Brazil seeks to boost trade with FTAs

Legislation | | MIC Customs Solutions |

Brazil hopes a network of free trade agreements could be a positive way towards greater economic stability.

Earlier this month, it was widely reported that Brazil had signed a free trade agreement with Paraguay in order to boost the trade of automobiles and parts between the two countries.

The progress towards the agreement was first revealed at the Mercosur Summit back in December 2019, with Brazil having already signed similar deals with Argentina and Uruguay.

It means Paraguayan auto parts will be able to enter Brazil freely, while Brazilian parts going to Paraguay will enjoy lower taxes of two per cent until they are eliminated completely by 2022.

However, Brazil is seemingly keen to strike while the iron is hot and build upon this success with further free trade agreements outside Latin America.

Reuters has quoted Brazil's foreign trade secretary Marcos Troyjo as saying the nation is very interested in a trade deal with the UK post-Brexit and will seek to strike a Mercosur-style deal similar to the one between the EU and the South American bloc of allies.

The UK already has a strong trading relationship with Brazil and is one of its most important trading partners in Latin America. Just last year, the UK launched an initiative to help Brazilian SMEs trade with the UK and elsewhere, suggesting Britain would certainly be open to some kind of agreement.

There is also evidence to suggest many UK businesses are unaware of the opportunities present in Brazil, particularly since it now has one of the world's most rapidly developing economies and a greater GDP per head than China. Clearly, this would be something Brazil is keen to address.

Another market Brazil looks eager to target is the US, with proposals already having been made for a free trade deal between the two. Last year, Brazilian foreign minister Ernesto Araujo met US secretary of state Michael Pompeo, culminating in the announcement of the US-Brazil Strategic Partnership that could pave the way towards even more trade integration.

The benefits would likely be mutual, as the US could use such a deal to increase its trade balance with Brazil and surpass its long-term rival China.

For Brazil, this interest in free trade agreements is part of a more long-term goal to boost the economy and counter the problem of low per capita income. 

Over the past 20 years, there has been a trend towards protectionism and economic isolation, but the crushing recession as recently as three years ago has made it clear for many that trade liberalisation is a far better way forward.

By negotiating new agreements and opening up trade pathways across the globe, Brazil could demonstrate its viability as a trading partner and make itself an attractive place to do business, thereby stabilising the economy using strong foundations.