RESTRICTED
WORLD TRADE WT/TPR/S/21
4October 1996
ORGANIZATION(96-4009)
Original: English
TRADE POLICY REVIEW
BRAZIL
Report bytheSecretariat
Thisreport, prepared forthesecond Trade Policy Review ofBrazil, hasbeendrawn up
bytheWTO Secretariat onitsownresponsibility. TheSecretariat has,asrequired by
theAgreementestablishingtheTradePolicyReviewMechanism(Annex3oftheMarrakesh
Agreement Establishing theWorld Trade Organization), sought clarification from the
Government ofBrazil onitstrade policies andpractices.
Document WT/TPR/G/21 contains thepolicy statement submitted bytheGovernment of
Brazil.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body ofBrazil.Brazil WT/TPR/S/21
Page iii
TABLE OFCONTENTS
Page
SUMMARY OBSERVATIONS xi
(1) TheEconomic Environment xi
(2) TheTrade andInvestment Policy Framework xi
(3) Trade Measures Directly Affecting Imports xii
(4) Trade Measures Directly Affecting Exports xiii
(5) Measures Affecting Production andTrade xiii
(6) Trade Policies andPractices inNon-Service Industries xv
(7) Services xvii
GLOSSARY xix
I. THE ECONOMIC ENVIRONMENT 1
(1) Introduction 1
(2) Recent Economic Performance 1
(i) ThePlano Real 1
(ii) Output, prices andemployment 2
(iii) Public finance 3
(iv) Monetary andexchange ratedevelopments 4
(3) Balance ofPayments 6
(i) Current account 6
(ii) Capital account 7
(iii) External debt 7
(4) Trade Patterns 8
(i) Commodity composition oftrade 8
(ii) Direction oftrade 11
(5) Investment Patterns 13
(6) Outlook 17
Annex I.1 Exchange Rates 18WT/TPR/S/21 Trade Policy Review
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II. THE TRADE AND INVESTMENT POLICY FRAMEWORK 19
(1) Trade Policy 19
(i) General trade policy objectives 19
(ii) Structure oftrade policy formulation 19
(iii) Laws andregulations 21
(iv) Trade relations 21
(2) Investment Policy 28
(i) Investment policy objectives 28
(ii) Constitutional andlegal framework 29
Annex II.1 Record ofDispute Settlement, January 1992 -February 1996 33
III. TRADE MEASURES DIRECTLY AFFECTING IMPORTS 35
(1) Registration, Customs Valuation, Rules ofOrigin andLicensing 35
(i) Registration anddocumentation 35
(ii) Customs valuation 35
(iii) Rules oforigin 36
(iv) Import licensing 36
(2) Tariffs 38
(i) Recent developments affecting Brazil 'stariff structure 38
(ii) Brazil 'stariff structure 41
(iii) Tariff bindings 47
(iv) Temporary tariffs 48
(v) Concessional entry 48
(vi) Tariff preferences 50
(vii) Tariff quotas 50
(viii) Variable import levies 50
(3) Non-Tariff Levies andCharges 51
(4) Quantitative Controls andRelated Measures 54
(i) Import prohibitions 54
(ii) Import quotas 55
(iii) Import surveillance 56
(iv) Import cartels andState-trading enterprises 56Brazil WT/TPR/S/21
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(5) Standards andOther Technical Requirements 56
(i) Standards, testing andcertification 57
(ii) Sanitary andphytosanitary regulations 59
(iii) Marketing, labelling andpackaging 62
(6) Contingency Trade Measures 62
(i) Anti-dumping andcountervailing measures 62
(ii) Safeguard actions 66
(iii) Measures implemented inexporting countries 67
(iv) Balance-of-payments andother measures 67
Annex III.1 Trade Defence Legislation 69
IV. TRADE MEASURES DIRECTLY AFFECTING EXPORTS 77
(1) Registration, Documentation andLicensing 77
(2) Export Charges andRelated Measures 79
(3) Quantitative Export Controls andRelated Measures 79
(i) Export prohibitions 79
(ii) Export quotas 79
(iii) Export cartels 81
(iv) Voluntary restraints, surveillance andsimilar measures 82
(v) Actions byother countries affecting Brazilian exports 82
(4) Export Support Measures 83
(i) Export subsidies 83
(ii) Duty andtaxconcessions 84
(iii) Export finance 86
(iv) Export insurance andguarantees 88
(v) Export promotion andmarketing assistance 89
(vi) Export-performance requirements 89
(vii) Export-processing zones 89
(viii) Generalized System ofPreferences andother measures 90
Annex IV.1 Anti-dumping andcountervailing actions in
force against Brazilian products, early 1996 91WT/TPR/S/21 Trade Policy Review
