World Trade Organization |
RESTRICTED |
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WT/TPR/S/140 1 November 2004 | |
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(04-4579) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW BRAZIL Report by the Secretariat |
This report, prepared for the fourth Trade Policy Review of Brazil, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Brazil on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr. Angelo Silvy tel.: (022 739 5249), Mr. Diego Iribarren tel.: (022 739 6392) and Mr. Raymundo Valdés tel.: (022 739 5346). Document WT/TPR/G/140 contains the policy statement submitted by Brazil |
Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on Brazil.
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SUMMARY OBSERVATIONS xiii
(1) Introduction xiii
(2) Economic Environment xiii
(3) Trade Policy and Investment Regime xiv
(4) Market Access In Goods xv
(5) Other Measures Affecting Trade xvi
(6) Sectoral Policies xvii
I. Economic environment 1
(1) Overview 1
(2) Macroeconomic Developments 1
(i) Economic structure and reform 1
(ii) Production and employment 3
(iii) Fiscal policy 5
(iv) Monetary and exchange rate policy 7
(v) Balance of payments 10
(3) Trade and Investment Flows 11
(i) Developments in merchandise trade 11
(ii) Trade in services 13
(iii) Foreign direct investment 14
(4) Outlook 16
II. TRADE AND INVESTMENT POLICY REGIME 17
(1) Overview 17
(2) Trade Policy Formulation and Implementation 17
(i) General legal and institutional framework 17
(ii) Trade and investment policy objectives 19
(iii) Trade policy formulation and implementation 20
(iv) Main trade legislation 21
(3) Foreign Investment Regime 22
(4) International Relations 25
(i) World Trade Organization 25
(ii) Preferential agreements 27
III. trade policies and practices by measure 37
(1) Overview 37
(2) Measures Directly Affecting Imports 38
(i) Customs procedures and documentation 38
(ii) Customs valuation 40
(iii) Rules of origin 41
(iv) Tariffs 43
Page
(v) Other charges affecting imports 53
(vi) Import prohibitions, restrictions, and licensing 55
(vii) Contingency measures 61
(viii) Technical regulations and standards 67
(ix) Sanitary and phytosanitary measures 72
(3) Measures Directly Affecting Exports 74
(i) Procedures and documentation 74
(ii) Export taxes and minimum export prices 75
(iii) Export, prohibitions, restrictions and licensing 76
(iv) Export support and related tax concessions 78
(v) Export finance, insurance, and guarantees 81
(vi) Export promotion and marketing assistance 86
(4) Measures Affecting Production and Trade 87
(i) Legal framework for production and investment 87
(ii) Pricing and competition policy 88
(iii) State-owned enterprises, privatization, and state trading 91
(iv) Incentives and other government assistance 92
(v) Government procurement 100
(vi) Intellectual property rights 103
IV. trade policies by sector 112
(1) Overview 112
(2) Agriculture 113
(i) Market developments 113
(ii) Policy objectives and administration 113
(iii) Policy instruments 115
(3) Forestry 126
(i) Market features 126
(ii) Institutions and regulations 127
(4) Mining 129
(i) Market features 129
(ii) Institutions and regulations 130
(5) Manufacturing 131
(i) Market structure 131
(ii) Automotive industry 134
(iii) Aircraft industry 135
(iv) Shipbuilding industry 136
(v) Textiles and clothing 137
(6) Energy 138
(i) Petroleum and gas 138
(ii) Ethanol 141
(iii) Electricity 142
(7) Services 145
(i) Introduction 145
(ii) Financial services 147
(iii) Telecommunications 158
(iv) Transport 162
(v) Professional and business services 170
Page
REFERENCES 175
APPENDIX TABLES 181
CHARTS
III. trade policies and practices by measure
III.1 Frequency distribution of MFN tariff rates, 2004 45
III.2 Tariff escalation by ISIC 2-digit in industry, 2004 46
IV. trade policies by sector
IV.1 Effective tariffs by industries (ISIC 2 digits), 2002 133
TABLES
I. Economic environment
I.1 Basic economic indicators, 1999-04 3
I.2 Financial accounts of the Central Government, FY 1999-04 6
I.3 Main monetary indicators, 1999-04 9
I.4 Balance of payments, 1999-04 10
I.5 Trade in services, 2000-03 13
I.6 Foreign direct investment in Brazil by country of origin, 1999-03 14
I.7 Foreign direct investment in Brazil by sector, 2000-03 15
II. TRADE AND INVESTMENT POLICY REGIME
II.1 Dispute settlement cases involving Brazil under the Protocol of Brasilia, 2001-03 30
II.2 Framework and free-trade agreements concluded by MERCOSUR, 2004 35
III. trade policies and practices by measure
III.1 Summary analysis of Brazil's MFN tariff, January 2004 44
III.2 Estimated tariff revenue concessions foregone through by main users, import rates 2004 50
III.3 CET reductions and tariff quotas, 2003 and 2004 51
III.4 Import prohibition for the protection of animal life and health and human health 56
III.5 Products subject to non-automatic licensing, 2004 57
