If you want to buy a car in Latin America that was made elsewhere, in the United States, for example, you have to pay a lot more than the market price. Almost every country in the region charges an import tax or tariff, or both, on top of the value of the car. In Argentina, for example, the government levies a tariff of 21.5% as well as a value-added tax (VAT) of 21%, which means that a $20,000 car will actually cost you $28,500. In Costa Rica, you might have to pay up to 71% in tariffs and taxes to buy an imported car. But now, increasingly, there’s an exception: electric cars.
This past Monday, the Legislative Assembly of Costa Rica approved a law to exempt electric cars from import tariffs and taxes. The new policy applies only to vehicles costing less than $30,000. The impetus behind the plan is to encourage the purchase of environmentally-friendly vehicles, especially by the country’s middle classes (those rich enough to buy more expensive vehicles, the logic goes, can afford to continue paying the tax).
With this move, Costa Rica joins a number of other Latin American nations, which have also worked to increase the ease with which hybrid and electric vehicles are imported into their territories. In February, Mexico took similar steps, for environmental as well as economic reasons. Mexican leaders hope that their country will eventually become a hub for the manufacturing and export of electric engines. Colombia and Argentina followed suit soon after (though the Argentine provision is scheduled to expire after three years), while the government in Uruguay announced the implementation of a program to encourage businesses to replace their commercial vehicles with electrics or hybrids.
They are, in turn, following the example set by the Dominican Republic, which enacted the first tax exemption for electric cars back in 2012, Paraguay (in 2012), and Ecuador (which did so in 2015). Puerto Rico, which is subject to import laws that differ from those in the United States, developed a similar initiative in 2014. And several other nations in the region, such as Peru, have already stated their intentions to take similar steps in the future.
This year will be remembered as a banner year for clean technology in Latin America. But in truth, these moves will have only modest effects on the emission totals their countries produce. Colombia, for example, hopes that by 2022 about 1% of its cars will be electric, not a world-changing number. Still, such a goal would almost raise it to the level of such environmentally-conscious nations as France and the Netherlands (where about 1.6% of cars are electric), though still significantly behind Sweden (4.2%), Iceland (an impressive 9.1%), and Norway, the undisputed world leader, where a third of all cars today run on electricity.
It’s interesting, though not terribly surprising, that all of these governments are taking similar steps at the same time. For one, policies tend to spill over from one country to its neighbors. But it’s still notable that the embrace of cleaner cars is happening in countries with governments on the right (such as Argentina), the left (Ecuador), and the center (Colombia). And still more notable that the United States, which under President Donald Trump is looking to reposition itself as the manufacturing leader of the world, is turning in the opposite direction.