The Fiber Broadband Association LATAM Chapter supports the tax Increase on Optical Fibers and Cables in Brazil: Resolution GECEX No. 655/2024.
The Brazilian government recently announced an increase in import tariffs on optical fiber cables and materials used in their production. This increase in tariffson telecommunications products aims to strengthen domestic production and mitigate the impact of foreign competition, especially from China.
The Fiber Broadband Association LATAM Chapter, an organization conformed by companies engaged with in-region technology R&D and manufacturing, fully supports this initiative, which in our belief has the potential to drive significant impact in the current situation to equalize prices and escalate in quality. The Association also believes that this kind of initiative should move further and be extended to other fiber connectivity products such as closures and terminals.
“This is an essential process to ensure competitive conditions for local manufacturers against Asian competitors, who have unfair prices to sell below-cost prices.” stated Nelson Saito, president of the Fiber Broadband Association LATAM Chapter’s Board of Directors.
Across Latin America, companies investing in strategic sectors have been affected by the influx of Asian products, mainly due to the strong erosion in the prices of products that have a significant impact on these economies. This global dispute, which has intensified in the post-pandemic period, has led global leaders to seek to increase trade barriers, which for many is not the most appropriate way to balance the scales, but which has become one of the weapons most used by governments around the world to deal with pressure from countries like China, which sees international trade as its main platform for boosting economic growth.
“Promoting and defending the competitiveness of state-of-the-art products, complying with international standards and manufactured in region will guarantee the quality levels required to succeed in the long-term strategy of a Latin America fully connected with fiber” said Eduardo Jedruch, Regulatory Director of the Fiber Broadband Association LATAM Chapter’s Board of Directors.
The Cable and Fiber Optic market, which already has characteristics of a highly seasonal market due to investment cycles, has seen a significant increase in the entry of these products in an uncontrolled manner, intensified by the growing supply from Chinese manufacturers through the large industrial hubs created from export incentives from that country.
In practically every region of the planet, governments have intensified measures to protect manufacturers, and in the cable and fiber optic segment this mechanism has also been widely used, as can be seen in the table in this link.
Following these consolidated initiatives, established companies in the Brazilian market, such as Prysmian, have launched efforts to protect the interests of businesses that invest heavily in Research and Development (R&D) in Brazil. This urgency has increased following the positive outcomes of measures taken by other countries to reduce export volumes, given the threat to local industry and the redirection of this unmet demand towards the Latin American region.
According to Cleber Pettinelli, Director of Operations of the Fiber Broadband Association LATAM Chapter, “initiatives to contain the uncontrolled entry of Asian products into the region are nothing new. This process had begun in mid-2021, when the first Antidumping process ended up not advancing as expected during the course of the investigation”.
Changes to GECEX resolution No. 655 regarding the increase, albeit temporary, of tariffs on optical cables and fibers were recently published, in a response by the Brazilian Government to the manufacturer’s request against imports from China in an antidumping process at the Ministry of Development (MDIC). The measure is valid for the next six months and foresees an increase in rates from 11.2% and 9.6%, respectively, to 35% in both cases.
In a recent press release, the manufacturer stated that the measure reinforces the sovereignty of the national industry. Prysmian develops and manufactures products with national technology and makes large investments in Research & Development in the market, and is currently the only factory that carries out all stages of fiber optic production within Latin America.
According to Pettinelli, there is broad support from the national industry for the lawsuit initiated by Prysmian. “There are more than 15 manufacturers of fiber optic cables in Brazil, and the result of this lawsuit brings relief to companies that struggle to compete in a scenario heavily impacted by the import of products at unsustainable costs, since the prices of imported cables can cost up to 60% less than those manufactured in the country.”
The investigations are still in their early stages, and there are important developments that need to occur until their conclusion. However, the Brazilian government’s position demonstrates alignment with the major global economies in a clear response to the need to strengthen the local industry and increasingly encourage innovation and investment in Research and Development (R&D).