III.6 Anti-dumping measures in force by country and product, 30 June 2004 64
III.7 Export taxes 76
III.8 Products subject to prior authorization, 2004 77
III.9 Resources assigned to and used by the PROEX, by modality 82
III.10 Value of the exports covered by the SBCE, 1998-02 85
III.11 Tax exemption/reduction under the SUDAM/ADA
and SUDENE/ADENE programmes 1998-02 94
III.12 FINOR/FINAM, Benefits (in lending) 95
III.13 Manaus Free Trade Zone production, 1998-03 98
III.14 Scientific and technological development support funds 99
III.15 Main dedicated intellectual property rights laws and regulations 104
III.16 Overview of IPR protection in Brazil, 2003 107
Page
IV. trade policies by sector
IV.1 Main agricultural support measures and programmes 116
IV.2 Rural credit 1994-02 118
IV.3 Agricultural credit programmes administered by the BNDES, early 2004 119
IV.4 PRONAF main indicators, 1995-03 121
APPENDIX TABLES
I. Economic environment
AI.1 Merchandise exports by groups of products, 1999-03 183
AI.2 Merchandise imports by groups of products, 1999-03 185
AI.3 Merchandise exports by trading partner, 1999-03 187
AI.4 Merchandise imports by trading partner, 1999-03 189
II. TRADE AND INVESTMENT POLICY REGIME
AII.1 Status of notification requirements to the WTO, January 2000-May 2004 191
AII.2 Cases in which Brazil appears as a complainant (2000-04) 193
AII.3 Disputes involving complaints against Brazil, 2000-04 195
GLOSSARY
Accredited sectoral standardization bodies |
Organismos de Normalização Sectorial, ONSs |
Additional Airport Tax |
Adicional de Tarifa Aeroportuária, ATAERO |
Additional Tax for the Renovation of the Merchant Marine |
Adicional ao Frete para Renovação da Marinha Mercante, AFRMM |
Administrative Council for Economic Defence |
Conselho Administrativo de Defesa Econômica, CADE |
Agri-business Development Programme |
Programa de Desenvolvimento do Agronegócio, PRODEAGRO |
Agriculture/Cattle Breeding Technology Development Programme |
Programas de Desenvolvimento Tecnológico Agropecuário, PDTA |
Airspace Control Department |
Departamento de Controle do Espaço Aéreo, DECEA |
Amazon Investment Fund |
Fundo de Investimento da Amazônia, FINAM |
Amazon Region Development Agency |
Agência de Desenvolvimento da Amazônia, ADA |
Amazon Region Development Authority |
Superintendência do Desenvolvimento da Amazônia, SUDAM |
Animal Origin Products Inspection Department |
Departamento de Inspeção de Produtos de Origem Animal, DIPOA |
Annual Report |
Relátorio Anual |
Alternative Sources of Electric Energy Programme |
Programa de Incentivo às Fontes Alternativas de Energia Elétrica, PROINFA |
Brazilian Aeronautic Registry |
Registro Aeronáutico Brasileiro, RAB |
Brazilian Aeronautics Enterprise |
Empresa Brasileira de Aeronáutica S.A, EMBRAER |
Brazilian Association of Aerospace Industries |
Associão Brasileira de Indústrias Espaciais |
Brazilian Association of Port Terminals |
Associação Brasileira de Terminais Portuários, ABTP |
Brazilian Association of Standards |
Associação Brasileira de Normas Técnicas, ABNT |
Brazilian Coffee Fund |
Fundo de Defesa da Economia Cafeeira, FUNCAFE |
Brazilian Electricity Regulatory Agency |
Agência Nacional de Energia Eléctrica, ANEEL |
Brazilian Enterprise for Airport Infrastucture |
Empresa Brasileira de Infra-strutura Aeroportuária, INFRAERO |
Brazilian Export Credit Insurance Company |
Seguradora Brasileira de Crédito à Exportação, SBCE |
Brazilian Export Promotion Agency |
Agência Brasileira de Promoção de Exportações, APEX |
Brazilian Financial System |
Sistema Financiero Nacional, SNF |
Brazilian Foreign Trade Association |
Associação de Comércio Exterior do Brasil, AEB |
Brazilian Institute of Geography and Statistics |
Instituto Brasileiro de Geografia e Estatística, IBGE |
Brazilian Institute of the Environment and Renewable Natural Resources |
Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis, IBAMA |
Brazilian Nuclear Industries |
Industrias Nucleares do Brasil S.A. |
Brazilian Payments System |
Sistema de Pagamentos Brasileiro, SPB |
Brazilian Privatization Programme |
Programa Nacional de Desestatização, PND |
Brazilian Reinsurance Institute, |
Instituto de Resseguros do Brasil, IRB BRASIL Re |
Brazilian Sanitary Surveillance Agency |
Agência Nacional de Vigilância Sanitária, ANVISA |
Brazilian Service of Support to Micro Businesses |
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas, SEBRAE |
Brazilian shipping company |
Empresa Brasileira de Navegação, EBN |
Brazilian Special Export Programme |
Benefícios Fiscais a Programas Especiais de Exportação, BEFIEX |
Brazilian System of Standardization |
Sistema Brasileiro de Noramlização, SBN |
Brazilian System for Protection of Competition |
Sistema Brasileiro de Defesa da Concorrência, SBDC |
Brazilian Technical Regulation |
Regulamentação Técnica Brasileira, RTB |
Central Bank of Brazil |
Banco Central do Brasil |
Central Bank's Electronic Declaratory Registry-Foreign Direct Investment |
