WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/BRA/36 
2 October 2012 
 (12-5324) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions Posed by CANADA1 Regarding the  
New and Full Notification of BRAZIL2 
   The following communication, dated 24 September 2012, is being circulated at the request of 
the Delegation of Brazil. 
 
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Question 1 
 
 Canada understands that Brazil has a numb er of agricultural programmes including the 
"Prêmio para Escoamento do Produto" (PEP) pr ogramme, the Agricultural and Livestock Plan 
(ALP), the Federal Government Acquisitio n Programme (AGF) and credit programmes under 
Sistema Nacional de Crédito Rural.  We note the absence of agriculture related programmes Brazil's notification.  Could Brazil elaborate as to the rationale for the absence of agricultural 
programs in its notification? 
 Reply 
 
 All the programmes mentioned have been dul y notified to the Committee on Agriculture, 
according to the submission G/AG/N/BRA/27, dated 14 February 2012.  Brazil understands that the 
Committee on Agriculture is the right forum for notifying and discussing agricultural programmes.  
Accordingly, it is our view that Brazil fully complies with all the principles of transparency applicable 
to this matter.  
Question 2 
 
 BNDES has a programme entitled "Pró-Aeronáutica" which provides long term financing to support investments made by SM Es which are part of the Brazilian aircraft 
industry production chain.  Pró-Aeronáutica has two modalities:  Empresa (companies) and 
Exportação (exports).  The Empresa modality finances the development of aeronautical 
products and services in partnership model risk.  The Exportação modality finances the 
production of goods and services for exports.  According to BNDES' web site, the programme 
                                                      
1 G/SCM/Q2/BRA/34. 
2 G/SCM/N/220/BRA. G/SCM/Q2/BRA/36 
Page 2  
 
  creates "special conditions" in order to allow the SMEs have access to BNDES financing, to 
grow and meet the demand both domestically and from abroad.
3 
 On a related note, Canada understands that  BNDES' "Taxa de Juros de Longo Prazo" 
(TJLP), which is used to establish BNDES's fi nancing rate, varied between 6 and 6.25% per 
year for the period covered by the present notification (2009-2010).4  In an August 2010 article5, 
The Economist reported that this rate was "…  well below the yield on ten-year government 
bonds of 12%.  The Treasury subsidizes the difference, which on $100 billion of outstanding 
loans, would be some $6 billion a year".  
 Could Brazil provide information on B NDES's Pró-Aeronáutica" including the 
financing rates and amounts di sbursed under each modality? 
 Reply 
 
 BNDES' Pró-Aeronáutica was created in 2009.  It was an effort to facilitate the access of 
small and medium enterprises of the aeronautical supply chain to long te rm financing, in the form of a 
direct contract with BNDES.  There is no differen tiation in the interest rate generally applied by 
BNDES to this programme.  Thus far, there has been no disbursement under said programme. 
 
INDUSTRIAL INCENTIVES  Support Programme for the Development of  the Pharmaceutical Productive Chain 
(PROFARMA –Innovation) 
 Question 3   According to the description for this programme, the subsidy may take the form of 
"participation in the project's revenues".  Could Brazil provide more detail on what is meant by 
"participation in the project's revenues" and on  how support is provided through this method?  
Could Brazil specify which companies or typ es of companies have received support under this 
programme?  Could Brazil confirm that this  programme will expire in August 2012?   
 
Reply 
 
 Participation in the project's revenues is no longer a possibility under this programme and, 
while in force, no company received support unde r this method.  The companies which received 
support under this programme were those whic h engaged in R&D activities aiming at the 
development of new or significantly improved products and/or processes to the pharmaceutical 
industry in Brazil.  The programme has been  extended and will expire in December 2012. 
 
                                                      
3"http://www.bndes.gov.br/SiteBNDES/bndes/bndes_p t/Institucional/Sala_de_Imprensa/Noticias/2007/
20070920_not212_07.html " 
 4"http://www.bndes.gov.br/SiteBNDES/bndes/bndes _pt/Ferramentas_e_Normas/Custos_Financeiros/T
axa_de_Juros_de_Longo_Prazo_TJLP/index.html " 
 5 http://www.economist .com/node/16748990   G/SCM/Q2/BRA/36 
 Page 3 
 
 
  Productive Development Policy (PDP) 
 Question 4   Could Brazil identify the criteria that compan ies must satisfy in order to be eligible for 
the Productive Development Policy's support pr ogramme?  Could Brazil specify whether this 
support is based either partly or wholly on export performance?  
Reply 
  According to Law No. 11.774/08, the Productive Development Policy aims at: 
 
a) Accelerating the depreciation of machines and equipments acquired in the internal 
market or imported and used in the pr oduction of goods and services. Any national 
enterprise can qualify for this programme. 
 
