On-the-Ground Updates

A Mercosur-Canada free trade agreement is under revision. Potentially it may increase brazilian exports up to $7.8 B/yr.

Fresh Whole Beef
Regulation & Compliances
Innovation & Technology
Caio Alves
Published Jul 27, 2020
The signing of a free trade agreement between Mercosur and Canada has the potential to increase revenues of Brazilian agricultural products exports by US $ 7.8 billion, according to a study by the Confederation of Agriculture and Livestock of Brazil.The study will be officially launched next Wednesday, 29, in a webinar on the progress of the negotiations.

According to the CNA, the results of the document show the relevance of the agreement for the sector and will subsidize Brazilian negotiators with technical data, in order to support defining the country's positioning.

Meats, cereals, flours and its by-products, fruits and the soy complex are the sectors of the agribusiness, according to the CNA, which have the most potential to benefit from the agreement. In the case of meat products, the increase in revenue may reach US $ 1.4 billion per year, as noble and better quality cuts from animals raised on pasture tend to have better attractiveness in the Canadian market.

The segment of cereals, flours and its by-products may increase US $ 771.9 million in sales to Canada. Corn is the product with the greatest capacity to increase revenue (US $ 324.0 million alone), while rice, which already has an import tax zeroed in the North American country, would still have exploitable potential in the short term, says the CNA.

For the fruit sector, the trade opportunity would be US $ 751.7 million. According to the document, despite the rates already zeroed, Brazil is still not very significant in supplying the Canadian market for tropical fruits, such as melons (1.7% of the market), guavas and mangoes (8.1%), lemons and limes(1.4%).

In the soy complex, the CNA estimates that an increase of US $ 703.9 million, despite competition with the United States. The geographical proximity between the two North American countries implies lower costs for logistics and transportation, and notwithstanding the distance itself, Brazil also has some logistic inefficiencies in terms of budget, as generally the product is moved across by truck loads. Plus internal distance for some origination sources and outflowing ports.

With regard to tariffs, the understanding of the entity's study is that the Canadian market tends to negotiate the elimination of a good part of them in the year following the entry into force of the agreements, which may benefit Brazilian producers in the short term.

The study shows that, in general, tariffs are not high for Mercosur countries. Many Brazilian agribusiness products are already entering this market free of the import tariff. However, the Confederation of Agriculture and Livestock warns negotiators of the importance of improving access conditions and non-tariff measures.

The CNA analysis concludes that, in addition to generating positive impacts on Brazilian exports, the Mercosur-Canada agreement can expand the commercial borders of the South American bloc with markets that import food, beverages and agricultural goods. In 2019, the bilateral trade agreement in agricultural products with Canada recorded a turnover of US$ 628.7 million. Brazilian exports of fresh chicken meat, cashews and corn increased by US $ 21.3 million, according to data from the Ministry of Economy.
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