Required Report - public distribution

**Date:** 7/17/2007

**GAIN Report Number:** BR 7626

B

**Brazil**

**Biotechnology**

**Annual Agricultural Biotechnology Report**

**2007**

**Approved by:**

![](media/image1.wmf)Alan Hrapsky, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Joao F. Silva, Agricultural Specialist

**Report Highlights:**

Updates were made regarding the approval process for biotech events in
Brazil as a result of Law 11,460, from March 21, 2007. Despite the
changes made in the structure of the National Technical Commission on
Biosafety (CTNBio) to speed the approval of biotech events in Brazil,
near all new approvals are subject to court injunctions filed by
anti-biotech groups within and outside the government, and by
unsupportive government prosecutors.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Brasilia \[BR1\]

\[BR\]

Table of Contents

[**SECTION I: EXECUTIVE SUMMARY 3**](#section-i-executive-summary)

[SECTION II: BIOTECHNOLOGY TRADE AND PRODUCTION
4](#section-ii-biotechnology-trade-and-production)

[Status of Product Approvals 4](#status-of-product-approvals)

[SECTION III. BIOTECHNOLOGY POLICY
5](#section-iii.-biotechnology-policy)

[Regulatory Framework 5](#regulatory-framework)

[Product Authorizations 6](#product-authorizations)

[Field Testing 6](#field-testing)

[Coexistence of biotech and non-biotech crops
6](#coexistence-of-biotech-and-non-biotech-crops)

[Technology Fees 7](#technology-fees)

[Labeling 7](#labeling)

[SECTION IV. Marketing Issues 8](#section-iv.-marketing-issues)

[SECTION VI: Capacity Building and Outreach
8](#section-vi-capacity-building-and-outreach)

# SECTION I: EXECUTIVE SUMMARY

United States-Brazil bilateral agricultural trade reached a record of
US\$ 4.2 billion in 2006 with record Brazilian exports to the United
States of US\$ 3.9 billion. The United States agricultural exports to
Brazil totaled nearly US\$ 300 million, primarily agricultural
commodities to meet local shortfalls. Brazil is a major producer and
exporter of agricultural products, such as soybeans, cotton, sugar,
cocoa, coffee, frozen concentrated orange juice, beef, poultry, pork,
tobacco, hides and skins, fruits and nuts, fish products, and wood
products. As a result, the United States and Brazil are often
competitors in third markets, while the United States is a major
destination for Brazil's exports of sugar, coffee, tobacco, orange
juice, and wood products.

Brazil's President signed on March 21, 2007 Law Number 11,460 which
alters provisions of the Biotech Law 11,105 from 2005. The main change
involved a reduction in the number of votes needed to approve individual
biotech events by the National Technical Commission on Biosafety
(CTNBio). The purpose of this change was to speed the approval process
of new biotech events, which has been blocked by anti-biotech groups
since 2006.

Although CTNBio has resumed its normal operations and approved new
events, such as Bayer Crop Science's "Liberty Link" corn, the approval
process of biotech products in Brazil remains a major hurdle for
companies, mostly multinationals. Nearly all approvals of new biotech
events by CTNBio are subject to court injunctions, filed by anti biotech
groups within and outside of the government, and from unsupportive
government prosecutors. These injunctions suspend temporarily the
implementation of CTNBio's decisions, until the court renders its final
decision. In addition, the strong anti-biotech position of the state
government of Parana causes more problems and often financial losses to
companies that conduct biotech research or that export biotech products
through the port of Paranagua, such as soybeans. Recently, after one
year and four months, Syngenta regained control from the courts of its
Experimental Station for seed research, which had been invaded by the
landless movement in Parana.

