Brazil could stop being one of the world's most closed economies – and these actions must be the most affected

SAO PAULO – Brazil is one of the most closed economies in the world, with an average import duty of 15% on manufactured goods, especially in the garment, steel, machinery and equipment, computer and vehicle sectors – which have the highest rates.

However, this image could change in Jair Bolsonaro's government if its signs of liberalism are confirmed. BBI Bradesco badysts believe that the president's economic team will still announce unilateral measures in the first quarter of 2019 to open the economy over the next four years.

The team headed by Paulo Guedes, Minister of the Economy, badyzes at least three proposals for reducing tariffs. The first is to reduce import duties on consumer goods, computer and telecommunications equipment to 4% by 2021, to reduce the CET (Common External Tariff) and to reinforce the electricity tariff. Free Trade Agreement between Mercosur and the Pacific Alliance, which includes Chile, Mexico, Peru, Colombia and Costa Rica.

The second proposal aims to bring back to 4% by 2021 the tariffs on capital goods, information technology and telecommunications and the tariff of the same. steel. The third objective is to reduce the number of tariffs to four over the next four years by lowering tariffs. and 35% to 15%, 15% to 20% to 10%, and the range 5% to 15% to 5%.

According to a World Bank study, a unilateral reduction in import tariffs could increase Brazil's growth potential by 0.9 percentage points over the next 12 years, as productivity would increase.

sectors can be negatively impacted. According to Bradesco BBI, in the most extreme scenario, between 4% and 5%, the companies that will suffer the most will be Mahle Metal Leve (LEVE3), Usiminas (USIM5), CSN (CSNA3), Randon RAPT3), Iochpe Maxion (MYPK3 ) and Gerdau (GGBR3, GGBR4).

Protect your money from global uncertainties! Usiminas is among the most vulnerable to the negative effects of tariff reductions among steel and mining companies.

followed by CSN and Gerdau. In a scenario of gradual rate reduction, the shares Usiminas and Gerdau have the potential to appreciate about 40%, believes Bradesco BBI.

In the oil and gas sector, tariff reductions could reduce prices. domestic market of the chemical industry, but Ultrapar (UGPA3) would have limited exposure, with an impact of only 3% on the indicative price.

Among the capital goods companies, the tariff reduction of 14% to 4% would have a 31% reduction in the target price of Mahle Metal Leve, a 22% drop for Randon, a reduction of 21% the expected price for the role of Iochpe Maxion and a minor influence on the shares of Weg (WEGE3) and POMO3; POMO4).

However, there are also those who are little affected: this is the case of the clothing and footwear companies, who should not have the feeling of a reduction in import tariffs , says Bradesco BBI.