Egypt and Mercosur, a South American economic bloc made up by Brazil, Argentina, Paraguay, and Uruguay, are two expanding markets located in developing regions. And with the purpose to exploit new business possibilities and to foster bilateral trade, they signed a free trade agreement in 2017. During these two years, Egypt has become the biggest partner to Brazil among the Arab countries; however, there are still more opportunities that need to be exploited.
Since the agreement went into effect, it did away with 31% of the tariffs on exportable products from Mercosur to Egypt, and 26% from Arab countries to the South American bloc. The expectation in the next ten years is for that figure to approach 100%. By 2020, the tariffs on products exported by Mercosur such as preparations for meat and fish, pickles, and some fertilizers are expected to be zeroed. And from Egypt, the vegetal sourced products, some fuel ores, machinery, and some pharmaceutical products, as well as others.
“Brazil, as it is the largest economy in the bloc, has directly benefited from the free trade agreement. Egypt, for example, has been the main destination for Brazilian exportations, compared to other Arab countries, exceeding Saudi Arabia and the United Arab Emirates”, explains Fernanda Baltazar, Institutional Relations Manager of the Arab Brazilian Chamber of Commerce.
“There has been a great deal of progress, also from the Egyptian side, as it considers Brazil as an interesting market for its products, especially in the field of textiles a specialty of that country. Thus, we have made considerable progress towards building a truly bilateral trade relation whereas everyone wins“, emphasizes Tamer Mansour, general secretary and CEO of the Chamber.
Egypt, for example, has been the main destination for Brazilian exportations, compared to other Arab countries, exceeding Saudi Arabia and the United Arab Emirates
“Due to this, we hope the trade flow between Mercosur and Egypt increase in the next few years, not only regarding reduced tariffs but also cooperation in other aspects, as customs and phytosanitary, so that the agreement expands possibilities,” argues Fernanda.
Positive results for Egypt
Due to this agreement, Egypt exceeded Saudi Arabia and the United Arab Emirates and thereby became the largest Arab market for Brazilian products. However, in 2018, the amount of Brazilian exportation dropped by 13% compared to 2017. The reduction was 23% overall for Mercosur.
According to Fernanda Baltazar, one of the explanations for that drop was the low price of commodities. For her, that decrease amount does not necessarily mean, a decrease in the exported quantity.
“Egypt has most obviously benefitted from the agreement. Mercosur immediately exempted around 26% of its products from the universal tariff agreement, when originating from Egypt, for example; mainly including fertilizers and vegetable seeds. Those products impelled the increase on exportations to 72% for Mercosur from 2017 to 2018, totaling US$ 363.60 million,” explains Fernanda.
New business opportunities
To Mohamed Elkhatib, who is the head of the Commercial Office of the Egyptian Embassy in Brazil, the Mercosur countries can further benefit from this agreement. According to him, Egyptian products have tax exemptions in over 70 countries. As stated by him at a seminar about the agreement, the South American bloc can make international business deals and take advantage of this Arab country as a springboard.
According to him, as these agreements encompass products produced in Egypt, Brazilian entrepreneurs can benefit from exporting inputs that will be used in concluding manufacturing in this African country.
Besides Egypt, there are other Arab countries showing interest in similar agreements with Mercosur. According to Fernanda Baltazar, there is already an ongoing agreement with Palestine that has not yet been ratified by either side at the moment. Negotiations have also begun with Morocco, but they have been paralyzed due to the fear of an unfair negotiation by the Moroccan agribusiness sector.