WT/TPR/S/212/Rev.1 Trade Policy Review 
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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW1 
1. Brazil is one of the world's largest exporters of  agricultural products.  The average tariff on 
agricultural products is lower than that on other g oods but a number of internal measures are in place 
to assist agricultural production.  These include gua ranteed producer prices and credit at preferential 
rates;  banks are required to reserve 25% of their demand deposits for agriculture.  Since 2004, 
enterprises investing in biodiesel crops are eligible  for reduced tax rates and preferential credit.  
Brazil's large forestry sector has made an increasingly important contribution to merchandise exports.   
2. During the review period, Brazil's mineral pr oduction benefited from strong world demand 
and expanded considerably.  Foreig n investment in the sector receives national treatment.  Private 
companies established in Brazil may be involved,  through concessions, in the petroleum and gas 
industry.  In practice, state-controlled PETROBRÁS has a dominant position in the sector, particularly in refining.  The State also has a domin ant presence in the electricity sector.  Brazil is the 
world's largest exporter of ethanol and second la rgest producer.  It also has a large and well 
diversified manufacturing sector, which has be en supported through both border and internal 
measures, particularly favourable c onditions for long-term financing. 
3. The services sector generates some 65% of Brazil's GDP at basic prices.  Although the 
Executive Branch has the right to limit new foreign participation in the telecommunications sector, in 
practice any company established in Brazil may pa rticipate.  Brazil does not have GATS specific 
commitments in telecommunications.  The establishm ent of new foreign financial institutions is 
subject to case-by-case approval.  Banks incorporated  in Brazil may be 100% foreign owned;  foreign 
banks may engage only in the same activities as dom estic banks.  Brazilian legislation was amended 
in 2007 to allow for the insurance to be taken out  abroad under certain conditions.  Brazil has not 
ratified the Fifth Protocol to the GATS on financia l services, but legislation is being examined by 
Congress to this end (end 2008).  
4. Brazil's commercial aviation continued to f ace problems during the period under review.  
Only companies majority-owned and managed by Brazilians may provide domestic services.  All 
major airports are owned and operated by the Stat e.  Brazil requires reciprocity in international 
maritime transportation services and, in principle, only Brazilian flag vessels may engage in cabotage 
activities.  Brazil applies a tax on the cost of maritime  freight;  the rate applie d on international routes 
is 25% while that on cabotage is 10%, with exports excluded from the tax;  the proceeds are used to 
finance the domestic shipbuilding industry.  Braz il collects a lighthouse fee only on foreign flag 
vessels.  The practice of professions in Brazil is regulated at the federal level.  No professions are reserved for nationals but the practice of the legal and other professions requires residence in Brazil.  
In architecture and engineering, foreign service su ppliers must form joint ventures with Brazilian 
service suppliers, who should take the burden of civil liability. 
(2) A
GRICULTURE AND FORESTRY  
5. The agricultural sector expanded by 16.7% in volume terms during 2004-07 .  Brazil is one of 
the few WTO Members for which the applied average ta riff on agricultural products is lower than that 
on other goods.  However, a relatively large number of programmes are in place to assist agricultural 
production, with many aimed at providing low cost credit especially to small farmers.  Although 
                                                      
1 In Chapters III and IV, figures in Brazilian real were  converted to U.S. dollars at an exchange rate of 
R$1.8/US$1, which represents the simple average for the fi rst 11 months of 2008.  As at 15 December 2008, the 
exchange rate was of R$2.37 per US$. Brazil WT/TPR/S/212/Rev.1 
 Page 95 
 
