G/SCM/Q2/BRA/44  
 
24 October 2014  
(14-6178)  Page: 1/2  
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES 
REPLIES TO QUESTIONS1 POSED BY CANADA REGARDING THE NEW 
AND FULL NOTIFICATION OF BRAZIL2 
The following communication, dated 24 October 2014, is being circulated at the request of the 
Delegation of Brazil.  
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  Q1. Canada notes that the amount of Braz il's subsidy related to the Support Program 
for the Development of the Pharmaceutical Pr oductive Chain has increased substantially 
in recent years, from R$12M and R$19M  in 2009 and 2010 to R$120M and R$75M 
in 2011 and 2012.  
 
 Could Brazil explain the reason(s) for the large increase in the subsidy 
programme?  
Reply: 
 
In recent years, the Brazilian pharmaceutical ma rket has been growing at a fast pace, over 10% 
per year. Consequently, private pharmaceutical  companies have been trying to increase 
investment in Research and Development (R &D) of new pharmaceutical products as a strategy to 
foster their competitiveness, resulting in greater demand for "BNDES Profarma Inovação" funds.  
Q2. Brazil indicates the subsidy amounts rela ted to its Diesel Oil Price Equalization 
Scheme totaled R$2.8M in 2012. In Brazil's previous notification to the Committee, 
Brazil indicated the number of vessels benefiti ng from the subsidized price of maritime 
diesel, whereas it has not done so in its new submission.  
  Could Brazil include again the number of vessels benefiting from support under 
this programme? 
Reply: 
 
The number of vessels under this scheme amounted to 1.197 in 2012, primarily small scale 
operators. Brazil takes note of Canada´s request. In future Brazilian notifications, a more 
comprehensive table, including the number of vessels, will be provided.  
Q3. BNDES has a programme entitled "Pró-Aeronáutica" which provides long term 
financing to support investments made by sm all and medium sized enterprises that are 
part of the Brazilian aircraft industry pr oduction chain. Pró-Aeronáutica has two 
modalities: Empresa (companies) and Expo rtação (exports). The Empresa modality 
finances the development of aeronautical pr oducts and services in partnership model 
risk. The Exportação modality finances the prod uction of goods and services for exports. 
When asked in the context of Brazil's previous subsidy notification 
                                               
1 G/SCM/Q2/BRA/41. 
2 G/SCM/N/253/BRA. G/SCM/Q2/BRA/44 
 
- 2 - 
 
  (G/SCM/Q2/BRA/36), Brazil indica ted that there had been no disbursement made under 
the said programme.   Could Brazil provide the amounts disburse d under each modality of BNDES's "Pró-
Aeronáutica" since its previous subsidy notification? 
 
Reply: 
 There have not been disbursements under this programme since the last notification. The programme was terminated on the 31st of March 2013.  
Q4. Law No. 12,249 of 11 June 2010 created the Special Regime for the Aeronautical 
Industry ( Regime Especial para a Indú stria Aeronáutica Brasileira , RETAERO). The 
beneficiaries are companies that produce part s, tools, components, equipment, systems, 
subsystems, inputs and raw materials, or serv ices to be employed in the maintenance, 
conservation, modernization, repair, overha ul, conversion, and industrialization of 
aircraft classified under NCM heading 88.02. Be nefits include a suspension of the IPI for 
purchases in the domestic market and for impo rts, as well as of PIS/Pasep and COFINS 
contributions (including PIS/ Pasep-  Importação and COFINS- Importação ). The 
suspension becomes a zero-rated regime af ter the employment or use of the goods 
acquired or imported under RETAERO, on goods used for the maintenance, upkeep, 
repair, modernization, industrialization, conver sion and overhaul of aircraft classified in 
heading NCM 88.02.  
 Could Brazil explain why this programme is not included in its subsidy notification 
and provide the amount of revenue foregone through this programme? 
Reply: 
 
The suspension scheme by itself does not entail the concession of subsidies, and, therefore, does 
not have to be notified. For purposes of tax administration, RETAERO only intends to prevent the accumulation of input tax rebates claimed by bene fited companies. Due to the exemption of taxes 
in export transactions, these companies are not able to offset their accumulated input taxes only 
with domestic sales. Tax suspension is not a subsidy but rather an accounting scheme to provide for the zero-rating of supplies of qualifying goods to qualifying persons. 
 
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