If you are an exporter targeting Brazil, you’ve probably already worked out that it is not an easy market (or markets) to enter. If you are already doing business in this vast and growing country, you probably know that for sure.
Apart from issues such as profit expatriation constraints, complex taxation, perplexing logistics requirements, mind-blowing bureaucracy and increasing competition, you will also be familiar with the heavy protectionist measures the country has – not without critics – implemented over the last few years to protect its own industry.
This week, the Brazilian government has announced a 25% import duty on 100 products (the World Trade Organisation allows a maximum of 35%, so this measure is totally legal). So what?, you ask.
Here are a few snippets of information to get you thinking:
1- Which are the goods affected? Finding a clear answer is a challenge given the lack of information, but most goods fall into the following categories:
a- Intermediary goods such as electrical equipment, plastics, laminated products, paper, and glass. Also tyres and engines.
b- Consumer goods such as household plastic goods and kitchen equipment.
c- The only commodity affected is potatoes.
2- In its announcement of this 25% tariff, the government has also made clear that it will monitor prices to make sure that consumers don’t end up paying extortionate amounts of imported goods – or, more realistically, they are keeping an eye on inflationary pressures. So, who will bear the burden? The exporter in the country of origin or the supply chain, including distributors? How will it be split and how will margins squeezed, if necessary?
3- So what can you do about it? There are many options, one of which is to add some local content to the products in Brazil or another Mercosur member. In this sense, Uruguay has been capitalising from this, offering an option to not only create a Mercosur origin for the products, but also facilitating the return of profit to the exporter with low (or no) taxes and no currency restrictions. If you would like to discuss these options, do contact us for further details.
The list is not over. 100 more goods will face the 25% duty and this second list will be finalised in October. We will keep you posted on any developments through our monthly newsletter, The Hummingbird.
When considering exporting to Latin America, you need to understand each country and each market within it. If after doing this research you find out that Brazil is definitely for you, there are many ways to enter this market but careful and realistic planning is crucial. We help companies understand and make the most of the opportunities while minimising risk. Our in-country associates give you the real insight into one of the most alluring countries for exporters around the world.
If you have any further questions, please do not hesitate to contact us, or approach your customs broker or a customs consultancy that can advise you accordingly.