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V. MEASURES AFFECTING PRODUCTION AND TRADE 93
(1) Arrangements Affecting Market Structure andCompetition 93
(i) Competition policy 93
(ii) Public enterprises andtheprivatization programme 94
(iii) Marketing andpricing arrangements 99
(iv) Local content schemes 102
(v) Government procurement 102
(vi) Free-trade zones 104
(vii) Countertrade 105
(2) Sectoral andOther Activity-Specific Assistance 106
(i) Production subsidies, taxconcessions 106
(ii) Credit programmes 107
(iii) Regional assistance 112
(iv) Adjustment assistance 113
(v) Assistance forresearch anddevelopment 114
(3) Trade-Related Aspects ofIntellectual Property Rights (TRIPS) 115
(i) Administrative procedures 115
(ii) Protection ofintellectual property rights 116
(iii) Initiatives onintellectual property 119
(iv) Suppression ofintellectual property rights violations 120
VI. TRADE POLICIES AND PRACTICES INNON-SERVICE INDUSTRIES 121
(1) Overview 121
(2) Agriculture andRelated Processing Industries 122
(i) Main features 122
(ii) Policy objectives andinstruments 123
(iii) Quantification ofgovernment intervention 127
(iv) Developments inselected activities 129
(3) Mining 135
(i) Main features 135
(ii) Policy objectives andinstruments 136
(iii) Developments inselected mining activities 137
(4) Manufacturing 140
(i) Main features 140
(ii) General policy objectives andinstruments 142
(iii) Developments inselected industries 142Brazil WT/TPR/S/21
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VII. SERVICES 151
(1) General Features 151
(2) Telecommunications 154
(i) Market structure andperformance 154
(ii) Regulatory framework 156
(iii) Recent andplanned reforms 158
(3) Banking andInsurance 158
(i) Banking 159
(ii) Insurance 163
(4) International transport 165
(i) Airtransport 165
(ii) Ports andmaritime transport 166
REFERENCES 169WT/TPR/S/21 Trade Policy Review
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CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Real effective exchange rate, May 1993 -May 1996 5
II. THE TRADE AND INVESTMENT POLICY FRAMEWORK
II.1 Main trade-related agencies 20
IV. TRADE MEASURES DIRECTLY AFFECTING EXPORTS
IV.1 Fiscal incentives under BEFIEX programmes, 1992-94 85
VI. TRADE POLICIES AND PRACTICES INNON-SERVICE INDUSTRIES
VI.1 Rural credit outstanding, July1994 andOctober 1995 126
VII. SERVICES
VII.1 Value added inservices, 1994 151
VII.2 Evolution ofnon-factor services account, 1990-95 152Brazil WT/TPR/S/21
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Page
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 Major features oftheeconomy, 1992-95 1
I.2 Recent economic performance, 1992-95 2
I.3 Public sector borrowing requirements 4
I.4 Balance ofpayments, 1992-95 6
I.5 External debt 8
I.6 Imports bygroups ofproducts, 1990-95 9
I.7 Exports bygroups ofproducts, 1990-95 10
I.8 Exports bydestinations, 1990-94 11
I.9 Imports byorigin, 1990-94 12
I.10 Foreign investment flows toBrazil 14
I.11 Stock offoreign investment inBrazil at30June 1995, bysource 15
I.12 Stock offoreign investment inBrazil at31March 1995, bysector 16
I.13 Brazilian investments abroad, March 1995 17
II. THE TRADE AND INVESTMENT POLICY FRAMEWORK
II.1 Notifications made byBrazil under theWTO Agreement, May 1996 23
III TRADE MEASURES DIRECTLY AFFECTING IMPORTS
III.1 Products subject toprior import authorization 37
III.2 Gross fiscal revenue, 1992 and1994 38
III.3 Evolution oftariff rates, 1990-1995 39
III.4 M.f.n. tariff andbindings, byHSchapter 43
III.5 Simple average applied m.f.n. tariff, bystage ofprocessing, January 1996 46
III.6 Tairff bindings inBrazil 47
III.7 Other charges affecting exclusively imports 51
III.8 Organizations involved instandards, testing andcertification 59
III.9 Selected newsanitary andphytosanitary regulations, 1992-1995 60
III.10 Anti-dumping andcountervailing actions inforce 65
Annex Table III.1 Anti-Dumping Measures Initiated byBrazil, 72
January 1992 -February 1996
Annex Table III.2 Countervailing Actions initiated byBrazil, 76
January 1992 -February 1996
IV. TRADE MEASURES DIRECTLY AFFECTING EXPORTS