 
possible by norm, the authorities have noted that, in practice credit preferences are not greater for 
Brazilian-owned than for foreign-owned companies.  However, in some cases, credit preferences can 
be contingent on the use of domestic inputs.  Guar anteed prices to a number of products are also used 
to support agriculture.  A law introduced in 2004 regulates biodiesel production and imports and 
makes farmers who invest in biodiesel crops eligib le for reduced tax rates and preferential credit. 
6. Although the value of assistance to agriculture in Brazil is low compared with the average in 
OECD countries, the interventions in both the cred it and agricultural domestic markets are distorting 
forms of support.  Moreover, as Brazil is one of th e world's largest exporters  of agricultural products, 
its support to agriculture could affect global markets.   
(i) General features, policy objectives, and administration 
7. The share of agriculture (including fishery and forestry but excluding processing activities) in 
GDP at basic prices was 5.5% in 2007, down from 6.9%  in 2004.  The nominal value of production in 
domestic currency increased by only 4.4% between  2004 and 2007, while the physical production of 
grains and meat increased by 16.7%.  This discrepancy between value and volume figures reflects a combination of falling international prices for so me export commodities, lower production, rising 
input costs, mainly for fuel, and an appreciating exchange rate.  During 2005 and 2006, guaranteed 
prices were extended to a number of products (inclu ding soybeans for the first time) and market price 
support increased.
2   
8. While the overall volume of production increased during the 2004-07, production of some of 
Brazil's main agricultural crops, such as maize and rice, contracted over 2005-06, while production of 
soy stagnated.  Production volum es recovered in 2007 and especia lly 2008, initially triggered by 
higher international demand and prices.  Overall,  the volume of production of cereals increased by 
11.7% between 2004 and 2007, when it reached 133 m illion tonnes.  Production increased further in 
2008 to an estimated of 145 million tonnes for the year.  The main cereals produced in 2007 were:  
soy (41.3% of the total, in volume terms), maize ( 40.2%), rice (8.2%), and wheat (4%).  Production of 
poultry meat increased from 8.5 million tonnes in 2004, to 11.1 million in  2008 (estimate). 
9. Brazil is a major exporter of agricultura l products.  Agriculture exports totalled 
US$48.2 billion in 2007, or 30% of total expor ts, down from 33% in 2003 (see Chapter I(6)(i)).3  In 
value terms, soybeans are the largest export (U S$6.7 billion in 2007), followed by poultry meat 
(US$4.4 billion), wood and derive d products (US$3.6 billion), coffee (all types, US$4.1 billion), 
sugar (US$5.1 billion), and orange juice (US$2.3 billion).  Brazil is the world's largest exporter of 
coffee, sugar, tobacco, soybeans, and orange juice.   Meat exports (beef, poultry, and others) were 
particularly dynamic during the period under review. 
10. Agricultural policy formulation and implementation is the responsibility of the Ministry of 
Agriculture, Livestock and Food Supply (MAPA), and of the Ministry of Agrarian Development (MDA).  The Secretariat of Agribusiness International Relations (SRI/MAPA), in charge of 
agricultural trade policy issues in the MAPA, is re sponsible for notifications to the WTO, and for 
advising the CAMEX on trade policy issues linked to  agriculture.  The MDA is responsible for 
policies aimed at sustainable rural development by  means of land reform and the strengthening of 
small-scale household agriculture, and for promo ting domestic food produc tion and enhancing food 
security, as well as for trade issues affecting these areas.   The National Food Supply Company 
                                                     
 
2 OECD (2007). 
3 The figures reported here are aggregations  undertaken by the WTO Secretariat using 
UN COMTRADE figures, and may differ from domestic figures. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 96 
 
 
(CONAB), a state trading company linked to the MAPA, is in charge of implementing certain 
agricultural policies, including those rela ted to minimum prices and storage. 
11. Brazil, has been actively engaged in WTO negotia tions on agriculture over the years.  In the 
DDA, Brazil has argued for the elimination or drastic reduction of all forms of distorting subsidies, as 
well as for greater market access.  Brazil has also made recourse to WTO dispute settlement 
procedures to guard its agricultural interests in wo rld markets.  Thus, Brazil has been involved as a 
complainant in five dispute cases in the WTO, on:  an Equalizing Excise Tax Imposed by Florida on 
Processed Orange and Grapefruit Products (respondent  the United States);  EC Export Subsidies on 
Sugar;  EC-Customs Classification of Frozen B oneless Chicken Cuts;  United States-Subsidies on 
Upland Cotton;  and U.S.-Agriculture Subsidies (see Chapter II(5)(i)).  
12. Brazil is lagging behind in certain of its notifi cations to the WTO with respect to agriculture 
(November 2008).  The last notification with respect to (not granting) export subsidies was made in 2003 for the 1999-2001 period.
4  The last WTO notification made by Brazil with respect to domestic 
support measures was dated 2007 and covered the 2003-04 period.5   
(ii) Border measures 
13. The average nominal MFN tariff for agriculture (WTO definition) was 10.1% in 2008, 
compared with 10.2% in 2004, and an overall averag e tariff of 11.5%.  Some agricultural subsectors, 
such as dairy products, sugar, beverages, spirits , vinegar, and tobacco and manufactured tobacco 
products, are granted higher than average protection, and bear the highest percentage of tariffs above 
20% among agricultural products;  grains are subject  to a lower than average rate of protection 
(Chapter III(2)(iv)).  Brazil's bound rates for agricultural goods range from 0% to 55%.   
14. Brazil undertook tariff quota commitments on th ree products (wheat, apples, and pears) 
during the Uruguay Round.  In 1996, Brazil notified WTO Members of its intention to withdraw its 
tariff quota for wheat, which it had never opened.  MFN tariff quotas of 10,000 tonnes may apply to pears and apples but these have not been opened si nce 1998 because the MFN tariff is lower than the 
in-quota rate of 15%.   
15. Preferential tariff quotas are applied under th e MERCOSUR agreements with Chile (wine, 
apples and processed peaches), and Mexico (garlic and durum wheat). 
(iii) Domestic support measures 
16. Brazil maintains a number of domestic support measures for agriculture, including credit 
availability at preferential conditions, price s upport and stabilization mechanisms, and option 
contracts (Table IV.1). 
17. The OECD calculated Brazil's average Producer Support Equivalent ( PSE) at 5% in 2003-05, 
increasing from 4% in 2004 to 6% in 2005, with bo th payments based on input use and market price 
support rising.  The OECD notes that payments based on input use involve mainly interest rate subsidies for investment and working capital under the Rural Credit scheme de scribed below, as well 
as the implicit subsidy associated with the deferral of  payments on farm debt.  This rate of support is 
much lower than the OECD average of 30%.  Two th irds of producer support is provided in the form 
of credit subsidies and one third through market pr ice support.  The OECD h as also calculated that 
prices received by producers were on average 2% higher than those received on world markets in 
                                                     
