São Paulo – The greater import tax levied on 100 products, announced on Tuesday (4) by the government of Brazil is evaluated as protectionist and does not affect the main problems of the Brazilian productive chain. Notwithstanding, it may help sectors benefited to compete with imported products in the short term.
To the president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro, the increase in tax on some products will have a small reflex in the end price and is not enough to make the domestic industry more competitive. "Brazilian products have very high idle cost and need measures like this for protection. It is more protectionism than protection of industry,” he said. To Castro, it would be ideal for the government to promote structural reforms, like the tax reform, to reduce the cost of domestic products.
The president at AEB is not the only one to defend structural reforms in the productive sector. The executive director of the Brazilian Foreign Trade Company Association (Abece), Lilia Miranda believes that the government would defend industry more if it promoted structural reforms in the economy. “The measures [announced], in last analysis, do not affect the lack of competitiveness. There are matters, tax, for example, that should be priorities for our economy to become truly strong,” she said.
Miranda said that the benefit that could arise from the government measure may, in fact, harm the country, as some products in the government’s list are inputs. If prices rise, the price of end product could also rise. Miranda also pointed out that competition stimulates greater competitiveness in products and added that other instruments could help a specific area of the economy to protect itself. "When a company or sector feels affected, it may call on the government to adopt protective measures,” she stated.
Castro pointed out, however, that although the government action does not promote competitiveness in the long term, the measure is legal and the country should not be faced with safeguard complaints. World Trade Organisation (WTO) regulations allow a country to tax industrialized products by up to 35%. Most products facing higher import tax suffered an increase to 25%. The measure was adopted for 12 months and may be renewable for another 12 months.
Little after announcing the increase in taxes, the minister of Finance, Guido Mantega, stated that the measure was adopted as other countries are facing a financial crisis and have sought expansion of exports to places with growing economies. Among the sectors benefited by the measure are ironworks as well as the petrochemical, rubber and medication sectors.
Not all believe that the government measures will be harmful. The Foreign Trade professor at the Technology College (Fatec) in Barueri, Givan Fortuoso da Silva, stated that the sectors benefited by the tax on imported competition will become more competitive. "In the case of some products, the tax has risen fivefold, in others, it has almost doubled. Some imported products will become less competitive,” he said.
*Translated by Mark Ament