Registro Declaratório Eletrônico - Investimento Externo Direto, RDE-IED |
Central Bank Information System |
Sistema de Informação do Banco Central, SISBACEN |
Centre for Research and Development in Telecommunications |
Centro de Pesquisa e Desenvolvimento em Telecomunicações, CPqD |
Chamber of Foreign Trade |
Cámara de Comércio Exterior, CAMEX |
Civil Aviation Council |
Conselho de Aviação Civil, CONAC |
Coffee Policy Deliberative Council |
Conselho Deliberativo da Política do Café, CDPC |
Committee for the Defence of Economic Order |
Comité para a Defesa da Ordem Económica, CDOE |
Commodity and Futures Exchange |
Bolsa de Mercadorias & Futuros, BM&F |
Competition among any interested parties |
Concorrência |
Competition among parties for projects |
Concurso |
Competitiveness Promotion Guarantee Fund |
Fundo de Garantia para a Promoção da Competitividade, FGPC |
Constitutional funds for financing the north-east, the north and the mid-west regions |
Fundo Constitucional de Financiamento do Nordeste(FNE), Noroeste (FNO) e Centro-Oeste (FCO). |
Contribution for intervention in the economic domain |
Contribução de Incidência sobre o Dominio Econômico, CIDE |
Cooperative Development Programme for the Enhancement of Agricultural Value Added |
Programa de Desenvolvimento Cooperativo para Agregação de Valor à Produção Agropecuária, PRODECOOP |
Corporation |
Sociedade anônima |
Department of Commercial Defence |
Departamento de Defesa Comercial,DECOM |
Department of Sectoral Policies Management |
Departamento de Gestão de Políticas Setoriais, DEGPS |
Electric Energy Commercialization Chamber |
Câmara de Comercialização de Energia Elétrica, CCEE |
Electric Sector Monitoring Committee |
Comité de Monitoramento do Setor Elétrico, CMSE |
Electric System National Operator |
Operador Nacional do Sistema Elétrico, ONS |
Electronic Declaratory Registry |
Registro Declaratório Eletrônico, RDE |
Electronic Quotation System |
Sociedade Operadora do Mercado de Ativos, SOMA |
Emergency Energy Trading Company |
Comercializadora Brasileira de Energia Emergencial, CBEE |
Energy Development Account |
Conta de Desenvolvimento Energético, CDE |
Environmental Tax |
Taxa de Controle e Fiscalização Ambiental, TCFA |
Exchange rate contract |
Contrato de câmbio |
Export Guarantee Fund |
Fundo de Garantia à Exportação, FGE |
Export Financing Programme |
Programa de Financiamento às Exportações, PROEX |
Federal Accounting Council (CFC) |
Conselho Federal de Contabilidade, CFC |
Federal administration procurement that does not require bidding |
Dispensa e Inexigibilidade |
Federal Government Acquisition Programme |
Aquisição do Governo Federal, AGF |
Federal Government Loans Programme |
Empréstimo do Governo Federa, EGF |
Federal Revenue Secretariat |
Secretaria de Receita Federal, SRF |
Financial Compensation for the Exploitation of Mineral Resources |
Compensação Financeira pela Exploração de Recursos Minerais, CFEM |
Financial System Organization Department |
Departamento de Organização do Sistema Financeiro, DEORF |
Financial transactions tax (IOF) |
Imposto sobre Operações Financeiras, IOF |
Financing of Studies and Projects |
Financiadora de Estudos e Projetos, FINEP |
FINAME |
Financiamento de Máquinas e Equipamentos |
Foreign Trade Department |
Departamento de Comercio Exterior, DECEX |
Fruit Industry Development Programme |
Programa de Desenvolvimento da Fruticultura, PRODEFRUTA |
General Services System |
Sistema Integrado de Administração de Serviços de Administração de Serviços Gerais, SIASG |
Incentives Programme for Irrigation and Storage |
Programa de Incentivo à Irrigação e Armazenagem, MODERINFRA |
Industrial Policy Secretariat |
Secretaria de Política Industrial |
Industrial Products Tax |
Imposto Sobre Produtos Industrializados, IPI |
Industrial Technology Development Programme |
Programa de Desenvolvimento Tecnológico e Industrial, PDTI |
Institute of Industrial Fostering and Coordination |
Instituto de Fomento e Coordinação Industrial, IFI |
Institute of Independent Auditors of Brazil (IBRACON); |
Instituto dos Auditores Independentes do Brasil, IBRACON. |
Integrated Foreign Trade System |
Sistema Integrado de Comércio Exterior, SISCOMEX |
Inter-Ministerial Committee Against Piracy, IMC |
Comité Interministerial de Combate contra a Pirateria |
Inter-Ministerial Council for Sugar and Alcohol |
Conselho Interministerial do Açúcar e do Álcool, CIMA |
Interest rates |
Juros |
Invitation by the Administration |
Convite |
Inverse Auction |
Pregão |
Lighthouse fee |
Tarifa de Utilização de FaroiS, TUF |
List of Convergence for Capital Goods |
Lista de Convergência de Bems de Capital, BK |
List of Convergence for the Informatics and Telecommunications Sector |
Lista de Convergência do Setor de Informática e Telecomunicações, BIT |
Milk Production Mechanization and Transportation Incentive Programme |