 
4 WTO document G/AG/N/BRA/21, 6 June 2003. 
5 WTO document G/AG/N/BRA/23, 8 May 2007. Brazil WT/TPR/S/212/Rev.1 
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2003-05, with higher assistance for rice, maize, co tton, and wheat.  Total support to agriculture 
averaged 0.7% of GDP in 2003-05, which is  less than the OECD average of 1.1%.6 
Table IV.1 
Main agricultural support measures and programmes 
(R$ million/US$) 
Programme  Description  Amount  
Rural Credit Financing of agricultural activities at rate s controlled and fixed by th e Government 51,200 (2007) 
(US$28.4 billion) 
BNDES/FINAME and Automatic for agriculture  Financing of specific agricultural act ivities, including the acquisition and 
maintenance of machinery and equipm ent, at preferential conditions  3,600 (2007) 
(US$2 billion) 
Programme to Strengthen Family Farming (PRONAF) Support for family farming, artisan fisher ies, aquaculture, livestock, and extraction 
of forest products 8,400 (2006/07) 
(U$S4.67 billion) 
Policy of Guaranteed Minimum Prices (PGPM) Price support mechanism 2,100 (2007)a 
(US$1.17 billion) 
 
a Net cost to the Treasury.  
Source:  Information provided by the Brazilian authorities. 
18. In 2007, Brazil notified that its Aggregate Measure of Support (AMS) during 2003-04 had 
been below the de minimis  level (less than 10% of the value of production), compared with a 
committed level of US$912.1 million.  Most of the AMS notified corresponded to minimum support 
prices under the Policy of Guaranteed Minimum Prices (PGPM) and the Premium per Output Flow 
(PEP) programme.  Brazil also notified as measures exempt from the reduction commitment production (rural) credit for low-income and resource-poor producers, and funds for investment credits of US$97.6 million, and US$280.5 million, respectively.
7 
19. In the September 2008 meeting of the WTO Committee on Agriculture, Brazil described 
support programmes for approximately US$40 billio n for 2008-09.  The programmes introduce new 
support schemes to promote the development of grain storage facilities; support the use of 
environmentally sound practices; and increase the le vel of minimum prices, partly due to higher 
production costs, among others.  Brazil pointed out that most of these measures (such as the PRONAF 
programme, see below) would continue to be classi fied under the special and differential treatment 
provisions of Article 6.2 of the Agreement on Agri culture, and hence excluded from the calculation of 
the AMS.8 
(a) Rural credit programmes 
20. Domestic support to agriculture through the provision of rural credit at fixed, below market-
interest rates remains important, and is one of th e main policy instruments to promote agriculture in 
Brazil.  The authorities note that  this importance is linked to farmers' difficulty in obtaining credit 
directly from the market, outside of Government-d evised schemes.  During the period under review, 
the policy thrust has continued to shift away from gr anting direct credit and towards intervening in the 
market to ensure that credit from the financial system  is allocated to agriculture at rates that are in 
many cases preferential.  Credit policy is implemented by the National System of Rural Credit (SNCR);  credit is channelled to farmers from both p ublic and private sources.  Interest rates are fixed 
by the Government.  Rural credit programmes are designed primarily to benefit producers without 
access to commercial credit, but as the OECD notes, th ey affect the overall allocation of credit, both 
within agriculture and beyond.
9 
                                                      
6 OECD (2007). 
7 WTO document G/AG/N/BRA/23, 8 May 2007. 
8 WTO document G/AG/R/52, 11 November 2008. 
9 OECD (2007). WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 98 
 
