Expert: Reciprocity can cause more problems than benefits

The United States' decision to propose additional tariffs on Brazilian imports has sparked debate about the tools available to Brazil to respond to American trade pressure.

In an interview with Hora H, José Pimenta, partner at the BMJ consultancy, assessed the impacts of the measure and warned that the Reciprocity Law, although legitimate, requires strategy and caution to be used without generating more harm than good.

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Pimenta, however, urges caution given this perspective.

According to him, although it is possible to redirect some products in volume, especially agricultural commodities, the same does not necessarily occur in terms of value.

"In terms of profitability, the United States is a well-paying market," he stated.

"It's a premium market for several products."

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The expert highlighted that Brazil and the United States have built, over decades, a trade chain worth US$80 billion, beneficial to both sides.

Estimates from the American Chamber of Commerce indicate that US$15 billion of Brazilian exports to the USA will be impacted by tariffs, a value that involves goods of medium and high technological intensity.

In addition, some Brazilian agricultural products are produced specifically for the North American market, with their own certifications and production processes, which makes redirection even more difficult.

Two negotiation tracks
Pimenta explained that Brazil has two distinct fronts to deal with the situation.

The first is the formal Section 301 trail, an investigation conducted by the USTR, in which the Brazilian government and the productive sector have up to one month to present statements and defenses in a public hearing.

The second track is a broader bilateral negotiation, which involves topics such as big tech legislation and, above all, the growing American interest in rare earths and critical minerals.

The expert highlighted that, although these two trails are interconnected in some way, they have different specificities.

"Somehow everything is interconnected, but they are different paths", observed Pimenta.

He added that the United States' interest in guaranteeing access to Brazilian reserves of critical minerals - and not to Chinese ones - represents an important bargaining chip in the negotiations.

Pimenta, in turn, considered that Brazil, despite having the world's second largest reserve of rare earths, is still structuring its internal legislation to deal with this asset.

The National Critical Mining Plan was recently approved by the National Congress, but the country is still "institutionally formulating a way to deal with this wealth", as the expert said.

He also highlighted that exploration, refining and commercialization projects for these minerals are long-term and require a strong public-private partnership.

Reciprocity Law: bargaining tool that requires strategy
Regarding the Reciprocity Law, Pimenta was direct: it is a legitimate tool, approved by the National Congress and in force, but which needs to be used with extreme caution.

"Depending on how it is used, you may have more problems than benefits", he warned.

To be activated, the law needs to be provoked by the productive sectors themselves, who will carry out an assessment and, if necessary, demand its application from the government.

"It's an interesting bargaining power to use," said Pimenta.

He argued that the central question now is no longer whether the law should be used, but against whom and in what dose.

"We are going to explore this remedy in a more strategic way", he concluded, reinforcing that the strategy behind the choice will be decisive for the success of its application.

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Source: CNN