Programa de Incentivo à Mecanização, ao Resfriamento e ao Transporte Granelizado da Produção do Leite, PROLEITE |
Mines and Metallurgy Secretariat |
Secretaria de Minas e Metalurgia, SMM |
Ministerial Act |
Portaria |
Ministry of Agriculture, Livestock and Food Supply |
Ministério da Agricultura, Pecuária e Abastecimiento, MAPA |
Ministry of Communications |
Ministério de Comunicações |
Ministry of Development, Industry and Foreign Trade |
Ministério do Desenvolvimento, Indústria e Comércio Exterior, MDIC |
Ministry of Environment |
Ministério do Meio Ambiente, MMA |
Ministry of Finance |
Ministério da Fazenda |
Ministry of Foreign Affairs |
Ministério de Relações Exteriores |
Ministry of Justice |
Ministério da Justiça |
Ministry of Labour and Employment |
Ministério de Trabalho e Emprego, MTE |
Ministry of Mines and Energy |
Ministério de Minas e Energia, MME |
Ministry of Planning, Budget and Management |
Ministério de Planejamento, Orçamento e Gestão |
Ministry of Social Development |
Ministério de Desenvolvimento Social MSD |
Ministry of Transportation |
Ministério dos Transportes |
Monetary Policy Committee |
Conselho de Política Monetária, COPOM |
National Agency for Land Transport |
Agência Nacional de Transportes Terrestre, ANTT |
National Board of Complementary Pensions |
Conselho de Gestão da Previdência Complementar, CGPC |
National Confederation of Industry |
Confederação Nacional da Industria, CNI |
National Congress |
Congresso Nacional |
National Council of Transport Policy Integration |
Conselho Nacional de Integração de Políticas de Transporte, CONIT |
National Council of Fiscal Policy |
Conselho Nacional de Política Fazendária, CONFAZ |
National Council of Metrology, Normalization and Industrial Quality |
Conselho Nacional de Metrologia, Normalização e Qualidade Industrial, CONMETRO |
National Council of Private Insurance |
Conselho Nacional de Seguros Privados, CNSP |
National Department of Mining Production |
Departamento Nacional de Produção Mineira, DNPM |
National Development Bank |
Banco Nacional de Desenvolvimento Econômico e Social, BNDES |
National Energy Policy Council |
Conselho Nacional de Política Energética, CNPE |
National Environmental Council |
Conselho Nacional do Meio Ambiente, CONAMA |
National Environmental System |
Sistema Nacional do Meio Ambiente, SISNAMA |
National Federation of Insurance Services Providers |
Federação Nacional das Empresas de Seguros Privados e de Capitalização,FENASEG |
National Food Supply Company |
Companhia Nacional de Abastecimento, CONAB |
National Forest Plan Coordinating Commission |
Comissão Coordenadora do Programa Nacional de Florestas, CONAFLOR |
National Forest Programme |
Programa Nacional de Florestas, PNF |
National Fund for Scientific and Technological Development |
Fundo Nacional de Desenvolvimento Científico e Tecnológico, FNDCT |
National Health Agency |
Agência Nacional de Saúde Suplementar, ANS |
National Integrated System |
Sistema Integrado Nacional, SIN |
National Iron and Steel Company |
Companhia Siderúrgia Nácional, CSN |
National Institute of Metrology, Normalization and Industrial Quality |
Instituto Nacional de Metrologia, Normalização e Qualidade Industrial, INMETRO |
National Industrial Property Institute |
Instituto Nacional de Propriedade Industrial, INPI |
National Monetary Council |
Conselho Monetario Nacional, CMN |
National Petroleum Agency |
Agência Nacional do Petróleo, ANP |
National Programme of Agrarian Credit |
Programa Nacional de Crédito Fundiário, PNCF |
National Registry of Legal Persons |
Cadastro Nacional da Pessoa Jurídica, CNPJ |
National Social Security Institute |
Instituto Nacional do Seguro Social, INSS |
National System of Metrology, Normalization and Industrial Quality |
Sistema Nacional de Metrologia, Normalização e Qualidade Industrial, SINMETRO |
National System of Rural Credit |
Sistema Nacional de Crédito Rural, SNCR |
National Telecommunications Agency |
Agência Nacional de Telecomunicações, ANATEL |
National Transportation Infrastructure Department |
Departamento Nacional de Infra-Estrutura de Transportes, DNIT |
Northeast Investment Fund |
Fundo de Investimentos do Nordeste, FINOR |
North-East Region Development Agency |
Agência de Desenvolvimento do Nordeste, ADENE |
Northeast Region Development Authority |
Superintendência do Desenvolvimento do Nordeste, SUDENE |
Open Sales |
Ventas em Balcão |
Overnight Inter-bank Loans Interest Rate |
SELIC (Sistema Especial de Liquidação e Custodia) Interest Rate |
Policy of Guaranteed Minimum Prices |
Política de Garantia de Preços Mínimos, PGPM |
Port Authority Council (CAP) |
Conselho de Autoridade Portuária, CAP |
Premium for Product Outflow |
Premio para Escoamento de Produto, PEP |
Private Insurance Superintendence |
Superintendência de Seguros Privados, SUSEP |
Programme for the Modernization of Agriculture and the Conservation of Natural Resources |
Programa de Modernização da Agricultura e Conservação de Recursos Naturais, MODERAGRO |