 
21. Agricultural credit has its legal base in Law No. 4,829, of 5 November 1965, Law No. 8,171 
of 17 January 1991, as amended, most recently by  Law No. 11,718, of 20 June 2008.  Agricultural 
credit regulations are made public by the Centra l Bank through the Agricultural Credit Manual, as 
modified each year by the National Monetary Co uncil (CMN).  Rural credit can stem from different 
sources:  25% of banks' demand deposits (mandatory resources)10, rural savings, constitutional funds, 
the Workers Support Fund (FAT), and agricultu ral federal programmes managed by the BNDES.11  In 
2007, 403 financial institutions.  Ba nks and cooperatives, participat ed in the rural credit scheme 
granting credit to farmers.  The equalization pr inciple, which consists in covering through 
Government outlays the difference between market in terest rates and those applied to the credit, is 
used in credits funded from rural savings, the FA T and the BNDES, mainly in credits to small 
farmers.  The equalization principle is not used in  the case of mandatory resources.  Under Resolution 
CMN No. 3,208 of 28 June 2004, at least 20% of all rural credit financed from demand deposits must be used for credits of R$60,000 or less. 
22. Rural credit through "mandatory resources" ma y be granted for production, investment or 
marketing, to farmers and cooperatives, or pers ons engaged in production or insemination research, 
fishing, or in activities providing certain services to farmers.  Beneficiaries must reside in Brazil.  
Credits are granted at an annual interest rate of 6.75%, for up to two years for expenditure, 12 years 
for investment, and 240 days for marketing.  This rate is considerably lower than for non-earmarked 
credits.  For example, the SELIC was, a comparable benchmark rate for non-earmarked credits, was at 
13.75% in September 2008.  Repayment schedules ar e generally linked to the crop's harvest period, 
with a maximum of 90 days after the harvest takes place.  Credit limits vary according to the crop, 
type of operation, or region;  producers may obt ain credit for more than one product.  Special 
provisions apply for funds from rural savings schem es maintained by the Banco do Brasil, Banco da 
Amazônia, Banco do Nordeste, and by cooperative banks;  these institutions must assign a minimum 
of 65% of rural savings to rural credit (since 1 September 2007).
12 
23. The Agricultural and Livestock Plan 2007/08 introduced some modifications to the rural 
credit system:  the main change was the reduction of  costs, which had been unaltered since harvest 
year 1998/99.  The interest rate applicable to rural credits was lowered from 8.75% per annum to 
6.75% for all rural credit lines, including MAPA i nvestment programmes and BNDES financing, with 
the exception of the MODERFROTA programme, for which it was lowered from 8.7% to 7.5% for beneficiaries with a gross annual income up to R$250,000 and from 10.75% to 9.5% for those with 
gross incomes above R$250,000.  The interest ra te applied under the Rural PROGER (see below) was 
lowered from 8% to 6.25%.  Some financing limits we re increased;  loans are limited by ceilings that 
vary by product, and which in crop year 2006/07 ranged from R$80,000 to R$400,000 (US$44,400 to US$222,200).
13 
24. In its 2007 report on Brazil's Agricultural Policies,  the OECD notes that Brazil's delivery of 
credit subsidies is heavily managed, and that this ap proach to the problem posed by high real interest 
                                                      
10 Alternatively, banks may choose to hold 25% of their demand deposits as obligatory reserves 
(exigibilidades ) at the Central Bank at zero interest. 
11 Resolution CMN 3,556 of 27 March 2008. 
12 Resolution CMN/BACEN No. 3,188 of 15 January 2004, as modified by Resolution CMN/BACEN 
No. 3,531 of 31 January 2008. 
13 The financing limit for the production of rice, b eans, cassava, sorghum, wh eat, and corn rose from 
R$400,000 in crop year 2006/07 to R$450,000 (US$250,000) in 2007/08;  the limit for peanuts, rice, beans, fruit, cassava, sorghum or wheat rose from R$250,000 (US$138,00) to R$300,000 (US$167,000);  for cattle and 
livestock, and dairy products, from R$140,000 (US$78, 000) to R$150,000 (US$83,000);  and for poultry and 
swine from R$120,000 (US$67,000) to R$150,000.  The limit for investment and marketing credit rose from R$80,000 (US$44,4 00) to R$100,000 (US55,5000). Brazil WT/TPR/S/212/Rev.1 
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rates thwarts the development of a properly functioning credit market.14  The OECD estimates that 
indirect subsidies granted in the form of fixed interest rates for the rural credit scheme exceeded 
US$1.6 billion in 2005, last year for which a calculati on is available.  These be nefits to rural credit 
recipients may have increased thereafter, since rat es applied to rural credit were lowered during the 
period under review, from 8.75% to 6.75%.  While this initially corresponded to a decline in market 
interest rates, these rates have been rising in 2008,  resulting in an increase in the implicit subsidy.  
The authorities note that there are social and ec onomic reasons for maintaining this policy.   
25. During the period under review, the share of rural credit provided by the banking system has 
continued to increase.  In 2007, 55.5% of rural cr edit was financed with mandatory resources from 
private (24.6%) and public banks (2 5.1%) and other financial instituti ons;  17.9% were financed with 
funds from rural savings, 7.6% from constitutional f unds, 4.6% through the BNDES, 4% through the 
FAT, 3.8% from the financial sector with "free"  (non-mandatory) resources, 3.2% from FUNCAFE, 
less than 1% directly by the Treasury, and the rest from other sources.15  Total outlays (private and 
public) for the rural credit schem e were R$51.2 billion in 2007. 
26. Rural credit disbursed increased in real terms in each year of the period under review, with 
the exception of 2005;  in nominal terms, outlays in 2007 were some two thirds higher than in 2003 
(Table IV.2).  Of the 2007 total, 59.8% was for production and 21.3% was for investment, both 
mostly at fixed interest rates;  some 18.9% was for marketing, generally at variable rates.  The south 
and south-east regions accounted for some 72% of credit allocated in 2007.  Most financing was 
allocated to small projects:  in 2007 31.6% of cr edits were of less than R$60,000 (US$33,300), and 
70% were for amounts below R$300,000 (US$167,000).16  The Agricultural and Livestock Plan 
2007/08 foresees rural credit resources of R$70 b illion, of which R$58 billion for commercial 
agriculture and R$12 billion for family agriculture. 
Table IV.2 
Rural credit, 2001-07 
(R$ million and per cent) 
Year Value in current terms Value in consta nt prices of 2006 Growth in real terms (%) 
2001 17,942.1 29,487.1 18.0 
2002 22,443.3 32,495.1 10.2 
2003 31,102.7 36,675.9 12.9 
2004  40,446.5 43,596.6 18.9 
2005 41,959.8 42,683.8 -2.1 
2006 43,765.6 43,765.6 2.5 
2007 51,164.7 45,997.7 16.9 
Source:  Central Bank of Brazil (2008), Anuário Estatístico do Crédito Rural 2007 .  Viewed at:  
http://www.bcb.gov.br/?RELRURAL. 
27. Under the Federal Government Loan (EGF) programme, the main marketing and storage 
credit granted directly by the federal government, th e farmer's crop or livestock serves as collateral.  
The maximum credit under the EGF is fixed, by product, each harvest year by the MAPA.  The 
annual interest rate for EGF farm loans is 6.75%.  In 2003, this programme were complemented by a 
Special Marketing Line (LEC) for products under th e Policy of Guaranteed Minimum Prices (PGPM, 
see below) using mandatory resources.   
28. The Rural Employment and Revenue Generati on Programme (Rural PROGER), created in 
1995, is aimed at increasing agricultural output a nd employment, and enhancing productivity through 
                                                      
