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MNI EXCLUSIVE: Brazil Ponders "Braxit", Looks To Cut Tariffs

     BRASILIA(MNI) - Brazil's foreign ministry is in the early stages of a study
on the economic impact of pulling out of Mercosur, but the country's next move
within the trade bloc will probably be further tariff reductions, officials at
the ministry and the office of President Jair Bolsonaro told MNI.
     While Bolsonaro has long threatened to evaluate Brazil's Mercosur
membership, the chances of what some Brazilians have dubbed "Braxit" have risen
since the victory of leftist Alberto Fernandez in Argentina's presidential
elections Oct. 27.
     But, while Bolsonaro has ordered the foreign ministry to assess the impact
of withdrawal from Mercosur, diplomats are also working on concluding a deal to
cut tariffs by a further USD500 million within the bloc, officials told MNI.
This agreement is expected to be announced by early 2020.
     South America's largest trade bloc groups Brazil and Argentina with Uruguay
and Paraguay. Venezuela is also a member but has been suspended since 2016.
     Mercosur accounts for 11% of Brazil's foreign trade. In 2018, the country
exported USD20.9 billion to its Mercosur partners, and imported USD13.4 billion.
Mercosur takes 20.4% of Brazil's manufactured exports and 25.6% of its high- and
medium-high technological products, according to data from the Economy and
Foreign Affairs ministries.
     Brazil's National Confederation of Industry has spoken out against the
possibility that Brazil might leave the bloc. "For industry, it is important for
Mercosur partners to continue on an ambitious agenda of trade liberalisation
through free trade agreements," said Carlos Eduardo Abijaodi, its director of
industrial development.
     Paulo Cesar Nascimento, a professor of political science at the University
of Brasilia, said Bolsanaro's bark was often worse than his bite. "The Bolsonaro
Government often makes controversial statements, but in practice, what prevails
is the market," he told MNI. Fernanda Magnotta, cordinator of institutional
relations at the Armando Alvares Penteado Foundation, agreed: "Pragmatism always
overcomes ideology. You can't isolate yourself from the world, nor ignore the
benefits of Mercosur for Brazil."
     When Bolsonaro won election in 2018, he quickly dropped earlier hints he
might walk away from Mercosur, saying instead that he would work to modernise
relations within the bloc. He found shared ideological affinities with
Argentina's outgoing President Mauricio Macri and Paraguay's Mario Abdo Benitez,
and at one point he even suggested that the Brazil might share a common currency
with Argentina, the "peso real".
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$T$$$,M$Z$$$,MT$$$$,MX$$$$,MGZ$$$]

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