Brazil breaks record in foreign trade – Bolsonaro government

Brazil took important steps to deepen its efforts to enter the global market in 2022. The Secretariat for Foreign Trade and International Affairs (Secint) of the Ministry of Economy presents advances that have contributed to increase both exports and imports. In addition, the actions bring the country closer to international organizations, improve the business environment and open new markets for Brazilian exporters and importers.

One of the main results is the record in the trade chain (sum of exports and imports), with a value of US$ 559.6 billion from January to November, up 22.4% over the same period last year and surpassing the value of the whole year of 2021, when it reached US$ 500.2 billion. This is the most important indicator of international insertion and increased productivity.

Commercial agreements

The country made progress in negotiating trade agreements – a pillar of Brazilian trade policy – opening foreign markets to domestic production and gaining access to inputs, new technologies and more modern and competitive processes. This year, the Mercosur Free Trade Agreement with Singapore, the Free Trade Agreements of Free Zones between Brazil and Uruguay and Colombia and the Mutual Recognition Agreement for Vehicle Homologations between Brazil and Argentina were concluded. There were also developments on other negotiating fronts – such as trade agreements with South Korea, Canada and Lebanon –, in addition to the negotiating process for the government procurement agreement within the scope of the World Trade Organization (WTO) and the request for adherence to the Agreement on Trade in Civil Aircraft, another plurilateral agreement within the scope of the Organization. Furthermore, the Protocol on Trade Rules and Transparency between Brazil and the United States entered into force, guaranteeing freer and fairer trade between the countries.

Modernization of Mercosur

One of the most significant actions on the international scene was the modernization of Mercosur. In 2022, there was the first horizontal review of the Common External Tariff (TEC) since its establishment in 1995. Considering it essential to bring the bloc’s tariff structure closer to the levels practiced internationally, Brazil conducted discussions with the other member countries on the gradual implementation of a reform, taking into account the needs of the productive sector to adapt to the new tariff reality.

In July 2022, the Mercosur Common Market Council approved a 10% decrease in the Import Tax rates, as well as a 0% reduction in the rates, which were then at 2%, in addition to maintaining part of of the tariff universe, encompassing, in all, about 87% of the codes that make up the Mercosur Common Nomenclature (NCM). These cuts constitute the most comprehensive review of the tariff structure ever adopted by the bloc since the creation of the TEC. Brazil had already temporarily reduced its import tariffs by 20%, given the need to protect the lives and health of Brazilians in the context of the pandemic and as a government response to the inflationary pressure resulting from the conflict in Ukraine. The agreement signed in Mercosur made part of the tariff reductions already implemented by Brazil permanent, and Mercosur members agreed to continue the work of reviewing the TEC, in order to seek a broader and deeper modernization of its structure.

The Foreign Trade Secretariat (Secex) of the Ministry of Economy estimated that, in the long term, the total reduction of the CET applied to these products by Brazil – being 10% in 2021 and another 10% in 2022 – will have accumulated impacts of BRL 533 .1 billion increase in GDP, R$376.8 billion in investments, R$758.4 billion increase in imports and R$676.1 billion increase in exports, resulting in R$1.434 trillion growth in the foreign trade chain (sum of imports and exports), in addition to a reduction in the general level of prices in the economy.

Towards the OECD

Another priority for Brazil at the international level is joining the Organization for Economic Cooperation and Development (OECD). In January of this year, the Organization’s Council approved the start of the country’s accession process. Since 2019, Brazil has adhered to 49 OECD legal instruments, becoming the non-member country that adheres most to the Organization’s regulatory framework. Among the candidate countries, Brazil was the first to deliver – in September 2022 – its Memorandum of Accession, a document with a self-assessment of its degree of convergence to OECD instruments. In total, Brazil has already adhered to 114 out of a total of 230 instruments. In addition, measures in line with the agenda were approved, including the gradual reduction of the IOF on foreign exchange transactions – a tax that will be zeroed in 2028 – and the New Foreign Exchange and International Capital Law, which will ensure greater simplification and agility for international payments and receipts.

As part of the accession process, the National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises underwent a peer review (Peer Review) and assisted in the Organization’s study of public policies on Responsible Business Conduct ( CER) from Brazil. The document brings policy recommendations to help regulate and reinforce behaviors aligned with these Guidelines, in addition to leveraging and encouraging CER through other policies that influence business activities in the country. Another important delivery in the context of the accession process was finalization of the Action Plan on Responsible Business Conduct (Pacer) within the scope of the National Investment Committee (Coninv). Compliance with the obligations with the responsible business conduct guidelines and policies is one of the first items to be evaluated in the accession process (Framework for the Consideration of Prospective Members of the OECD).

Trade facilitation and promotion

On another front, actions to reduce bureaucracy, facilitate and increase the efficiency of state action on foreign trade operations will allow the country to end 2022 with savings of more than R$ 50 million in fees that were no longer paid by importers to the issuance of documents, thanks to the elimination of the requirement for more than 700 thousand automatic and non-automatic import licenses for various products.

In addition, with the implementation of the Single Foreign Trade Portal, the average time to export in Brazil fell from 13 days to less than five days, generating annual cost savings – due to the reduction in delays in shipments – of more than Rs. $100 billion every year. In imports, 40% of operations can now be carried out through the Siscomex Single Portal, thus reducing the average import time from 17 days to 9 days, generating savings of R$ 60 billion each year.

In the sphere of promoting foreign trade and Brazilian exports, a paradigm shift occurred in the drawback regime, with the expansion of the mechanism for services. The drawback suspension is a tool for the international insertion of Brazilian companies that supported the export of more than US$ 61 billion in 2021, representing approximately 22% of total Brazilian exports. Currently, the regime covers tax relief only on the purchase of foreign and national goods destined for the industrialization of products that will be exported.

Based on Secex’s actions, Law 14,440/2022 was enacted, which will come into force in January 2023, and services directly and exclusively linked to exports will have tax relief similar to that applied to goods used in the manufacture of items sold abroad , generating a reduction in charges and greater competitiveness for Brazilian exporters. It is also worth mentioning the development of an integrated foreign trade service platform aimed primarily at serving MSMEs, called BRAEXP. The project, carried out under the Brazil-UK Trade Facilitation Program, seeks a greater insertion of MSMEs in global value chains. With the signing of the cooperation agreement between the federal government and the Brazilian Trade and Investment Promotion Agency (Apex Brasil), the National Confederation of Industry (CNI) and the National Confederation of Agriculture (CNA), a virtual environment in which Brazilian MSMEs will be able to connect to suppliers, both public and private, of services aimed at exports, such as export maturity assessment services, business training, commercial intelligence, trade promotion, financing, insurance and guarantees, logistics, dispatch and customs documentation, among others.

Safe

Important measures had a direct impact on Brazilian exporters, such as the resumption of the possibility of approving new Export Credit Insurance operations. After several actions to strengthen the current model, based on the Export Guarantee Fund (FGE), its governance was improved, which allowed the resumption of approval of new risk coverage. Since May 2022, support for US$709 million in new businesses has already been confirmed.

More investments

On the part of the External Financing Commission (Cofiex), the approval of projects to be financed with resources from multilateral organizations and foreign government agencies in 2022 reached 53 projects, totaling around US$ 7.13 billion in new investments, especially in social development and physical infrastructure in the country.

To facilitate private investments, the Single Investment Information Portal was launched in September 2022, and the Regulatory Agenda for the Improvement of the Investment Environment is being prepared, containing a broad review of the normative acts that impact this matter.