there is no major fundamental concern, just this stinging feeling” said Mujica following a ceremony at the Mercosur administrative building.

However, “I don’t believe that Brazil’s latest measures are targeted on us, I rather believe they are in the defensive context of its economy from outside the region”, added Mujica who said he saw no need to contact President Dilma Rousseff.

Last week Brazilian Finance minister Guido Mantega announced a 30% tax increase for the import of cars outside Mercosur, but those from the block must comply with certain component requisites. The measure is extensive to cars, tractors, buses, trucks and light trucks and is effective until 31 December 2012.

Mercosur cars to have access to Brazil free of the latest tax must have a minimum 65% of components manufactured in the block.

Brazil, the world’s fifth auto market and seventh manufacturer has given Mercosur suppliers 60 days to comply with the new scenario.

Nevertheless Uruguayan officials admitted to have urgently contacted their Brazilian peers to have further information on the extent of the decision.

“If Uruguay is included, it could have a significant economic and jobs consequence” admitted Sebastian Torres, head of Uruguay’s energy office. “We want to check the correct interpretation of the decree”, he added.

Likewise Ramon Cataneo president of the Auto Industries Chamber said that “having given the decree a quick first reading it sounds most protectionist of Brazilian industry, and imposes restrictions that could impact on Uruguay”.

Last year Uruguay’s auto exports totalled 103 million dollars, mostly to Brazil and auto-parts, 228 million dollars. Forty companies in Uruguay are involved in the assembly of vehicles and manufacture of auto parts.

Uruguay has complementation agreements with Brazil and Argentina which has enabled the development of a flourishing auto industry. Under the agreements Uruguay can export, with no limit on numbers, and fee of tariffs as long as the regional content reaches a minimum 60%.

However another sector, the paper industry as of last week has also been exposed to Brazilian non automatic import licences which could considerably delay annual shipments close to 15 million dollars.

Argentina has also decided to apply non automatic import licences to textiles, clothing and the plastic industry.

Under recent president-to-president (Mujica-Cristina Fernandez) agreements the non automatic licences should not exceed thirty days.

However some experienced economists have warned about the near future.

“Uruguay should be ready for ‘selective protectionism’ which is what Brazil has begun to apply mainly with China, but can easily expand to other origins”, warned economist Carlos Sténeri for over a decade Uruguayan delegate before the IMF.