Brazil works towards formal EU-Mercosur agreement

Among the issues addressed by President Dilma Rousseff while she took part in the 7th EU-Brazil Summit, in Brussels, are the importance in the global scenario of tackling the crisis in Europe, her attempt to negotiate agreements between Mercosur and the European Union, and the need for internet governance aimed at ensuring citizens’ privacy. She also criticized the EU’s objection to the special tax system in the Free Economic Zone of Manaus (Portuguese: Zona Franca de Manaus).

She further declared that overcoming the crisis in the euro zone is key to keeping the world economy vigorous. “Brazil is directly interested in its recovery due to the number of ties in trade and investments,” she remarked. Rousseff added that the efforts to agree a EU-Mercosur trade deal contribute significantly to the recovery of the European countries. The volume of trade between Brazil and the European Union totaled $98 billion in 2013.

Rousseff explained that Brazil has resisted the effects “of the worst global crisis since 1929” thanks to job creation and income generation policies which have maintained macroeconomic balance. The president also stressed that 42 million Brazilians ascended to the middle class over the last years, with a rise of 78% in these families’ per capita income, besides the creation of 4.5 million formal jobs since 2011.

EU Council President Herman Van Rompuy said that “free trade is the best answer to economic challenges” and thanked for all the progress made through the negotiations. In addition, she said that she is expecting “greater cooperation with Brazil over internet governance.”

The president also underscored the importance of the connection between the countries through underwater optical fiber cables.

Brazil and the EU, according to Rousseff, agree on the need for the new internet governance which ensures the privacy of both citizens and companies, and that, at the same time, “protects freedom of speech and the safety in the cyberspace.” Both sides are still deliberating on their future financial participation.

As regards tax incentives granted by Brazilian government to the Free Economic Zone of Manaus, a debate raised by the EU with the World Trade Organization, Rousseff stated that she has focused on an environment-friendly production, crucial to the Amazon rainforest. “The Free Economic Zone of Manaus is not a zone of export, but one of production, for Brazil. In it, jobs and income are generated.” And she added, “Therefore, [the Zone] has a purpose, namely, to prevent deforestation.”

Among the benefits currently enjoyed by manufacturers in the Free Economic Zone of Manaus are total exemption from the Tax on Industrialized Products (“IPI”), reduction of up to 88% in the Import Tax on industrial input, and 75% reduction in the Income Tax.

During the press conference, European Commission President José Manuel Barroso said that the EU understands the local goals of the Free Economic Zone of Manaus and the need for a “positive differentiation” on behalf of the region as a way to compensate for the problems caused by deforestation, but he expects the issue to be analyzed with flexibility by both sides.

Translated by Fabrício Ferreira