Programme of Commercial and Recovery Forest Planting |
Programa de Plantio Comercial e Recuperação de Florestas, PROPFLORA |
Programme of Incentives for the Reduction of the State Role in Banking Activity |
Programa de Incentivo à Redução do Setor Público Estadual na Atividade Bancária,PROES |
Programme of Transfers to Poor Families |
Bolsa Familia |
Programme to Strengthen Household Agriculture |
Programa Nacional de Fortalecimento da Agricultura Familiar, PRONAF |
Provisional Measure |
Medida Provisoria |
Provisional Contribution on the Operation or Conveyance of Funds, Credits and Rights of a Financial Nature |
Contribuição Provisória sobre Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira, CPMF |
Public auctions for specific goods |
Leilão |
Public Federal Administration |
Administração Pública Federal |
Regional Accounting Councils |
Conselhos Regionás de Contabilidade, CRCs |
Register of Exporters and Importers |
Registro de Exportadores e Importadore, REI |
Register of Sale |
Registro de Venda |
Reversal Global Reserve |
Reserva Geral de Reversão, RGR |
Rural Employment and Revenue Generation Programme |
Programa de Geração de Emprego e Renda da Área Rural, PROGER Rural |
Rural Insurance Programme |
Progama Nacional de Garantia da Atividade Agropecuária, PROAGRO |
Rural Insurance Stability Fund |
Fundo de Estabilidade do Seguro Rural, FESR |
Rural Product Certificate |
Cédula de Produto Rural, CPR |
Rural Promissory Note |
Nota Promissória Rural, NPR |
São Paulo Stock Exchange |
Bolsa de Valores de São Paulo, BOVESPA |
Secretariat for Economic Monitoring |
Secretaria de Acompanhamento Econômico, SEAE |
Secretariat of Agricultural Policy |
Secretaria de Política Agrícola, SPA |
Secretariat of Agricultural Protection |
Secretaria de Defesa Agropecuária, SDA |
Secretariat of Foreign Trade |
Secretaria de Comércio Exterior, SECEX |
Securities Central Custody and Financial Liquidation Registry. |
Câmara de Custódia e Liquidação, CETIP |
Securities Exchange Commission |
Comissão de Valores Mobiliários, CVM |
Services and Merchandise Circulation Tax |
Imposto sobre Circulação de Mercadorias e Prestação de Serviços, ICMS |
Shipbuilding Industry National Union |
Sindicato Nacional da Indústria da Construção Naval |
Small-scale mining activities |
Garimpos |
Social Security Contribution on Payroll |
Contribuição para a Seguridade Social sobre a folha de pagamentos e salários, CINSS |
Special Brazilian Registry |
Registro Especial Brasileiro, REB |
Special Credit Programme for Agrarian Reform |
Programa de Crédito Especial para a Reforma Agrária, PROCERA |
Special Regime for the Exportation and Importation of Goods Destined to the Exploration of Petroleum and Natural Gas |
Regime Aduaneiro Especial de Exportação e de Importação de Bens Destinados às Atividades de Pesquisa e de Lavra das Jazidas dePetróleo e de Gás Natural, REPETRO |
State Institutes for Weights and Measurements |
Institutos de Pesos e Medidas, IPEMs |
State Secretariat for Pension Funds |
Secretaria de Previdência Complementar, SPC |
Statement of Principles |
Presentação de Motivos |
Structure and Tariff Values |
Estrutura e Valores Tarifários |
Suppliers Declaration |
Declaração do Fornecedor |
System for Pre-registration of Suppliers |
Sistema de Cadastramento Unificado de Fornecedores, SICAF |
System of Industrial Depots subject to Standardized Control |
Regime Aduaneiro de Entreposto Industrial sob Controle Informatizado, RECOF |
Telecommunications Technology Development Fund |
Fundopara o Desenvolvimento Tecnológico das Telecomunicações, FUNTTEL |
Temporary reduction in import duties of capital, and informatics and telecommunications goods |
Ex Tarifário |
Tractor Fleet Modernization Incentives Programme |
Programa de Modernização da Frota de Tratores Agrícolas e Implementos Associados e Colheitadeiras, MODERFROTA |
Universal Telecommunication Services Fund |
Fundo de Universalização dos Serviços de Telecomunicações, FUST |
Waterways Transport National Agency |
Agência Nacional de Transports Aquaviários, ANTAQ |
Workers Support Fund |
Fundo de Amparo ao Trabalhador, FAT |
(1) Introduction
1. Since its last Review in 2000, Brazil has continued to liberalize, and enhance the transparency of, its trade regime. Thus, the average applied MFN tariff has decreased to 10.4%, and licensing requirements have been considerably reduced. These efforts have paid-off in the form of a more flexible economy, as evidenced by the resilience shown to a series of shocks during the period under review. Trade has come to play an increasingly important role, and has been key in Brazil's rapid recovery from an economic recession in 2003. Nevertheless, further steps appear to be required to accelerate and ensure the sustainability of growth, as Brazil still faces the long-term challenge of increasing its GDP per capita, which in real terms stagnated between 1999 and 2003.
