However, while Brazil has approved the new regulations to permit its first border stores to open, Secretary-General José Luis Donagaray told The Moodie Davitt Report that it was unlikely that neighbouring states such as Uruguay, Argentina or Paraguay would adopt the new rules for at least another year. Originally, it was planned that the updated rules would be signed into law in each state by April. That means the status quo on allowances and approved categories will remain.

He said that ASUTIL officials had met with the Uruguayan and Brazilian governments, and their tax and customs offices, on the issue, to seek reassurances.

Speaking previously about the issue, Donagaray said the new Mercosur resolution has “positives and negatives” for the industry. “The positive is that Mercosur recognised the importance of border shopping, the impact it has on employment and the regional economies. But on the other hand, it restricts the sale of some categories. That sets a bad precedent for the future.”

It now appears that change to the significant border business in Uruguay won’t happen soon, which will come as a relief to retailers in the region. However, the association plans to continue lobbying legislators about the proposed category restrictions.

Donagaray said: “Our main aim is to continue selling what we have always sold in the free zones. Rather than including certain categories, we would prefer to have a list of items that cannot be sold.

“We’ll agree not to sell anything that doesn’t come under the normal duty free rules, We don’t want our shops to become IKEA. But we do want to offer textiles, shoes, electronics, small fashion items, tobacco and so on.”

He acknowledged that tobacco may prove a difficult issue, but added: “We can give examples of solutions such as exists in Uruguay. There is already a special taxation on tobacco, even in duty free.”

Hailing the expansion of the land border business, Donagaray noted that the duty free industry can point to some persuasive arguments about the benefits the channel brings.

“The industry has a big impact on employment and local taxation. We did some research in Uruguay in 2017. We know that in some border towns, 30% of people who are employed there work in duty free. It is quality employment and there is a positive impact on hotels and restaurants, where more jobs are created. That also means people don’t have to travel to the major cities to work in low-income jobs.”

Other countries may choose to adopt the Mercosur land border legislation later, Donagaray noted. “Other states such as Argentina or Paraguay might adopt the legislation later, but we have more time, perhaps one or two years.

“Argentina does not have true duty free border stores currently. London Supply in Puerto Iguazú works under a different regime, and in Ciudad del Este, Paraguay, the only true duty free shop is at the airport.”

In Brazil itself, Donagaray said it was likely that the first stores would open this month in Uruguayiana (a municipality in the Brazilian state of Rio Grande do Sul) with Rio Branco to follow. “The big players in the key cities will come later in the year,” he said.

Speaking about the wider business climate, Donagaray said: “I think we’ll have a stable year. The business in our region fell by around 25% on average in 2018 compared to 2017. The first four months were positive, followed by the currency devaluations from May, and then some recovery in November.

“We understand that the US Federal Reserve won’t change interest rates soon so that has brought some stability in recent months. We know we’ll hear some ‘noise’ in Argentina in October with elections planned, as they are in Uruguay, but we hope for recovery in Brazil and a calm environment. We need to recover and with stability comes recovery.”