IV.1 Budgeted andactual PROEX expenditures, 1991-1995 88
V. MEASURES AFFECTING PRODUCTION AND TRADE
V.1 Main features ofselected public enterprises 95
V.2 Stages ofthePrivatization Programme, 1990-95 97
V.3 Results ofthePrivatization Programme, 1991-1996 98
V.4 Crops forwhich AGF andEGF coverage changed between 1992/93 and1996/96 100WT/TPR/S/21 Trade Policy Review
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V.5 Production volumes ofmajor crops under theAGF andEGF, 1990/91 to1994/95 100
V.6 Rural credit programmes, 1995 109
VI. TRADE POLICIES AND PRACTICES INNON-SERVICE INDUSTRIES
VI.1 Effective Rates ofProtection byactivity 122
VI.2 Public expenditure onagriculture andnatural resources, 1991 129
VI.3 Value added, employment andestablishments inmanufacturing 141
VI.4 Production, imports andexports inselected manufacturing industries 141
VII SERVICES
VII.1 Summary ofBrazil 'shorizontal GATS commitments 153
VII.2 Summary ofBrazil 'sArticle II(m.f.n.) exemptions 154
VII.3 Selected statistics ontelecommunications 155
VII.4 Structure ofthebanking system, March 1996 159
APPENDIX TABLES
AVII.1 Summary ofBrazil 'sspecific GATS commitments inselected sectors 172Brazil WT/TPR/S/21
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SUMMARY OBSERVATIONS
Introduction
1. Brazil hasmade considerable progress
indealingwithsomeoftheeconomicconstraints
itfaced intheearly 1990s: principally, in
restoring growth andconfidence intheeconomy
andlowering inflation. Since economic growth
resumed in1993, theeconomy hasproved
resilient toexternal shocks andforeign capital
hasflowed copiously intothecountry. Trade
liberalization,privatization,thegradualopening
ofkeyactivities toforeign investment, and
general deregulation are creating an
increasingly competitive economy. Theprocess
should befurther aided bycontinuing
microeconomic andfiscal reforms. Today 's
challenge istoensure thecontinuity ofthemore
open, lower-inflation environment andpreserve
external balances, while achieving therapid
economic growth required toabsorb an
expanding labour force, andtoresist pressure
toreverse thereform process.
(1) Economic environment
2. Brazil'smajormacroeconomic
achievement inrecent years hasbeen the
reduction ofinflation from anannual rateof
nearly 2,500 percentin1993 tosome 20per
centinearly 1996. Thiswasachieved inlarge
part through theimplementation ofanew
stabilization programme, thePlano Real,
introduced inmid-1994. Real GDP growth
recovered to5.8percentin1994, although
there hassince beenaslowdown. Economic
growth remains constrained byhigh, albeit
falling, real interest rates linked totight
monetary policies. Fiscal deficits require
attention both ontherevenue and the
expenditure side.
3. High interest rates, combined with
improved economic performance, intensified
privatization efforts, andgreater pricestability
have resulted inastrong inflow offoreign
capital andaconsiderable accumulation of
international reserves, whose composition has
alsovaried. Concurrent current account and
merchandise trade deficits have ledsomeobservers tosuggest thattherealeffective
exchange rate(REER) isovervalued. Certainly,
there wasasharp appreciation oftheREER in
1994, when thenewcurrency, thereal, was
introduced, butthere hasbeenaprogressive
depreciation sincethen. Thepossibility thatthe
REER hasbeenovervalued would beconsistent
withthesharp increase inimports since 1994
andalossofexport dynamism, which formthe
backdrop forrecent moves torestrict selected
imports andsupport exports.
(2) TradeandInvestmentPolicyFramework
4. Since thelastreview, thestructure of
tradepolicyformulationinBrazilhasundergone
major changes. Inlate1992, theMinistry of
Economy, Finance andPlanning wasdivided
intothreeMinistries: (i)Planning andBudget,
(ii)Finance, and(iii)Industry, Trade and
Tourism. In1995, theChamber ofForeign
Trade, consisting ofthemain economic
ministries and agencies, was created to
formulate andevaluate policies, co-ordinate
activities related toforeign trade andserve as
adiscussion forum forthepublic andprivate
sectors.
