This is the view of customs law and foreign trade specialists interviewed by the electronic legal magazine Consultor Juridico. In their assessment, Brazil will need to reform archaic bureaucracies and raise its production standards to global levels in order to benefit from the agreement opportunities without being overtaken by European competition.
In numerical terms, the agreement is expected to benefit virtually all sectors of the Brazilian economy. A study published by the Institute for Applied Economic Research (Ipea) in February 2024 projected that, by 2040, the treaty should generate cumulative GDP growth of 0.46% and increase investment by 1.49%.
Sectors such as agribusiness, already competitive on a global scale, should feel the benefits more quickly. Brazilian industry, by contrast, is expected to experience a negative impact in the early years due to competition from European products that will become more affordable in the domestic market.
In the long term, however, the industrial sector may strengthen because inputs and technology will also enter the country duty-free. To achieve that, Brazil will need to adapt to new standards of excellence, which requires urgent modernization of internal customs procedures to avoid bureaucracy, legal uncertainty and more favorable treatment for European actors than for regional partners.
Efficiency shock
From the industry perspective, the agreement is an industrial policy tool that exposes the national sector to qualified competition. Economist Victor Bovarotti Lopes, a foreign trade specialist, argues that Brazil has historically needed to open its economy in order to increase competitiveness. The strategic choice was to do so with Europe, which follows strict market, labor and environmental rules.
Lopes believes that inefficient sectors, including parts of the textile industry, will face difficulties, but that the process should lead to better and cheaper products for Brazilian consumers.
In his view, Mercosur needed to open its industrial sector to more competition in order to increase the competitiveness of its companies. This would have been necessary even without an agreement with the European Union.
The economic selection process will be unavoidable, but beneficial in the long term. If a company cannot compete with Italy, whose market standards differ from China, it must critically reassess its own efficiency.
End of isolation
Currently, only 8% of Brazilian imports are linked to international agreements. With the treaty, that figure will rise to 36%.
The agreement requires compliance with environmental and sustainability standards that are already a reality in Europe, such as the Carbon Border Adjustment Mechanism (CBAM). This policy imposes a charge on carbon-intensive imported products such as steel, aluminum, cement and fertilizers.
Mercosur will need to meet obligations that are particularly strict on the European Union side, including rules related to the environment, labor standards, deforestation and sustainability.
Source: Conjur
