Brazil’s ailing textiles and apparel sector could save $100 million a year if a government plan to help shore up Latin America’s largest economy succeeds, a top industry executive said.
The country, reeling from anemic economic growth, is set in June to unveil a scheme to boost general exports and simplify trade, said Fernando Pimentel, director of top textiles and apparel lobby Abit.
“If the plan is fully implemented, we could see transactional costs fall by $100 million a year,” Pimentel said.
The aid package calls for the introduction of a “single door” to cut trade bureaucracy and slash import/export and other business expenses. It would also hand partial tax credits for textiles and apparel duties which can range from 1 to 5 percent. Brasilia also plans to create a more flexible exchange rate, among other measures to bolster Brazilian firms’ international presence, Pimentel said. He added the scheme’s benefits should be felt in four to five years.
“The government is changing direction,” he said, adding that trade officials are keen to fulfil pledges under the World Trade Organization’s Trade Facilitation Agreement in 2013. “It is realizing Brazil must be much more involved in international business and supply chains and we [at Abit] are looking at how we can do this for the fashion sector.”
Brazil is looking to step up trade with the U.S., its second-largest partner after Argentina, with which it signed a trade facilitation agreement in late March. Under the pact, the two countries agreed to increase technical border management expertise, bilateral trade and cut business costs through a five-point working agenda.
“We are interested in doing more and more trade with the U.S.,” Pimentel said, adding that President Dilma Rousseff is set to meet U.S. President Barack Obama in June to strengthen diplomacy.
Pimentel added last year’s U.S. exports totaled $150 million compared to $300 million to Argentina.
Abit is jockeying the government to pursue a free-trade agreement with the U.S. though he acknowledged such a bid faces big challenges. He noted the government has not signaled it will reduce high import duties (which have triggered international criticism) but that he hopes these, “as well as other high U.S. duties” will eventually fall to buoy trade.
Brazil also intends to lift commerce with the European Union and through the Mercosur block of which it is the largest member. Other actions will also see it flesh out trade with Colombia and Peru to benefit from the Pacific Alliance, which also includes Mexico and Chile.
Pimentel said the industry hopes to lift exports to $2 billion in the next two to three years from a forecast $1.3 billion in 2015. This will be partly done by expanding export promotion program Texbrasil.
Pimentel said, however, that 2012 expectations for a doubling of exports by 2016 now looked unrealistic.
“The international markets have become much tougher,” he said, nothing that it may take Brazil 10 to 12 years to witness a significant export rebound.