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Brazil: Economic agreement with Paraguay, incentives for automotive sector

Brazil: Economic agreement with Paraguay

Representatives of the governments of Brazil and Paraguay in February 2020 signed an economic agreement.

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According to a joint release, the economic agreement (Acordo de Complementação Econômica nº 74) will be expected to strengthen and facilitate trade and customs cooperation between the two countries, in line with the existing understandings under the Mercosur pact.

In particular, there are measures in the economic agreement concerning the automotive sector. Brazil will grant immediate “free trade” treatment for certain Paraguayan automotive products. In exchange, Paraguay will grant free trade for certain Brazilian automotive products. By the end of 2022, tariff preferences will be applied aiming at tariff-free treatment.

The agreement also provides specific requirements for the rules of origin for automotive products, as well as preferential access conditions, with a reduced regional content index (a lower percentage of content considered to originate in the final merchandise for certain purposes).

Regarding Paraguayan auto parts produced under a maquila regime, with a parent entity resident abroad and a maquiladora company domiciled in Paraguay, the agreement provides for free access to the Brazilian market until the end of 2023, if certain rules of origin and regional content index measures are satisfied.

The agreement must be ratified by both countries (in Brazil, this requires the publication of an executive decree).

Read a February 2020 report (Portuguese) prepared by the KPMG member firm in Brazil

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