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Last week, President Jair Bolsonaro issued Decree 10,786, published in the Official Gazette of 8 September 2021, making public that Brazil will not renew the validity of the maritime transport agreements with its neighbours Uruguay (signed in 1975) and Argentina (celebrated in 1985). The decision was taken in December 2020 and conveyed to the respective countries last February.
Under the agreements to expiry, cargoes moved between ports of signatory countries should preferably be bilaterally carried on vessels flying their flags, except when such vessels are not available.
The move seeks to encourage the entry of foreign shipping companies and increase competitiveness in the sector. Roughly, half of the cargo trade with Argentina and Uruguay is carried by sea. The government affirms that the agreements create a market reserve and impose barriers to trade flow and free competition, limiting the ability of users to choose their service providers.
Another reason for ending the agreements is to adjust the country’s legal framework to an unrestricted opening of deep-sea trade in line with the principles of the Organisation for Economic Co-operation and Development (OECD) and, with that, help Brazil earn a spot in this organisation, as coveted by the current federal administration.
In general, the presidential decree was praised among cargo interests, notably those represented by the Brazilian National Confederation of Industry (CNI), who see it as a stimulus for open competition between shipping companies, resulting in cheaper freight rates for the benefit of users. On the other hand, the Brazilian Association of Cabotage Shipowners (ABAC) criticised the measure for believing that the cargo currently transported by Brazilian shipowners will be handled by foreign companies that do not generate jobs nor collect taxes and duties in the country, and often rely on open registry vessels with lower operating costs.
The termination of the bilateral agreements will take effect from 7 October 2021 for Uruguay and 5 February 2022 for Argentina.
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