2. Some barriers to market access persist in a few areas. Tariffs hinder the access of domestic consumers and producers to some of the world's most competitive products, which Brazil has tried to offset through a range of tariff concessions. Anti-dumping measures are used actively to protect domestic producers against imports deemed unfair. Support, largely in the form of credit or credit facilitation, is granted to selected activities. Also often taking the form of credit, export support programmes are another feature of Brazil's trade policy regime. Targeted support risks distorting resource allocation and may burden taxpayers. To the extent that such support is linked to the high domestic cost of capital, it would be important to take additional steps to lower the costs of financial intermediation.
3. Brazil has been an active participant in the WTO since the conclusion of the Uruguay Round, although it has not ratified the Fourth and Fifth Protocol to the GATS nor has it participated in the Information Technology Agreement negotiations. Enhancing multilateral commitments would increase the predictability of its trade regime and make Brazil an even more attractive investment destination. This could include narrowing the gap between applied and bound tariff rates, and expanding the scope of its GATS commitments. An ambitious agenda in this respect would not only benefit Brazil but also help bring about a successful conclusion to the Doha Development Agenda, which Brazil has been instrumental in moving forward and in which it has a major stake in view of the increasingly global reach of its trade interests.
(2) Economic Environment
4. Economic growth has been modest during the period under review, reflecting a number of factors, including adverse international events and domestic difficulties. Low GDP growth in 2001 was partly in response to energy supply shortages, while slow growth in 2002 reflected mainly weak domestic demand, particularly consumer spending. In the second half of 2002 and the first quarter of 2003, growth was affected by capital outflows. Growth resumed thereafter and is expected to exceed 3% in 2004, supported by exports and a strengthening of domestic demand.
5. The Government's economic policy priority is to achieve a sustainable fiscal position. To maintain fiscal discipline, fiscal targets are set; these were fixed at 4.25% of GDP for the primary surplus of the non-financial consolidated public sector for both 2003 and 2004. However, the surplus has not been sufficient to cover the increasing debt-interest payments, resulting in an overall non-financial consolidated public sector deficit of 5.2% of GDP. Overall debt servicing amounts to over two thirds of the budget.
6. The public debt to GDP ratio increased to 56% in mid 2004, from some 49% in 2000. This has constrained policy choices. It has also contributed to continued high interest rates, generated risk expectations, and made Brazil vulnerable to an increase in international interest rates. The Brazilian authorities recognize the importance of redressing fiscal finances and reducing the debt burden to foster investment and resume self-sustained growth.
7. Brazil has continued to seek low inflation, using inflation targeting as its main monetary policy instrument. Although inflation targets have not always been met, this policy has resulted in lower inflation rates.
8. Brazilian exports performed strongly during the period under review, increasing by over 50% in U.S. dollar terms between 1999 and 2003. This gain has been widely spread but has been more significant with non-traditional trading partners, such as China. Reflecting a period of weak economic growth, imports of merchandise declined, although growth resumed in the last quarter of 2003. The share of trade of goods and services in GDP rose to 30% in 2003, confirming Brazil's increasing integration into the world economy.
9. Since 2001, a trade surplus has been posted, which almost doubled in 2003. The bilateral trade balance with all the major trading partners improved, posting a surplus with most. The improvement in the trade balance led to a turnaround in the current account, which, after deficits of 4% of GDP or higher during 1999-01, moved to a surplus in 2003 and the first quarter of 2004.
10. After showing strong results in the late 1990s, FDI flows into Brazil declined over the period under review. This reflects a number of factors, including reduced investor confidence, an unstable global economic environment, the deceleration of the privatization process, and the relatively weak performance of the Brazilian economy. Investment in services has been the most important in value terms, much of it linked to privatization in telecommunications and financial services. Investment in the industrial area was focused mainly in the automotive and chemical industries.
(3) Trade Policy and Investment Regime
11. Brazil sees the active use of trade policy as a means to foster sustainable economic growth and to reduce its vulnerability with respect to global financial markets. Regional economic integration and export promotion and diversification are considered important policy targets. With respect to the latter, Brazil considers it essential to obtain enhanced market access for its agricultural products through multilateral and regional negotiations, while seeking to maintain instruments to foster development in its manufacturing sector. Brazil also considers it vital to improve its external balance, through competitive (market-based) import substitution and export growth.
