Brazil, Argentina discuss lower Mercosur external tariff: sources

RIO DE JANEIRO/BUENOS AIRES (Reuters) - Brazil and Argentina have started discussing a reduction in the common external tariff (TEC) of the South American trade bloc Mercosur, sources in both governments told Reuters on Wednesday, as their market-friendly presidents look to boost economic growth.

Mercosur, a common market formed by Argentina, Brazil, Paraguay and Uruguay, exacts tariffs averaging about 14% on goods that come from outside the bloc. A reduction presumably would ease trade of all four countries with the rest of the world, and potentially spur economic growth within Mercosur.

All five people familiar with the matter, who were not authorized to speak publicly about negotiations, said that changes to the TEC would not come in the short-term. It was not clear how long an eventual reduction would take to implement.

“Mercosur is not helpful unless it is a platform to integrate with the world,” Horacio Reyser, Argentina’s secretary of international economic relations, said in a Tuesday radio interview. “We have to go out and export the products in demand in the rest of the world. In that we are aligned with Brazil.”

The foreign ministries of Argentina and Brazil had no immediate comment.

One of the five sources, a Brazilian official, said the common external tariff had not been changed in 25 years and both countries agree on the need to revise it, a process that was launched by Argentina and will take until the end of the year.

“Work is beginning on a technical revision proposal and no substantial decisions have been taken yet,” he said.

Another Brazilian source said any agreement will have to wait until after Argentina’s elections in October, but the intention was to lower the bloc’s external tariff over several years from an average 14% to around 5% or 6% in the long term.

An Argentine diplomat said any change to the tariff would depend on the outcome of Mercosur trade talks with the European Union. Another official in Buenos Aires confirmed the lower TEC was one of the aims of President Mauricio Macri’s government, but said it was not likely to be an across-the-board reduction.

“We want to bring the tariff down to a global average, because it is very high now and that affects our ability to compete,” said the Brazilian source.

Brazilian President Jair Bolsonaro will visit Argentina on Thursday to advance a bilateral agenda, but an agreement will likely wait until the fate of the pro-business Macri is decided in elections that could end in a Peronist comeback.

“If Macri wins, the tariff review could start at the beginning of next year. We share the same views on opening up trade,” the Brazilian source said.

Ideally, the long-awaited EU-Mercosur trade deal would be struck before the elections in Argentina, added the source.

Reporting by Rodrigo Viga Gaier in Rio de Janeiro and Nicolas Misculin in Buenos Aires; Writing and additional reporting by Anthony Boadle; Editing by Brad Haynes and Matthew Lewis