14 OECD (2007). 
15 Central Bank online information.  Viewed at:  http://www.bcb.gov.br/. 
16 Central Bank of Brazil (2008b). WT/TPR/S/212/Rev.1 Trade Policy Review 
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credit to small producers at a preferential interest rate of 6.25%.  Beneficiaries must derive at least 
80% of their income from agricultural activities;   annual income must not exceed R$80,000.  
Disbursements in harvest year 2006/07 totalled R$50.3 million. 
29. The OECD has noted that debt repayment has become an issue for negotiation with 
producers.  In the mid 1990s, as the portion of cred its that were not repaid on a timely fashion 
increased, the Brazilian Government decided on a resch eduling programme for agricultural debt.  The 
repayment period for the overdue debt was extend ed by 20 or 24 years, depending on type of 
borrower, and the interest rate was set at below-mark et rates.  At the beginning of the 2000s, further 
rescheduling measures provided for the prolongation of loans repayments for small farmers and land 
reform beneficiaries at reduced interest rates, as well as for partial write-offs and good-payer rebates.  
The OECD estimates that, at the end of 2005, the total outstanding restructured debt stood at R$17.3 billion (US$9.6 billion at the Septembe r 2008 average exchange rate) with overdue 
repayments of R$4.5 billion (US$2.5 billion).
17 
BNDES credit lines 
30. The BNDES operates two general credit lines fo r investment in agriculture, with funds 
channelled through other financia l institutions:  the FINAME Agricultural Credit, and the BNDES 
Automatic (Table IV.3).  The FINAME programme gr anted credits for R$2.07 billion in 2007, and a 
cumulated R$10.31 billion over 2004-07.  The B NDES-Automatic agricultural programme granted 
credits for R$1.6 billion in 2007, and a cumulated R$6.8 billion over 2004-07.18 
31. BNDES FINAME conditions may differ if the co mpany is controlled by foreign capital, or 
according to domestic-content requirements.  In the case of credits to companies controlled by 
domestic capital, the interest rate is the TJ LP plus a BNDES fee of 0.9% plus a financial 
intermediation fee of 0.5%, and a fee charged by the financial ins titution providing the funds.  For 
Brazilian companies controlled by foreign capital and for acquisitions of goods with a domestic 
content of less than 60%, the BNDES Monetary Unit (UMBNDES, based on the average cost of the 
BNDES's currency basket), plus currency basket charges are applied on an average variable BNDES 
interest rate (Chapter III(4)(iv)).19  In practice, there are exceptions to  this difference in treatment:  for 
activities considered of national interest under D ecree No. 2,233 of 23 May 1997, the same conditions 
apply to companies of domestic or foreign capital.  For agriculture-related activities, this is limited to 
agri-industry and forestry. 
32. The BNDES also manages nine specific progra mmes for agriculture, which have their own 
budget and purpose.  The scope a nd conditions of these programmes vary:  some are offered with a 
fixed interest rate plus a financial cost spread, ot hers at the TJLP plus a remuneration fee.  In both 
cases, the financial cost is lower than relevant s hort-term market rates.  The BNDES also provides 
export credit lines through BNDES-EXIM, but only for agri-industry (Chapter III(3)(v)(b)).  
Disbursements under the main BNDES specific agri cultural credit programmes totalled R$2.9 billion 
in harvest year 2006/07 and R$11.2 billion over harvest years 2003/04-2006/07. 
                                                      
