Brazil and Argentina have started discussing a reduction in the common external tariff (TEC) of the Mercosur trade block, sources in both governments revealed on Wednesday, as their market-friendly presidents look to boost economic growth.
Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay, exacts tariffs averaging about 14% on goods that come from outside the bloc. A reduction presumably would ease trade of all four countries with the rest of the world, and potentially spur economic growth within Mercosur.
“Mercosur is not helpful unless it is a platform to integrate with the world,” Horacio Reyser, Argentina’s secretary of international economic relations, said in a Tuesday radio interview. “We have to go out and export the products in demand in the rest of the world. In that we are aligned with Brazil.”
A Brazilian official, said the common external tariff had not been changed in 25 years and both countries agree on the need to revise it, a process that was launched by Argentina and will take until the end of the year.
“Work is beginning on a technical revision proposal and no substantial decisions have been taken yet,” he said.
Another Brazilian source said any agreement will have to wait until after Argentina’s elections in October, but the intention was to lower the bloc’s external tariff over several years from an average 14% to around 5% or 6% in the long term.
An Argentine diplomat said any change to the tariff would depend on the outcome of Mercosur trade talks with the European Union. Another official in Buenos Aires confirmed the lower TEC was one of the aims of President Mauricio Macri’s government, but said it was not likely to be an across-the-board reduction.
“We want to bring the tariff down to a global average, because it is very high now and that affects our ability to compete,” said the Brazilian source.
Brazilian President Jair Bolsonaro will visit Argentina on Thursday to advance a bilateral agenda, but an agreement will likely wait until the fate of the pro-business Macri is decided in elections that could end in a Peronist comeback.
“If Macri wins, the tariff review could start at the beginning of next year. We share the same views on opening up trade,” Brazilian diplomats said. Ideally, the long-awaited EU-Mercosur trade deal would be struck before the elections in Argentina, added the source.