# SECTION II: BIOTECHNOLOGY TRADE AND PRODUCTION

## Status of Product Approvals

+----------+--------+----------+--------+-----------+---------------+
| **Crop** | *      | **App    | **E    | **Trait   | **Reviewed    |
|          | *Trait | licant** | vent** | Desc      | Uses within   |
|          | Cate   |          |        | ription** | Brazil**      |
|          | gory** |          |        |           |               |
+----------+--------+----------+--------+-----------+---------------+
| Cotton   | Insect | Monsanto | BCE    | Le        | Textile       |
|          |        |          | 531    | pidoptora | fibers        |
| G        | Rest   |          |        | Order     |               |
| ossypium | istant |          |        |           | Food and Feed |
| hirsutum |        |          |        |           |               |
+----------+--------+----------+--------+-----------+---------------+
| Soybeans | Her    | Monsanto | TTS-   | G         | Food and Feed |
|          | bicide |          | 40-3-2 | lyphosate |               |
| Glycine  | To     | (Monsoy) |        | Herbicide |               |
| max (L.) | lerant |          |        | Tolerant  |               |
| Merrill  |        |          |        |           |               |
+----------+--------+----------+--------+-----------+---------------+
| Corn     | Insect | AVIPE    | Cry 1a | Lep       | Impo          |
|          | Res    | (Poultry | (c)    | idopteran | rt/Processing |
| Zea Mays | istant | P        |        | resistant |               |
|          |        | roducers | Cry 1a |           | /Feed         |
|          | Her    | from     | (b)    | Glo       |               |
|          | bicide | Pe       |        | phosinate |               |
|          | Res    | rnambuco | P      | tolerant  |               |
|          | istant |          | AT/bar |           |               |
|          |        |          |        |           |               |
|          |        |          | MEPSPS |           |               |
+----------+--------+----------+--------+-----------+---------------+
| Corn     | Her    | Bayer    |        | A         | Food          |
|          | bicide | Cro      |        | mmonium-G |               |
| Liberty  | to     | pScience |        | lyphosate |               |
| Link     | lerant |          |        | tolerant  |               |
+----------+--------+----------+--------+-----------+---------------+

Source: CTNBio

**Soybeans:**

Soybean biotech seeds are also registered under the Ministry of
Agriculture, Livestock, and Food Supply (MAPA) and meet the requirements
of Brazil's Plant Variety Protection Law. This means they can be legally
used for planting. Post expects that biotech soybean seeds will account
for nearly 35-40 percent of the upcoming 2007/08-crop. According to
market analysts, soybean producers that plant biotech varieties in
Brazil have a profit of 25 percent compared to those that plant
conventional seeds, despite the payment of royalties. However, the
significant increase in the price of Glyphosate Herbicide will moderate
the increase in the use of biotech soybeans in the upcoming crop year.

**Cotton:**

On March 17, 2005, The National Technical Commission on Biosafety
(CTNBio) legalized the planting and commercialization of a biotech
cotton variety owned by Monsanto. The approval of the insect resistant
BT variety was under deliberation by CTNBio since September 2005 with
only the Ministry of Environment voting against and effectively blocking
planting and commercialization. It was no surprise that CTNBio voted in
favor of the use of biotech cotton given that in November the commission
approved the sale of cottonseeds with 1 percent biotech material.
However, it is surprising to some in the industry that the decision by
CTNBio came so soon. The Brazilian Cotton Producer's Association
(ABRAPA) was not expecting approval of biotech cotton for several months
or even years.

The Ministry of Environment and environmental NGO's are opposed to the
release of biotech cottonseed due to the possibility of crossing with
native cotton species. However, CTNBio did require that Monsanto prepare
an impact study on the effects of planting the seed. Furthermore, in
some regions the federal government prohibits planting of biotech seeds
and buffer zones on cotton farms are required.

In addition to this approval, current requests by Monsanto and Bayer are
pending for approval of additional biotech cotton varieties. Currently,
input costs in Brazil are very high and insecticides comprise about 40
percent of the production costs for cotton with producers spraying up to
14 times a year. It is estimated that use of biotech seed will reduce
the cost of production by U.S. \$130 per hectare. Therefore, it is
expected that adoption of this biotech variety will make cotton even
more attractive to producers in Mato Grosso and Bahia.

**Corn:**

After nine years waiting for approval, on May 17, 2007 CTNBio approved
the commercialization of Bayer Crop Science's "Liberty Link" corn
(herbicide tolerant -- ammonium-Glyphosate tolerant) stating that it
does not present a threat to human, animal or environmental health.
However, producers still cannot use "liberty Link" corn seed because a
final decision depends on approval of the National Biosafety Council
(CNBS).