12. Brazil is an original Member of the WTO, and one of its most active participants. It supports the strengthening of special and differential treatment for developing countries. It has maintained a rigorous programme of notifications to the WTO, although notifications in some areas, such as agriculture and state trading enterprises are lagging. Brazil is an active user of the WTO dispute settlement mechanism, having participated in 23 disputes as a complainant and 12 as a defendant since the creation of the WTO.
13. Brazil participated in the WTO Negotiations on Financial Services and in the Negotiations on Basic Telecommunications. However, it has not ratified the Fourth Protocol on Basic Telecommunications services nor the Fifth Protocol on Financial Services. In this respect, Brazil informed the Council on Trade in Services that the Fourth Protocol had to be withdrawn from Congress. Subsequently, it submitted a new draft schedule to WTO Members, to which some Members objected, and, as a result, Brazil withdrew it. Ratification of the Fifth Protocol is linked to the adoption of insurance legislation by Congress.
14. Brazil considers preferential agreements as a complement to the multilateral trading system. Brazil is a participant in the Southern Common Market (MERCOSUR) and, through this participation, has concluded preferential trade agreements with Bolivia, Chile, and Peru (which are also associate members of the Common Market), and preferential agreements with the three other countries of the Andean Community. MERCOSUR has also concluded framework agreements with India, Mexico and South Africa, is negotiating a preferential trade agreement with the European Union, and participates in the Free Trade Area of the Americas initiative. Brazil also has a number of bilateral preferential agreements with other LAIA members.
15. Brazil's investment regime is largely open to foreign investors and there are generally no restrictions for the remission of profits and the repatriation of capital that has been duly registered with the Central Bank. However, a number of market access and investment limitations for foreigners remain in areas such as mining, financial services and transport. The Federal Government does not grant special incentives to foreign investment. Although Brazil has signed bilateral investment agreements with several countries, including within MERCOSUR, the Brazilian Executive decided to withdraw all of these from the consideration of the Congress.
(4) Market Access in Goods
16. Since its last Review, Brazil has continued to enhance the transparency and reduce the complexity of its trade regime, including by streamlining its import procedures and consolidating regulations. The main customs procedures have been codified under a single Decree and the principle import measures have been grouped in a single Ministerial Act. The average time for customs clearances seems to have fallen significantly.
17. Brazil applies the WTO Customs Valuation Agreement; customs value is generally the transaction value, which is applied in over 99% of cases.
18. The tariff continues to be Brazil's main trade policy instrument. Brazil applies MERCOSUR's Common External Tariff (CET), with a number of exceptions. The average applied MFN tariff decreased from 13.7% in 2000 to 10.4% in 2004, reflecting to a large extent the stepped elimination of the general tariff increase adopted in 1997. Brazilian tariffs on agricultural goods are on average lower (10.2%) than on non-agricultural products (10.5%). Tariff dispersion is relatively low, but the tariff shows signs of escalation in most industries. Brazil has bound its entire tariff, mostly at ceiling levels.
19. Brazil has in place a number of temporary tariff-concession schemes, mainly to reduce the cost of imported capital goods or goods not produced in the MERCOSUR area. Tariff concessions are also granted through a number of customs regimes, which allow for the temporary importation or the warehousing of imports without prior payment of customs duties. A similarity test to determine if comparable goods are produced domestically may be applied on imports on which tax, including tariff, exemptions or reductions are granted.
20. A value-added tax (ICMS) is applied by states at rates that in a limited number of cases may discriminate against imported or domestic products. In 2002, Rio de Janeiro State imposed an ICMS of 18% on the temporary admission or importation of machinery and other items used in the extraction of petroleum and natural gas.
21. Prior to 2003, all goods imported into Brazil were subject to an import licensing requirement. These requirements were modified in that year and, as a general rule, Brazilian imports are now exempt from import licensing. However, some 35.8% of all CET tariff lines (eight-digit level) are at least partly subject to non-automatic licensing.
22. Brazil remains an active user of anti-dumping measures, notwithstanding the fall in the number of investigations initiated since 2000. As at 30 June 2004, 48 anti-dumping measures were in force, compared with 46 in December 1999. In the period 1 January 2000 to 30 June 2004, Brazil initiated 43 anti-dumping investigations. During the same period, Brazil imposed definitive anti-dumping in 26 new cases. Most of the duties fell on steel products, chemicals, and cement.
23. The six countervailing measures in place in 2000 had been eliminated by late 2003, and no new countervailing measures have been imposed. Since the establishment of the WTO, Brazil has conducted two safeguard investigations, and applied measures on both occasions, affecting coconuts and toys; both measures are still in place.
24. A number of agencies issue technical regulations, both at the federal and at the state level. At the federal level, authority to issue technical regulations lies with the particular ministry with competence in the specific area to be regulated. There is no general rule for preparing a technical regulation; each body has its own internal procedures in this respect. Technical regulations take the form of laws, decrees or resolutions, as appropriate, and are published in the Official Journal.
(5) Other Measures Affecting Trade
25. Since the last Review, export procedures have been codified in a single Ministerial Act but no major modifications have been made. Exports of certain types of wood are prohibited, suspended or subject to quotas. Exports of a range of products are subject to licensing; they wholly or partly represent some 10.7% of all tariff headings at the eight-digit level.