17 OECD (2007). 
18 BNDES online information.  Viewed at.  http://www.bndes.gov.br/estatisticas/download/ 
Int2%201D%20a%20produto.pdf. 
19 The TJPL in mid 2008 was 6.25%.  In the 12 months ending in June 2008, the accumulated rate of 
the BNDES currency basket (including  the UMBNDES, the variable interest rate and the income tax) was 
11.18%, which corresponds to an accumul ated real rate of 7.47%, discounting the exchange rate variation during 
the period.  The UMBNDES reflects the weighted average of the exchange variations amongst the currencies in 
the BNDES currency basket.  See BNDES online information;  "The BNDES currency basket", 17 July 2008.  Viewed at:  http://www.bndes.gov .br/english/bndes/cestaing.pdf. Brazil WT/TPR/S/212/Rev.1 
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Table IV.3 
Agricultural credit programmes administered by the BNDES, early 2004 
Programme/description Financial conditions 
General Credit Lines 
BNDES/FINAME Agricultural Credit 
Provides credit for the acquisition and maintenance of machinery 
and equipment, irrigation system s, and refrigeration equipment 
manufactured domestically.  Finances up to 100% of investment.  
Different conditions apply to fore ign-owned companies (see right).  
Micro, small, and medium-size enterprises are not charged the intermediation fee. Interest rate:  TJLP plus a BNDE S fee of 0.9% plus a financial 
intermediation fee of 0.5% and a fee charged by the financial institution channelling the funds.  Credit for up to 90 months.  For 
credits destined to operations w ith Brazilian companies controlled 
by foreign capital and for acquisitio ns of goods with a domestic 
content of less than 60%, the BNDES Monetary Unit 
(UMBNDES) plus Currency Basket charges are applied.
a   
BNDES Automatic 
Grants credits of up to R$10 million to persons/companies to 
finance investment and the purch ase of domestic machinery and 
equipment or imported capital goods, when no similar goods are produced domestically.  Financing can be up to 95% of value, at the TJLP (or the 
UMBNDES) plus a BNDES fee and a fee charged by the financial 
institution channelling the funds.  The credit period is defined by 
the financial agent.   
Specific BNDES Agricultural Programmes 
Tractor Fleet Modernization Incentives Programme (MODERFROTA) 
Credits for up to 100% of the purchase value of tractors;  90% for 
farmers with gross annual agricultural revenue above R$250,000.  
Coffee farmers can benefit if annual income is below R$60,000. Interest rate of7.5% for farmers with gross annual agricultural 
revenue lower than R$250,000;   9.5% for income above that 
threshold.  Repayment period up to 6 years. 
Incentives Programme for Irrigation and Storage (MODERINFRA) 
Finances irrigation and storage pr ojects of up to R$1 million per 
farmer or R$3 million per cooperative. Interest rate:  6.75%.  Repa yment period:  eight years. 
Cooperative Development Programme for the Enhanc ement of Agricultural Value Added (PRODECOOP) 
Aimed at promoting efficiency ga ins in cooperatives by financing 
studies, projects, works, installation, machinery and equipment, and working capital for up to R$35 million per cooperative. Up to 90% of the project value is financed depending on turnover.  
Interest rate:  6.75%.inlcuidng 3%  remuneration of the financial 
institution.  Repayment period:  12 years, include three of grace. 
Programme for the Modernization of Agriculture and the Conservation of Natural Resources (MODERAGRO) 
Provides credit for soil and pastur es conservation and recuperation 
for up to R$250,000 per producer, or R$7500.000 per cooperative. 
Up to 100% of the project value may be financed.   Annual interest rate:  6.75%, in cluding remuneration to financial 
institution of 3%.  Repayment period:  96 months, including a 36 
month grace period.   
Credit Cooperatives Capitalization  Programme (PROCAPCRED) 
Acquisition of shares of single credit cooperatives with a functioning period of over a year.  Up to R$10,000 per client.  Up 
to 100% of the project value may be financed.   Annual interest rate:  TJLP plus remuneration to financial 
institution of 3%. plus BNDES remuneration of 1% .  Repayment 
period of up to 72 months including 12 months grace period. 
Incentive to Investment in Agribusiness Programme (INVESTIAGRO) 
Finances investment in agribusiness for rural producers negotiating 
to obtain credit from other financia l institutions.  Advance of up to 
100% of the credit requested.   Annual interest rate:  TJLP plus remuneration to financial 
institution of 3%. plus BNDES remuneration of 3% .  Repayment 
period of up to 6 months. 
Agriculture-Livestock Integration Programme (PROLAPEC). 
Credits to intensify th e use of land and integrate agriculture and 
livestock.  Up to 100% of the project value may be financed.  The limit is R$300,000 per farmer. Annual interest rate:  6.75%, in cluding remuneration to financial 
institution of 3%.  Repayment period:  60 months, including a 24 month grace period. 
Warehousing Incentive Programme for Domestic Cereal Producers 
Finances the acquisition by domestic cereal producers with annual revenue of up to R$500 million of machinery and equipment for 
warehousing.  Up to 100% of the project value may be financed. Annual interest rate:  TJLP plus remuneration to financial 
institution of 3%. plus BNDES remuneration of 1% .  Repayment 
period of up to 96 months including a 36 months grace period. 
Programme of Commercial Planting  and Recovery Fo rest (PROPFLORA) 
Aimed at fostering tree planting a nd grants credits for up to 100% 
of the value of a project, with a limit of R$200,000 per beneficiary.   Annual interest rate:  6.75%, in cluding remuneration to financial 
institution of 3%.  Repayment period:  12 years.   
 a The UMBNDES is based on the average cost of the BNDES's cu rrency basket, a bundle of BNDES debt obligations in foreign 
currencies.  The cost of the currency basket is based on the rates and charges, including taxe s, applicable on BNDES debt 
obligations in foreign currencies, readjusted on a quarterly basis. 
 