5. Thegradual process ofreforming
Brazil 'slegal framework hascontinued. In
1995, constitutional amendments approved by
Congress eliminated theconcept of"Brazilian
company ofnational capital" andopened a
number ofstrategic areas toprivate andforeign
participation. Adoption ofimplementing
regulations isnowinprogress.
6. Brazil 'semphasis onautonomous trade
liberalization before theconclusion ofthe
Uruguay Round allowed ittoofferdeepcutsin
itsbound tariff rates, aswellaselimination of
mostnon-tariff barriers totrade. Brazil also
made specific commitments inthearea of
financial services andisactively participating
inthebasic telecommunications negotiations.
New regulations have been introduced to
facilitate the implementation ofWTO
commitments, including intheareas of
safeguards andindustrial property. The
authorities consider thatBrazil 'sconcessionsWT/TPR/S/21 Trade Policy Review
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inthisRound werenotfullymatched bycertain
major trading partners.
7. While theWTO provides themain
framework forBrazil 'sgeneral trade relations,
efforts havealsobeenfocused onthecompletion
ofMERCOSUL, which isbecoming the
cornerstone ofBrazil 'strade agreements with
othercountriesandgroupswithinLatinAmerica
andbeyond. Brazil isalsoactively participating
innegotiations toestablish aFreeTrade Area
fortheAmericas.
(3) Trade Measures Directly Affecting
Imports
8. Under thetariff reform programme,
Brazil 'saverage applied tariff dropped from
21.2percentinJanuary 1992 to14percent
inJuly1993 andnowstands at12.5percent.
Tariff dispersion andescalation were also
reduced. TheshifttotheCommon External
Tariff (CET) ofMERCOSUL didnotleadtoany
majorchanges:Brazil'snationaltariffstructure
remains relatively complex, with several,
variable exemptions fromtheCET, subject to
aprocess ofconvergence through totheyear
2006; suchexemptions haveallowed frequent
adhoctariff changes toprotect particular
products ortocontrol domestic prices.
9. WhilethebindingofBrazil'sentiretariff
schedule intheUruguay Round negotiations
will, over time, provide greater security of
access, thestability ofcommitments hasbeen
reduced bythefactthatthevastmajority of
bindingsarehigherthanappliedrates;bindings
aregenerally ataceiling rateof35percentfor
manufactures and55percentforagriculture.
Theauthorities arecommitted nottoapply the
CET inthose cases where thecommon rate
might exceed Brazil 'sbinding commitments. On
theother hand, tariff exemptions arestill
actively usedtoallow duty-free import ofinputs
andcapital goods; particularly important are
theexemptions granted totheautomotive
industry.
10. Many technical changes haveoccurred
intrade regulations;- stepshavebeentaken tosimplify trade
procedures andfurther improvements
are expected with theimminent
implementation ofanewcomputerized
import system.
- minimum import prices forcustoms
valuation purposes.
- Criteria established in1994 formotor
vehicles require theuseoffactory list
orpublished second-hand prices,
althoughBrazildoesnotapplyminimum
import prices forcustoms valuation
purposes.
- Changes affecting thelicensing régime
since 1992, including reducing licence
validity periods from90to60daysand
eliminating licence extensions, suggest
departures fromthegeneral rulethat
imports aresubject toautomatic
licences,mainlyforstatisticalpurposes.
Limits oncredit terms havealsobecome
aconsideration inthegranting of
licences fortextile imports.
- Many changes havealsobeenmade to
thedevelopment andadministration of
standards,testingandcertificationsince
1992.AlthoughregulationsrequireISO
methodology forcertification tobe
adopted, they also prescribe the
priority use ofBrazilian norms;
compulsory certification isrestricted to
products orservices thatmayaffect
health, safety ortheenvironment.
