Brazil announces a new 10% cut in import tax rates

On Monday, May 23, the Brazilian Federal Government decided to cut by another 10% the import tax rates levied on 6,195 categories of products. The measure includes items such as beans, meat, pasta, biscuits, rice, and construction materials, among other items to which are applied Mercosur’s common external tariff (TEC). These items had already seen their rates reduced by 10% in November last year. Thus combining the new measure with the previous action, more than 87% of all goods traded in and out of Mercosur either had their rates reduced to zero or by a total of 20%.

The new cut in import tax rates was approved on a temporary and exceptional basis at an extraordinary meeting of the Chamber of Foreign Trade’s Executive Management Committee (Gecex) until December 31, 2023. It will contribute to the cheapening of almost all imported goods, directly benefiting the population and the companies that consume these inputs in their production process. Gecex’s resolution was published in the Official Brazilian Gazette on Tuesday, May 24.

Economic Impact

The government’s goal is to mitigate the negative economic consequences of the Covid-19 pandemic and the war in Ukraine, primarily the high cost of living for low-income people and the increase in the costs that companies have to deal with in the production and marketing of goods.

The Department of Foreign Trade (Secex) of the Ministry of Economy estimates that, in the long term, the total reduction of the TEC applied to these products (10% in 2021 and another 10% in 2022) will have an aggregate impact of R$ 533.1 billion in GDP growth, BRL 376.8 billion in investments, BRL 758.4 billion in imports and BRL 676.1 billion in exports, resulting in a growth of BRL 1.434 trillion in the current trade flow (sum of imports and exports), in addition to generally lower price levels across the economy.

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