b) Suspending indirect taxes PIS and Co fins for legal persons on the sales or 
importations of fuel oil for coastal shipping and port and maritime support. 
 c) Reducing to zero indirect taxes PIS and Co fins on the import or sale of materials and 
equipments, including parts, pieces and components, used to build, maintain, 
modernize, convert or repair ships regist ered in the Brazilian  Special Register 
(Registro Especial Brasileiro ). 
  There are no export performance criteria in this programme.  Regional Incentives B. Investment Funds for the Amazon, the Northeast Regions and the State of Espirito Santo (Finam/Finor/Funres)  Question 5   Brazil has notified that Investment Funds for the Amazon, the Northeast Regions and 
the State of Espirito Santo are delivered th rough primary subscription of debentures 
convertible into stock, at a ratio of 70 per cent in convertible debentures and 30 per cent in 
non-convertible debentures.  In 2000, Pr ovisional Measure 2058 extinguished the 
non-convertible debentures.  Could Brazil explain why convertible debentures are preferred?  Further, Brazil has indicated that the beneficiaries of the subsidy are legal persons that 
implement a project considered to be relevant to the region.  Could Brazil specify which 
companies or types of companies have receive d support under this programme?  Do these 
subsidies benefit the agricultural sector in particular?  
Reply 
  Convertible debentures are preferred because, through this method, funds become investors 
but not managers of every single project.  It is th e responsibility of the ordinary shareholders, not of 
preferred ones, to take decisions regarding management issues in each one of the benefited projects.  
Companies from different sectors have received support under this programme.  There are no specific eligibility criteria targeting the agricultural sector.  G/SCM/Q2/BRA/36 
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  FISHERIES INCENTIVES 
 Programme for Diesel Oil Support  Question 6 
 
 Could Brazil clarify how the "international price" of diesel was calculated?  Could Brazil elaborate on whether there is any fishin g sustainability criteria for vessels or fisherman 
to be eligible to receive support under this programme?  Could Brazil confirm whether this 
programme is ongoing?  
 Reply 
 
 This programme is managed by the Ministry of  Fisheries and Aquaculture in conjunction with 
PETROBRAS – the Brazilian state-owned oil company.  All information related to prices, including 
the international price as well as the national price at th e refinery level, are provided to the Ministry of 
Fisheries and Aquaculture by PETROBRAS in acco rdance with current market conditions for 
maritime diesel.  The international price used  as reference is the "Marine Gas Oil"(MGO) bunker 
price.   There are no specific sustainability criteria for fishermen or vessels to qualify for this 
Program.  However, sustainability analyses are conduc ted on a continuous basis in order to verify if 
all the persons or vessels engaged in fishing opera tions comply with general rules in Brazil, which 
include disciplines related to sustainability.  
National Programme for Financing the Enlargement and Modernization of National Fishing 
Fleet – PROFROTA 
 Question 7   Could Brazil elaborate on the sustainability criteria for qualified projects to be eligible to receive support under this programme?  Coul d Brazil elaborate on whether any performance 
bonus has been denied as a result of failing to meet these criteria?  
 
Reply 
 
 The "National Programme for Financing the Enlargement and Modernization of National 
Fishing Fleet – PROFROTA" is a government pr ogramme for the construction, acquisition, 
replacement and modernization of fishing vessels in order to enhance the ocean fishing fleet. 
  Different sustainability criteria must be met for each type of use of the programme 
(construction, acquisition, replacement or moderni zation).  Such parameters may also vary in 
accordance with the fishery and it may include physi cal characteristics of the vessel, identification of 
specifically targeted species, identification of targ eted operational areas, commitments related to size 
and weight for specific monitored species, informati on on the capture devices to be used, information 
on the measures to be implemented to reduce by catch, improvements in the vessel (including 
benchmark for the quality of life for onboard workers,  as set by the International Labor Organization 
– ILO), scrapping commitment (for substitution of vessels), among others. 
 
 All the sustainability analysis is carried out  in the pre-approval phase.  The "non-default" 
bonus ("paid-on time" installment performance bonus) , based on the interest of the financed amount, 
is a post-concession benefit, only granted when the installment of the loan is paid on due date.  
However, ongoing assessments of vessels in operation (re gardless of whether they have received any  G/SCM/Q2/BRA/36 
 Page 5 
 
 
  benefit from any government programme) are carried out on a regular basis to check compliance with 
general rules in Brazil, including those disciplines rela ted to sustainability.  In practical terms, the 
Ministry of Fisheries and Aquaculture notifies fi nancial institutions responsible for managing its 
resources about cases of non-compliance with sustai nability criteria and requests the suspension of 
any benefits in connection with the Programme. 
 
 As environmental criteria are a precondition for granting any benefit under this programme, 
operations are expected to comply with those criteria.  The last operations carried out under 
PROFROTA happened in 2010 and covered 4 vessels.  
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