Note: Since harvest year 2007/08 MODERAGRO also in cludes the PRODEAGRO and PRODEFRUTA programmes. 
 
Source:  BNDES. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 102 
 
 
Programme to Strengthen Hou sehold Agriculture (PRONAF) 
33. The Programme to Strengthen Household Ag riculture (PRONAF), managed by the MDA, 
provides small-scale farmers and small production cooperatives and associations with loans at 
preferential fixed interest rates to finance pr oduction-related expenditure  and investment in 
infrastructure and machinery.  The main beneficiar y products are maize, soy, milk, coffee, manioc, 
and rice. 
34. The structure and rules of the PRONAF were modified by Resolution BACEN No. 3,559 of 
28 March 2008, as modified by Resolution BACEN No. 3,589 of 30 June 2008.20  The new rules, in 
place since 1 July 2008, attempt to simplify the process of obtaining credit, eliminating several 
financing categories and replacing them with  a single category entitled Family Farming.21  The new 
rules also provide for interest rate reductions, from a range of 3-5.5% to 1.5-5.5% for production 
operations, and from 2-5.5% to 1-5% for investment.22  Credit Groups A (credit for land reform) and 
B (rural microcredit) were maintained unchanged, as well as special lines such as PRONAF Forest 
and PRONAF Youth, at the same interest rates and limits of financing as the normal lines.  Interest rates for other special PRONAF lines, such as PRONAF Agro-ecology, PRONAF Women, PRONAF 
Forest, and PRONAF Agro-industry, were lowered fr om between 2% and 5.5%  annually to between 
1% and 2%.  The credit limit per farmer is  R$30,000 (US$16,600) for production credits and 
R$36,000 (US$20,000) for investment credits.  Du ring 2003-07, 7.99 million contracts were signed, 
for a total of R$33.7 billion.  In harvest year 2006/07 PRONAF registered transactions for R$8.4 billion.   
35. In December 2006, the Price Guarantee Progra mme for Family Farming (PGPAF) was added 
to the PRONAF.  The PGPAF is an indexation of th e credit taken by small fa rmers through which the 
price is fixed when the credit is granted, and the va lue is converted to an equivalent in volumes terms 
of the product financed.
23  Upon repayment of the credit, if the price of the product financed has 
decreased, the farmer will benefit from a discount from the monetary amount due, and will pay back 
the equivalent of the expected physical production.  The PGPAF, thus ensures that production costs 
are covered.  Beneficiaries are all farmers who ar e guaranteed access to PRONAF production credit.  
The limit for the PGPAF bonus per farmer is R$3,500 each harvest.  As from the 2006/07 harvest, the 
products with guaranteed prices were rice, beans,  cassava, maize, soya, and milk.  Information 
regarding the products covered by the PGPA F each season is posted on the MDA's website.24 
(b) Domestic pricing arrangements 
36. Brazil grants support to selected agricultural  products through various price support schemes 
(Table IV.4).  These schemes affect the production of  commodities such as coffe e, corn, cotton, milk, 
rice, rubber, sorghum and soybeans.  The OECD has not ed that falling international prices led to a rise 
                                                      
20 For the text of the resolution see MDA online information.  Viewed at:  http://www.mda.gov. 
br/saf/arquivos/ 1651916442.pdf. 
21 For a description of these groups see:  WTO (2005). 
22 Interest rates are:  (a) for production credits:  of up to R$5,000, 1.5%;  R$5,000-10,000, 3%;  
R$10,000-20,000, 4.5%;  R$20,000-30,000, 5.5%;  and (b) for investment contracts:  up to R$7,000, 1%;  R$-7,000-18,000, 2%;  R$18,000-28,000, 4%;  R$28,000-36,000, 5.5%. 
23 The price is based on the cost of production of the product concerned as measured by the CONAB.  
The indexation may be applied at a level up to 10% higher or lower than the cost of production  and acts as a mechanism to stimulate or discourage the production of a specific pr oduct according to its stock situation and 
the socioeconomic condition of the farmers.  These in dexed levels are published annually through a CMN 
Resolution. 
24 MDA online information.  Viewed at:  http://www.mda.gov.br/saf/arquivos/1203113063.pdf. Brazil WT/TPR/S/212/Rev.1 
 Page 103 
 