26. Export taxes are applied to cashew nuts, leathers and skins, and certain products exported to some countries in Latin America and the Caribbean. Export taxes are zero-rated on all other exports, although the law allows for the application of an export tax of 30%, which can be increased to up to 150%.
27. Export promotion remains a key element of Brazil's trade policy, which may well be needed to offset domestic inefficiencies such as expensive financial intermediation and, according to the authorities, to match the incentives provided by other countries. The Export Financing Programme (PROEX), one of the main tools for export promotion, can be used for exports of goods, services, software and cinematographic works. The amount to be financed depends on the percentage of domestic content. The PROEX equalization modality as used for aircraft was challenged in the WTO and Brazil modified it twice during the period under review as a result of DSB recommendations.
28. The BNDES-EXIM programme also provides export credits for most of Brazil's export products, subject to a domestic-content requirement, in value terms, of at least 60%. The Export Credit Insurance (SCE) scheme guarantees and covers losses incurred by exporters from non-receipt of foreign payments for their exports. The Brazilian Export Programme (BEFIEX) was discontinued in 2002.
29. Brazil maintains an array of incentives and assistance schemes both at the federal and state levels to promote regional development, research or certain sectors. There are also some general support schemes, such as Automatic BNDES and the FINAME, which are contingent upon domestic-content and/or local-ownership requirements.
30. Privatization was pursued actively until 2002. The major privatization operations during the 2000-02 period affected petroleum and mining companies, and financial institutions. Efforts have continued to apply competition policy legislation more extensively, make more assertive use of competition policy, and to bring increasingly important cases under the law.
31. Brazil is not a party to the WTO Plurilateral Agreement on Government Procurement. Although, in general, national treatment is afforded to foreign suppliers legally established or represented in Brazil, domestic law grants preferential treatment to telecommunications and informatics products developed within Brazil. While fostering the development of the targeted industries, procurement preferences might increase the cost of government services.
32. Since 2000, Brazil has revised or adopted new laws and regulations on intellectual property rights, in areas such as copyright, patents, compulsory licensing, information disclosure and trade mark legislation.
(6) Sectoral Policies
33. Since its last Review in 2000, Brazil has continued to promote greater competition and efficiency within sectors, notably in services; although the State remains involved in production activities in some sectors, the extent of this involvement has continued to diminish since 2000. At the same time, Brazil has maintained a tariff structure that protects a number of manufacturing activities while implicitly taxing agriculture and mining.
34. Assistance to agriculture appears modest and, like in earlier years, mainly takes the form of minimum-price supports and rural credit at preferential rates. These are complemented by marketing schemes, and market-oriented price and stabilization mechanisms. Most rural credit is provided by private sources, but the Government intervenes by setting minimum credit requirements for banks, as well as regulating interest rates, or by assuming risk coverage. As a large exporter of agricultural products, Brazil has much to gain from the reduction of distortions in world markets and, thus, has over the years been engaged actively in WTO negotiations, calling for the reduction of all trade-distorting domestic support measures on a product-specific basis.
35. Although falling, state participation remains significant in the hydrocarbons industry, where certain policies are in place to favour domestic suppliers. The alcohol fuel industry has been largely liberalized although alcohol-fuel stocks are financed by the Government for energy security reasons. A crisis in the electricity sector during the second half of 2001 led to major policy changes to ensure the supply of electricity, and promote affordable tariffs and universal service programmes.
36. The manufacturing sector is highly diversified and has been one of the most dynamic areas of the economy. However, while some industries have become world-class producers, others have sought contingency protection against import competition. Protection through higher-than-average tariffs is provided to activities such as beverages, transport equipment, clothing and footwear. As in the past, specific support programmes, particularly financing, have benefited the automobile, shipbuilding, and aircraft industries. Brazil's industrial policy now emphasizes expanding the volume of exports, particularly by small and medium-size enterprises.
37. Brazil has continued to liberalize its services sector in recent years, which in turn has promoted efficiency gains. Liberalization has been particularly noticeable in telecommunications, financial services, and port and airport services. The State is still an important supplier of banking and insurance services, but private participation, including foreign, has increased in these and other areas. Moreover, the State may establish limits to foreign investment in telecommunications and financial services.
38. Foreign-ownership restrictions remain in air transport services, and cabotage restrictions apply to both maritime and air transport. Brazil applies a tax on freight with different rates for domestic or international cargoes. A lighthouse fee is applied only to foreign flagged vessels.
39. Consolidation of the changes that followed the privatization of the state-owned system in 1998 has continued in the telecommunications sector. As a result, competition in long-distance and mobile telephony is deemed to have emerged, but not in local fixed telephony. Brazil has no specific GATS commitments on telecommunications.
40. Brazil has sought to enhance the effectiveness of supervision in financial services. However, the cost of credit remains very high. This represents a major hindrance to the development of other sectors and explains many instances of targeted assistance in Brazil. In this respect, continuing to take steps to remove distortions and promote greater competition and efficiency in the financial sector would thus be important to reduce the need for state intervention, and promote greater policy neutrality across sectors.