Venezuela’s Mercosur entry worries industry leaders

10 May 2013 20:23  [Source: ICIS news]

(Recasts 10th paragraph)

Venezuela’s Mercosur entry worries industry leaders HOUSTON (ICIS)--The acceptance of Venezuela into the Mercosur trade bloc is starting to produce changes in the tariffs code, as the country goes from being a member of the Andean Community of Nations to becoming a member of Mercosur, industry sources said on Friday.

Venezuela is in the process of adopting a new code of tariffs that has about 30% more entries, according to local sources.

The country has less than three more years to adapt its industry and the tariffs code to the new guidelines, and the transition could be painful for industries that lack a competitive cost structure to face the upcoming imports.

In the period, Venezuela will have to adopt the common nomenclature for Mercosur and the external common tariffs.

Venezuela joined the Mercosur in July 2012. When the grace period expires in 2016 and all protections disappear, the Venezuelan industry must have all codes established and, more importantly, industries prepared to compete.

The prospects are troubling for a company such as Estizulia, the domestic polystyrene (PS) producer, which has price levels that are almost two times higher than competitive international producers in the US and Mexico.

Venezuela will likely face PS imports from Brazil and perhaps Argentina – countries with prices that are not as competitive as Mexico’s, but still much lower than Venezuela’s.

The adaptation will be easier for polypropylene (PP) and polyethylene (PE) producers because their prices are currently lower or at about the same levels than those of the upcoming competition, expected to come mostly from Brazil.

Industry executives have demanded incentives for their sector such as the elimination of bureaucratic obstacles, access to international monetary instruments and anti-inflationary measures to keep inflation down in the single digits.

The country's inflation rate was 29.44% in April, according to the Central Bank of Venezuela.

By: George Martin
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