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Heads Up: MERCOSUR Raises Tariff
By Joao F. Silva
A 3-point increase in the Common External Tariff (CXT) of the MERCOSUR countries of Argentina, Brazil, Paraguay and Uruguay affects over 9,000 products imported into the four countries.
U.S. exporters are dealing with the price impact of this change, which went into effect in November 1997 for Brazil, to be followed soon by Argentina and later by Uruguay and Paraguay.
Brazil Markets Bear the Brunt
Because of greater amounts involved, U.S. exports to Brazil are particularly affected--remember that Brazil's 159 million citizens make up almost 80 percent of the MERCOSUR countries' population. The country's $780 billion gross domestic product (GDP) comprises more than two-thirds of the GDP of member countries.
For example, the tariff on wheat, the largest U.S. grain export to Brazil ($174 million in 1996), will increase from 10 percent to 13 percent. So does the tariff on tree nuts ($12.6 million in U.S. exports for 1996), one of the largest consumer-oriented export categories.
Also of interest to U.S. exporters who sold almost $38 million worth of wine and beer to Brazil in 1996: Besides the 3-point increase in the import tariff, Brazil has increased its Federal Excise Tax (IPI) on wine, beer and spirits, imported and domestic, by 10 percent. The IPI tax now varies between 10 and 130 percent.
The MERCOSUR tariff rate increase--requested by Argentina and Brazil--came just after Brazil's president set forth an austere fiscal package designed to defend the real against international pressures to devalue the currency. The package included 51 measures to cut government expenditures, increase government revenues and boost exports and restrict imports.
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The author is an agricultural specialist at the FAS Office of Agricultural Affairs at the U.S. Embassy in Brasilia, Brazil. Tel. (55-61) 226-3159; Fax: (55-61) 226-6784; E-mail: SilvaJ@fas.usda.gov
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