# SECTION III. BIOTECHNOLOGY POLICY

## Regulatory Framework

The new regulatory framework for agricultural biotechnology in Brazil is
outlined in law 11,105 and Decree Number 5,591 and basically consists of
the following:

a)  The National Biosafety Council (CNBS, in Portuguese). This council
    falls under the Office of the President and is responsible for the
    formulation and implementation of the national biosafety policy
    (PNB, in Portuguese) in Brazil. It establishes the principles and
    directives of administrative actions for the federal agencies
    involved in biotechnology. It evaluates socio-economic implication
    and national interests regarding approval for commercial use of
    biotech products. No safety considerations are evaluated by CNBS.
    Under the presidency of the Chief of Staff of the Office of the
    President, 11 cabinet ministers comprise CNBS and a minimum quorum
    of 6 ministers is needed to approve any relevant issue.

b)  The National Technical Commission of Biosafety (CTNBio, in
    Portuguese) was initially established in 1995 under the first
    Brazilian biosafety law (Law \# 8,974). Under the current law,
    CTNBio was expanded from 18 to 27 members to include official
    representatives from 9 ministries of the federal government, 12
    specialists with scientific and technical knowledge from 4 different
    areas including animal, plant, environment, and health (3
    specialists from each area), and 6 other specialists from other
    areas such as consumer defense and family farming. Members of CTNBio
    are elected for two years with a possibility of being reelected for
    an additional two years. CTNBio is under the Ministry of Science and
    Technology. All technical related issues are debated and approved
    under CTNBio. Imports of any agricultural commodity for animal feed
    or for further processing, or any ready-to-consume food products,
    and pet food containing biotech events must be pre-approved by
    CTNBio. Approvals are on a case-by-case basis. For additional
    information on CTNBio, please see GAIN BR 5632.

Note:

Although under the current law, CNBS is supposed to handle all
political, social and economic factors that may influence regulatory
decisions related to agricultural biotechnology, the expansion in the
number of members that compose CTNBio created a major deadlock for
approval of new biotech products in Brazil. The reason was because of
the two-thirds majority required under law 11,105/2005 for CTNBio
members to approve any biotech event

However, after an intense debate in the National Congress (house and
senate), a new draft bill was approved and signed into law by President
Lula. He maintained the changes introduced by Brazil's House and
confirmed by the Senate regarding the number of votes needed by CTNBio
to make any board decision. The new law 11,460 of March 21, 2007,
changed article 11 of law 11,105 of March 24, 2005 and established a
majority of votes needed out 27 total voters on CTNBio's board, to
approve new biotech products.

## Product Authorizations

In Brazil, a technology provider must file an application for approval
to sell agricultural biotech products with CTNBio. A company must file a
single application for each biotech event. CTNBio will evaluate the need
for any further environmental impact studies. After the approval of
CTNBio, three other ministers have an important role in the registration
process:

a)  Ministry of Agriculture, Livestock, and Food Supply (MAPA) for
    products used in agriculture, livestock, and agribusiness
    (processing);

b)  Ministry of Health, regarding use of products for humans and
    pharmaceutical uses; and,

c)  Ministry of Environment for products that require registration and
    inspection for use in the natural ecosystem.

## Field Testing

Field-testing of biotech crops is allowed in Brazil, but CTNBio must
previously approve this research. The technology provider must obtain
from the National Technical Commission on Biosafety (CTNBio) the
so-called CQBs (Certificate of Quality in Bio Safety) to perform
field-testing.

## 

## Coexistence of biotech and non-biotech crops

There is no national policy in place regarding the coexistence of
biotech and non-biotech crops in Brazil. Law 11,105 of March 2005
established the legal framework under which biotech crops can be
produced and marketed in Brazil. Conventional or non-biotech crops are
produced throughout the country with agricultural zoning and
environmental limitations mostly applicable in the Amazon region.

Law 9,456 of April 25, 1997, the so-called Plant Variety Protection law
establishes the legal framework for registration of both biotech and
non-biotech seeds, but the law does not favor one over the other.

Decree 2,366 of November 5, 1997, established the National Plant
Varieties Protection Service under the Ministry of Agriculture,
Livestock, and Food Supply (MAPA) and regulate the registration of
biotech and non-biotech seeds.

Organic agriculture is growing rapidly in Brazil. Growth is estimated at
20 percent per year, but commercial production is still limited mostly
to grains and vegetables, although it is increasing in the meat and
dairy sectors. The growth in organics in Brazil has been recently
boosted by the interest of the Brazilian supermarkets in providing
organic products. There are approximately 1,200 certified farmers and
two private institutions with the authority to certify organic products.
There are no official trade statistics about organic products either for
imports or exports.

The rapid growth of organic farming in Brazil has prompted the Brazilian
government to regulate the sector. On May 19, 1999, the Minister of
Agriculture, Livestock, and Food Supply (MAPA) published in the Diario
Oficial (Brazil's Federal Register) Normative Instruction Number 7,
which contains the standards for production, classification, processing,
packaging, imports, distribution, identification, and certification of
the quality of organic products, of both animal and plant origin.

