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Bolsonaro Administration Tries to Measure Brexit’s Impact on Brazilian Companies

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Research by the Brazilian Embassy in London and by Apex with companies that export to the United Kingdom indicates that the majority expect a negative impact on business with the departure of the British from the European Union.

The tumultuous exit of the United Kingdom from the European Union also causes uncertainty and pessimism in Brazil, which last year exported to the British market about $ 3 billion, the equivalent of $ 11 billion.

To try to help Brazilian businessmen minimize risks and take advantage of opportunities when Brexit becomes a reality, the Brazilian Embassy in London and Apex (Brazilian Agency for the Promotion of Exports and Investments) have launched a platform that promises to monitor future tariff and logistics changes , as well as new customs and legal requirements.

The two bodies also try to measure the expectations of exporters and what they call the appetite of Brazilian entrepreneurs for the British market. For this, they sent a questionnaire to about 2,000 companies in Brazil, most of them with a history of export to the United Kingdom.

But so far, only 40 companies have responded to the questionnaire, including small, medium and large companies, with up to 20 thousand employees, who work in different segments such as footwear, food and beverages, agribusiness and machinery.

Seven out of ten companies that responded to the survey believe that the impact of Brexit should be negative.

Pessimism is related to a possible cost increase and bureaucracy in business with England, Scotland, Northern Ireland and Wales. Businessmen cite fears such as increased spending on logistics and customs, increased tax burden, barriers related to exports via Europe, requirements for new certificates and the imposition of tariff and non-tariff barriers.

But there are also those who see the exit of the Europeans from the block as an opportunity, like companies that operate in the coffee market. According to entrepreneurs interviewed in the research, there are among possible positive impacts the possibility of improving the competitive conditions of Brazilian products, either by imposing import taxes on European products or by reducing tariffs for Brazilian production.

The great message of this research is that the business community is afraid of a market that it can not see how it will be, says political scientist Leandro Consentino, professor of Insper and specialist in International Relations.

Brexit’s environment is still uncertain, and Brazil is already part of the European bloc countries, with whom it has a strong trade tradition, he said. No company likes to be unable to predict, not be able to measure and not understand processes. Evaluates Consentino. He ponders, however, that there is room for Brazilians to unravel the new opportunities that may potentially arise with the UK being forced to seek new markets and new partnerships.

A study by the German consulting firm Bertelmann Stiftung has estimated the impact of Brexit for different countries and has identified that Brazil may have commercial gains of up to € 1.7 billion (depending on the way in which the United Kingdom will leave the European bloc.

This amount, according to the study, refers to the no-deal scenario (without agreement). If the United Kingdom maintains proximity to the European market in a kind of soft Brexit (or Brexit suave), Brazil can still obtain gains of approximately € 940 million (about R $ 4 billion).

But the so-called hard Brexit can compromise up to 600,000 jobs, with a greater impact in Germany and with indirect negative effects in Brazil. A study by the Halle Institute for Economic Research (IWH), also from Germany, assessed the impacts of this scenario in 43 countries and estimated that almost 10,000 workers in Brazil could be affected in dozens of export-related sectors, in which the country stands out as the largest supplier in the European Union.

Last year, Brazil exported almost 5% more to the United Kingdom than in the year abroad. The British, however, are far from being among Brazil’s main trading partners. Most of the Brazilian exports were gold in semifaturated forms (26%), followed by silicon (5.5%) and soy (5.25%).

Together, exports of prepared and preserved beef and poultry accounted for 6.6% of Brazilian exports to the United Kingdom in 2018.

Products exported by Brazil such as fruits, coffee, tobacco, and wood receive an average tax of 6% to 18% to enter the United Kingdom. But British Prime Minister Thereza May has already said that if the exit is without an agreement the tariffs on these products would be reduced to zero.

The idea is to help companies prepare for change. With the platform, the Embassy and Apex also intend to help Brazilian exporters explore new slices of the British market, especially since many already compete with European companies in the United Kingdom.

According to the Brazilian Embassy, the United Kingdom is the fifth largest economy in the world and one of the main global import markets, with imports equivalent to 32% of its GDP (£ 658 billion a year in 2018). In the food and beverage sector, for example, it imports 50% of its consumption, with 60% of the total imported from the European Union.

For Insper’s Leandro Consentino, the current change in the political orientation of Brazilian diplomacy may help the country increase business with the British.

“The United Kingdom can use the new (Brazilian) orientation to value the countries of the West, the new agenda in this process of untying the European bloc,” he says, recalling that under Jair Bolsonaro’s government there is fear and resistance to the so-called “invasion” Chinese. ”

Deadline for Brexit

In 2016, the UK voted through a plebiscite to leave the European Union – Brexit won with 51.9% of the votes. Since then, the exit process, initially scheduled for March 29, has become a novel. The agreement brokered by Prime Minister Thereza May with the European bloc has already been rejected three times by Parliament.

May even promised that he would step down if the plan was approved, but the promise did not work. The European Union agreed to extend the deadline, initially, until April 12, and the British are still discussing how they will get out of the bloc.

The Prime Minister officially asks for a further extension, this time for June 30. But behind the scenes, a flexible extension is negotiated, possibly for 12 months.

By BBC NEWS