Duty free ‘makes positive moves’ on Mercosur

By Luke Barras-hill |

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Mercosur headquarters in Montevideo, Uruguay. Source: Mercosur.

South America’s DF&TR market is understood to have secured ‘important concessions’ related to product exclusions within the Mercosur Resolution, which was implemented in April.

As reported, A regime that harmonised regulations for border duty free shops to begin operating in 16 countries subscribing to the *Southern Common Market regional integration union –  agreed in December and implemented into state parties’ legal systems in April – excludes the sale of some products such as tobacco.

ASUTIL (Asociación Sudamericana de Tiendas Libres) has been lobbying against the restrictions  to ensure sales of ‘everyday basket’ items such as electronics and tobacco are included within the new land free and tax free stores regime.

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José Luis Donagaray, Secretary General, ASUTIL: “Governments are working to harmonise the symmetries of the economies on the border; in the next few weeks there will be some news.”

MORE DETAILS TO FOLLOW…

In response to a question posed by TRBusiness during a press webinar yesterday (15 August) updating on the regional business, ASUTIL Secretary General José Luis Donagaray acknowledged that exemptions have been negotiated but did not confirm specific details or divulge any further information.

“We have been working with them [government and relevant authorities],” he stated. “The Mercosur Resolution came at the end of last year which presented some issues. Now the governments are working to harmonise the symmetries of the economies on the borders. So in the next weeks we will have some news.”

Pressed on whether the association had managed to secure ‘significant’ concessions, Donagaray answered affirmatively.

The Mercosur developments have coupled with the long-awaited emergence of Brazil’s new duty free border business, which ASUTIL revealed in 2018 had formally gained regulatory approval from Brazilian customs.

This permits land border duty free shops to open in any of Brazil’s 32 twin cities bordering variously with Argentina, Paraguay, Peru, Colombia, Bolivia, French Guiana, Uruguay, Guyana, Venezuela and Suriname.

In addition, Donagaray said a forthcoming vote on Brazil’s social security law in October may also pave the way for long-discussed allowance increase at airports in the country.

As reported, Dufry Group has been gearing up to open its first concession, an 850sq m shop in Uruguaiana. The city is the second largest on the Brazilian border with Argentina and Uruguay.

Dufry’s shop is the latest opening after several others from smaller operators – a 200sq m Barra do Quarai outlet operated by Emporio Duty Free and a 400sq m Jaguarão shop run by Caraballat Free Shop.

During the webinar, ASUTIL confirmed that the globe’s leading duty free and travel retailer soft-opened its first Brazilian border store on Wednesday (14 August), with an official opening in the presence of stakeholders and key authorities planned in the coming week (Thursday).

Currently, there are no restrictions on the number of licences that operators can obtain in each of the 32 locations.

Asked by TRBusiness about the quantity in the future, Donagaray said: “It’s impossible to know. This is a new business with 32 different cities. They [operators] can have multiple licences in multiple cities. It depends where the [product] stock will be – it has to be in a free zone.”

NON-MEMBERS INVITED TO BRAZIL CONFERENCE

During the webinar, ASUTIL also shared some outline information on a conference due to take place on 5-6 November in Porto Alegre, although a venue is yet to be decided.

The two-day event will combine a conference element and – as is customary – ample networking time in an inaugural meeting gathering stakeholders across the entire Brazil land border business.

In a break from tradition, ASUTIL confirms that non-members of the association – operators and suppliers – will be invited to participate.

“Members and non-members of ASUTIL will have an opportunity to meet with suppliers,” said Donagaray. “Networking is open to all.”

While the new Brazilian border business is an important breakthrough for South America’s duty free sector, it remains embryonic with the full mechanics of the trade yet to be established properly; undoubtedly there will be questions and concerns raised on operations and regulations, among other matters.

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Dufry, Caraballat Free Shop and Emporio Duty Free have already opened shops on the Brazilian land border.

“Basically the general idea of this event is to help new operators, potential ones and suppliers [to understand] how this [the Brazilian border business] will develop and answer all the questions,” commented Donagaray.

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Julián Díaz, CEO, Dufry Group told TRBusiness during a recent investors call announcing its half-year results that he is convinced the border shops will be one of the most important future growth drivers of the Brazilian travel retail business.

Aside presentations from Brazil’s federal tax and revenue office Receita, which also holds customs responsibilities, ASUTIL President and Dufry General Manager Brazil Gustavo Fagundes and Argentinian economist Carlos Melconian, the event will feature a panel session with a Brazilian expert from the Uruguay Free Zone.

He is expected to be able to illuminate delegates on logistical procedures for the Brazilian border operations.

ASUTIL says the event will address these questions and more to allow operators and suppliers alike to conduct and discuss a potentially flourishing – and lucrative – business once it beds in.

Reflecting on the performance of South America’s duty free business this year and his take on how the next few months are shaping up, Donagaray added: “We had some recovery in May and June but with the Argentina situation and Brazil not growing as expected, we think we will have a difficult second semester.

“In terms of travel and tourism, Brazil and Argentina are very important. When you talk about Chinese devaluation, it also affects commodity exports in South America.”

Stay close to TRBusiness for more concrete information on the ASUTIL Brazil conference agenda.

*Mercosur state parties include Argentina, Brazil, Paraguay and Uruguay. Venezuela is currently suspended, while Bolivia is in the process of accession.Chile, Colombia, Ecuador, Guyana, Peru and Suriname are designated as associated states.

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