Both domestic and imported organic products must be labeled with the
term \"organic product\" and the name and registration number of the
certifying organization. For bulk products, a "certificate of organic
quality" must accompany the shipment. The Office of Agricultural
Protection (SDA) of the Ministry of Agriculture, Livestock, and Food
Supply (MAPA) has the authority to approve imported organic products.

## Technology Fees

The new Biosafety Law, which provides a clear regulatory framework for
the research and marketing of new biotechnology crops in the country,
has encouraged Brazil's federal government to embrace and protect new
technologies that benefit agriculture.

During the 2005/06-crop year, Monsanto was not able to reach an
agreement with Brazil's Seed Producer's Association regarding collection
of royalties. The new strategy of Monsanto was to negotiate directly
with the so-called "seed multipliers" and a preliminary agreement was
reached to collect a fee of R\$ 0.88 per kilogram of RRS seed
(equivalent to R\$ 35.20 per bag of 40 kilograms). Trade sources
indicate that this is equivalent to US\$ 8.00 per acre, nearly half of
the value paid by U.S. soybean producers. During the 2006/07-crop year,
Monsanto and producer negotiated a proposal that included a standard
royalty of two percent for both certified and non-certified (pirated)
seeds, and apply a discount of 20 to 22 percent for the use of certified
seeds.

## Labeling

On April 24, 2003 the President of Brazil published in Brazil's Federal
Register (Diario Oficial) Executive Order number 4,680/03 establishing a
tolerance limit of **one percent** (see note below) for food and food
ingredients destined for human or animal consumption containing or being
produced through biotech events. The Executive Order also declared that
consumers need to be informed of the biotech nature of the product.

Note: The previous regulation (Executive Order Number 3,871 of July 18,
2001) established a four percent threshold, which was considered too
high by environmentalists and consumer groups. Executive Order 4,680
revoked Executive Order 3,871.

On December 26, the Ministry of Justice published in Brazil\'s Diario
Oficial, Directive Number 2,658/03 approving the regulations for the use
of the transgenic logo, which basically was the same as reported in our
GAIN BR 3614. As per Article Two of Directive 2,658/03 use of the new
logo required would be effective as of February 23, 2004 (60 days after
the publication in the Diario Oficial of Directive 2,658/03). It applies
for biotech products for both human and animal consumption with biotech
content above one percent. On February 27, 2004 The Ministry of Justice
published in the Diario Oficial Directive Number 786 that extended for
another 30 days the effective date of Directive 2,658/03. The new
effective date was March 27, 2004.

On April 2, 2004, the Civil Cabinet of the Presidency published
Normative Instruction Number 1, signed by 4 cabinet ministers (Civil
Cabinet, Justice, Agriculture, and Health) that established the
conditions by which Directive 2,658/03 will enforce the labeling of
products containing biotech events above the one percent limit. In
addition to the federal agencies, Normative Instruction Number 1 also
authorizes the state and municipal consumer defense officials to enforce
the new labeling requirements.

# SECTION IV. Marketing Issues

There is a public publicity campaign "Brazil Better Without Transgenics"
against the use of biotech crops in Brazil sponsored by Greenpeace and
supported by certain environmental and consumer groups, including
government officials within the Ministry of Environment, some political
parties, the Catholic Church, and the Landless Movement. However, the
acceptance of biotech crops in Brazil is strong among producers.
According to the Brazilian Farm Bureau (CNA), the latest survey among
Brazilian farmers dated from 2001 showed an 80 percent acceptance rate
of biotech crops.

Acceptance is low among meat processors and the food processing
industry. These groups fear the publicity campaign against their
products sponsored by Greenpeace and other environmental and consumer
groups. However, tests conducted by Greenpeace showed a minimum of
biotech residues in several consumer ready products. Brazilian retailers
also are reluctant to accept biotech products, especially the large
supermarkets under French ownership. Reliable information about consumer
acceptance of biotech products in Brazil is currently not available.

# SECTION VI: Capacity Building and Outreach

Post has developed and implemented two major outreach activities over
the past five years that were important in the development of biotech
regulations in Brazil.

1.  First Biotechnology Workshop, August 20-21, 2002 for a select group
    of Brazilian scientists from various ministries, universities, and
    scientific foundations;

2.  Second, Brazilian Congressional Visit to the United States in 2004
    with representatives from select Brazilian NGOs and institutes.