In the first International Business Spotlight installment, this blog covered Japanese trade law. Today, we’ll travel around the globe from Japan to Brazil to learn about Brazilian international trade laws.
Foreign Direct Investment
Recent reports have shown that Brazil is a tricky country in which to practice international business, due in part to complex business regulations and the country’s history of supporting domestic businesses. However, Brazil is still considered one of the world’s top ten Foreign Direct Investment (FDI) destinations, accompanying countries such as Spain and the Netherlands.
Central Bank of Brazil
Since its establishment in 1964, the Central Bank of Brazil (BCB) has overseen monetary policy and international business within the country. Much like how Japan reorganized its legislative structure to better centralize policy, Brazil combined the efforts of its previous Currency and Credit Superintendence (SUMOC), the Bank of Brazil (BB), and the National Treasury into one entity—BCB. The Central Bank requires a Corporate Taxpayer Identification Number (CNPJ) from non-residents of Brazil who own properties or rights within the country, including anyone conducting international business.
MERCOSUL and Common Foreign Tariff (TEC)
Much of Brazil’s foreign trade is dictated by the Southern Common Market (MERCOSUL) and the Common Foreign Tariff (TEC). MERCOSUL is defined as “the most comprehensive regional integration initiative in Latin America.” An agreement between Brazil, Argentina, Paraguay, and Uruguay, as well as other South American “associated” countries, MERCOSUR seeks to shape a common market that allows for “free internal circulation of goods, services, and productive factors.” To achieve this level of free trade, participating country leaders signed the Treaty of Asuncion in 1991 and established the TEC.
In general, common external tariffs are introduced in cross-country trade agreements and customs unions. This uniform rate creates free internal trade between a collection of countries, while those outside the common market are subject to tariffs. In regards to MERCOSUL’s TEC, the current tariff rate for countries outside of the common market is 14%, though Brazil and Argentina have recently discussed lowering the rate for goods imported to the bloc. Lowering the tariff rate would allow the South American to compete more intensely with other exporters.