- Modificationstohealth-related
legislation over thelastfour years
aimedtoestablishanup-to-dateproduct
safety system andpre-empt possible
difficultiesforBraziliananimalproducts
inforeign markets. Newphytosanitary
rules, covering some 100agricultural
products, were expected tocome into
force inearly 1996. Work wasalsoin
progress tobroaden thenumber of
technicalrulestopreventcontaminating
substances inimported foodproducts,
inparticular wheat. Brazil hassigned
orisnegotiating bilateral phytosanitaryBrazil WT/TPR/S/21
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GLOSSARY
English Portuguese Acronym
Administration oftheFree-
trade Zone ofManausSuperintendência daZona
Franca deManausSUFRAMA
Administration forthe
Development oftheNortheastSuperintendência do
Desenvolvimento doNordesteSUDENE
Administration forthe
Development oftheAmazonSuperintendência do
Desenvolvimento daAmazoniaSUDAM
Administrative Council for
Economic DefenceConselho Administrativo de
Defesa EconômicaCADE
Alcohol Price Unification
FundFundo deUnifica çãodos
PreçosdoÁlcoolFUPA
Brazilian Agricultural
Research CorporationEmpresa Brasileira de
Pesquisas AgropecuariasEMBRAPA
Brazilian Institute ofthe
Environment andRenewable
ResourcesInstituto Brasileiro doMeio
Ambiente edosRecursos
Naturais RenováveisIBAMA
Federal Savings Bank Caixa Econômica Federal
National Institute ofIndustrial
PropertyInstituto Nacional de
Propriedade IndustrialINPI
Chamber ofForeign Trade Câmara deComércio Exterior
Commission forthe
Concession ofFiscal Benefits
forSpecial Export
ProgrammesComiss ãoparaConcess ãode
Beneficios Fiscais a
Programas Especiais de
Exporta çaoBEFIEX
Consultative Committee on
Trade DefenseComitê Consultivo deDefesa
Comercial
Directive Portaria
Economic LawSecretariat Secretaria deDireito
EconômicoSDE
Export licence Guía deExporta çao
Export Finance Programme
forNational Goods and
ServicesPrograma deFinanciamento
àsExporta çoesdeBense
ServiçosNacionaisPROEX
Export licence Guia deexporta çãoWT/TPR/S/21 Trade Policy Review
Page xx
English Portuguese Acronym
Federal Revenue Secretariat Secretaria daReceita Federal
Federal Government
Acquisition ProgrammeAquisi çaodoGoverno
FederalAGF
Federal Government Loan
ProgrammeEmpréstimo doGoverno
FederalEGF
Finance Programme for
Exports ofMachinery and
EquipmentPrograma deFinanciamento
àsExporta çoesdeMáquinas
eEquipamentosFINAMEX
Financing Programme forthe
Export ofDomestic Goods
andServicesPrograma deFinanciamento
àsExporta çoesdeBense
ServiçosNacionaisPROEX
Foreign Trade Secretariat Secretaria deComércio
ExteriorSECEX
Import licence Guia deimporta ção
Industrialized Products Tax Imposto sobre Produtos
IndustrializadosIPI
Interministerial Directive Portaria Interministerial
Merchandise Brazilian
NomenclatureNomenclatura Brasileira de
MercadoriasNBM
Merchant Fleet Fund Fundo daMarinha Mercante FMM
Mercosul Common
NomenclatureNomenclatura Comun do
MercosulNCM
Ministry ofAgriculture Ministério daAgricultura, do
Abastecimento edaReforma
Agrária
Ministry oftheArmy Ministério doExército
Ministry ofExternal Relations Ministério dasRelações
ExterioresItamaraty
Ministry ofFinance Ministério daFazenda
Ministry ofHealth Ministério daSaúde
Ministry ofIndustry, Trade
andTourismMinistério daIndústria, do
Comércio edoTurismoMICT
Ministry ofJustice Ministério daJustiça
Ministry ofLabour Ministério doTrabalhoBrazil WT/TPR/S/21
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English Portuguese Acronym
Ministry ofPlanning and
BudgetMinistério doPlanejamento e
Orçamento
Ministry ofRegional
IntegrationMinistério daIntegra ção
Regional
Ministry ofScience and
TechnologyMinistério daCiência e
Tecnologia
National Development Bank Banco Nacional de
Desenvolvimento Econômico e
SocialBNDES
National Monetary Council Conselho Monetário Nacional CMN
National Treasury Council Conselho Nacional da
FazendaCONFAZ
Official Diary Diário Oficial daUnião
Provisional Decree Medida Provisoria
Reinsurance Institute ofBrazil Instituto deResseguros do
BrasilIRB
Secretariat forEconomic
SurveillanceSecretaria de
Acompanhamento Econômico
Services andMerchandise
Circulation TaxImposto sobre Circula çãode
Mercadorias eServiçosICMS
Southern Common Market Mercado Comum doSul MERCOSUL
Special Agency forIndustrial
FinancingAgência Especial de
Financiamento IndustrialFINAME
Trade Defence Department Departamento deDefesa
ComercialDECOM