The lack of consensus in Mercosur countries delayed the division of quotas for preferential access to the European Union. The provisional trade agreement between Mercosur and the European Union, in force since Friday (1), began the reduction (withdrawal of the tariff) for South American agricultural products that access the European bloc, but still without definitions on the quotas belonging to each Mercosur country.
The main impasse is in the division of the beef quota, with Paraguay resisting the division between Brazil, Argentina, Uruguay and Paraguay itself for market share, people familiar with the matter report to Estadão/Broadcast.
Brazilian government interlocutors believe that the division of quotas, still under negotiation, should only be completed by 2027.
Mercosur exporters will have a quota of 99 thousand tons of beef (carcass weight, 55% chilled and 45% frozen) with a reduced tariff of 7.5% to sell to the European Union. The volume will be increasing, with a gradual increase over five years.
A private sector agreement made in 2004 within the scope of Farm (Federation of Rural Associations of Mercosul) provided for 42.5% of the volume destined for Brazil, 29.5% for Argentina, 21% for Uruguay and 7% for Paraguay. The calculation considers the share of each country in the European market and the production of beef by the countries.
But now, Paraguay, which is the temporary president of the bloc, is questioning the agreement and calling for a proportional equal division between the Mercosur countries. The country’s claim is for the right to 25% of the beef quota to be exported to European countries at a reduced tariff. Brazil resists reviewing the agreement, say people familiar with the conversations.
Members of the Brazilian government see at the heart of the discussion pressure from Paraguay amid the review of the Itaipu contract, which involves the tariff for the Itaipu Binacional hydroelectric plant.
“Argentina and Uruguay agree with the proportional division by market share. Paraguay is messing up the game, but by the end of the year the issue should be overcome”, said a person who follows the negotiations.
In the private sector, executives from large companies claim that there was lethargy on the part of the Brazilian government to complete the negotiation of quotas during the 90 days between the ratification of the agreement and its provisional entry.
Behind the scenes, industry sources argue that Brazil slaughters around 40 million animals per year, while Argentina slaughters around 10 million animals, Uruguay around 3 million animals, and Paraguay, in turn, around 2.3 million heads. The numbers, say representatives of the livestock sector, justify Brazil obtaining the highest percentage in the quota division.
Abiec (Brazilian Association of Meat Exporting Industries) defended in a note that the possible division of the quota between Mercosur countries “must consider objective criteria, especially the effective capacity for compliance and the history of performance in exports to the European Union” in order to avoid risks of underutilization of the quota.
“For the Brazilian productive sector, this is not a merely arithmetic division, but rather ensuring that the negotiated quota is fully used, maximizing the benefits of the agreement. In this context, factors such as scale of production, sanitary qualification, regularity of supply and previous experience in the European market are relevant elements to be considered”, said Abiec.
Government members estimate that the division of quotas between Mercosur countries should take place next year. This year, countries will fill the quota using the FIFO (First-In, First-Out) mechanism, meaning that products that arrive first in the European bloc will have priority in tariff preference.
The Mdic (Ministry of Development, Industry, Commerce and Services) stated in response to the Estadão/Broadcast that the “definition of the criteria for administering the tariff quotas of the Mercosur-European Union Agreement integrates the ongoing measures for its implementation”.
“The division of quotas between Mercosur countries is still under negotiation. Until the joint definition is reached, each country will follow its own procedures, without changing the agreed volumes or access to tariff preferences”, explained the ministry.
Until the end of this year, the rules are established in the department’s ordinances, with the distribution of quotas following the order in which requests are registered on the Siscomex Single Portal.
“In imports and exports, the allocation follows the order of request, according to the availability of each quota. After the operation, the Mercosur Quota Authorization Certificate is issued, which allows the application of the tariff benefit”, explained the ministry.
The MDIC also highlighted that the incidence of quotas is limited to only around 4% of exports and 0.3% of imports between the blocs, with the majority of trade between Mercosur and the European Union taking place with the reduction or elimination of tariffs, without quantitative restrictions.