 
in market price support, and that in 2005/06 th e volume of crops benefiting from price support 
doubled, and price guarantees were extended to soybeans for the first time.  It also observed that by 
limiting the regional coverage of price guarantees th e government had in the past sought to limit the 
coverage of support to smaller farmers, but that later payments "breached this implicit objective and 
create a worrying precedent, given that a downturn in market conditions was widely anticipated." 25 
Table IV.4 
Price support programmes, 2008 
Price support programme/description Use/cost 
Policy of Guaranteed Minimum Prices (PGPM) 
Regulated by Decree No. 57,391 of 12 D ecember 1965 and Decree-Law No. 79 of 
19 December 1966, the PGPM fixes mini mum guaranteed prices annually, taking 
into account production costs in the different  regions;  these prices are promulgated 
by Decree.   Decree No. 6,266 of 22 November 2007 fixes minimum prices for a 
number of products for the 2007/08 summer harvest.  The PGPM is implemented 
through two schemes:  the Federal Govern ment Acquisition Programme (AGF), and 
the Federal Government Loans Programme (EGF) (see rural credit).  The AGF 
allows farmers and cooperatives to sell thei r products to the CONAB at a guaranteed 
minimum price, ensuring that the Federal Government acquires the excess production by The AGF is applied on specific products and regions when the 
Government deems it necessary to support prices, for up to 100% of a farmer's 
production.   The PGPM programme cost the Treasury a net 
R$2.1 billion in 2007.  Products covered by 
minimum prices in the 2007-08 harvest included:  cassava flour, starch cotton, beans, coffee, garlic, 
jute, milk, rice, rubber, silk cocoon, sisal, soy, 
and sorghum.   
Premium for Product Outflow (PEP) and Outflow of Product Value (VEP) 
Guarantees a reference price for producers and cooperatives.  References prices are determined for the different products.  U nder the PEP, when the market price is 
below the reference price, the CONAB pa ys the marketing agents a premium for 
products purchased from the producer or cooperative at the reference price.  The 
premium is determined in public aucti ons and generally reflects the difference 
between the reference price and the market price.  The PEP is also used to shift 
supply of agricultural products across regions, to avoid deficits and prevent the 
accumulation of stocks.  Although all products  included in the AGF can participate 
in the PEP, it has been used for only a few products, mainly cotton, maize, wheat, 
beans, rice and wine.  The VEP has the same  goal as the PEP, but is used only to 
dispose of Government stocks. The value of premiums paid in 2007 was 
R$103.4 million (US$57 million), of which R$16.6 million for rice, R$70.9 million for 
maize, and R$15.9 million for beans  In 2006, the 
value of premiums was R$334.2 million (US$185.7 million).  In 2007, the VEP was used 
only for maize:  1.18 mill ion tons of maize were 
sold through auctions for a value of R$356.2 million (US$198 million). 
Public Option Contracts 
Through this programme, operated by th e CONAB, an "execution price" (a 
minimum price plus storage and financial co sts) was offered for the next harvesting 
season, at which eligible products (rice, maize, wheat, cotton, sorghum and coffee) 
could be sold to the Government.  The CONAB sold the option contracts to rural 
producers and cooperatives in an aucti on at an option price (premium).  The 
producer could obtain credit from rural credit funds to finance the cost of the premium.  The CONAB, could buy back its obligation to purchase the product 
before the expiration of the contract, in  which case the producer would receive a 
payment equal to the difference between the "execution price" and the market price;  
alternatively it could tran sfer the obligation to buy to another party.   In 2005/06, use of this instrument was 
discontinued, but it was used again in 2007/08 
for rice, when 31,767 contracts were negotiated for a value of R$437 million;  of these, the 
CONAB bought 489,065 tons at a total cost of 
R$248 million. 
Private Option Risk Premium (PROP) 
The Private Option Risk Premium (PROP) programme is a subsidy granted in public auction to the consumer or user of an ag ricultural product who is willing to acquire it 
in a future date directly from the producer  at a fixed price.  In this case, producers 
pay a premium to the private agent inte rested in buying the product, and the 
Government guarantees the opera tion within certain limits. In 2006, 81,091 contracts were sold (each 
contract is of 27 tons), for a value of 
R$329 million, with subsidies paid totalling 
R$173.4 million.  In 2007 1.6 million tonnes of 
soy for R$138.5 million were marketed through 
the PROP, and subsidies totalled R$947,740.   
Agricultural Products' Sale Option Private Premium (PEPRO) 
This scheme offers producers and their cooperatives the possibility to sell their 
product at a premium, equal to the differe nce between reference and market prices, 
fixed through an auction.   In 2007, the Government purchased 728,900 tons 
of cotton, 300 tons of coffee, 37 tons of beans, 
3.75 million tons of corn and 537.1 tons of soy, for a total of R$1.2 billion. 
 
Source:  SPA, MDA and CONAB. 
                                                      
25 OECD (2007), page 35. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 104 
 
 
37. The most important of the support schemes is the Policy of Guaranteed Minimum Prices 
(PGPM), regulated by Decree No. 57,391 of 12 December 1965 and Decree-Law No. 79 of 19 December 1966, which fixes minimum guaranteed  prices annually, taking into account production 
costs in the different regions;  these prices are promulgated by Decree.
26  The PGPM programme cost 
the Treasury a net R$2.1 billion in 2007.27  Purchases under the Agricultural Products' Sale Option 
Private Premium (PEPRO) totalled R$1.2 billion in  2007.  Other programmes include the Premium 
for Product Outflow (PEP) and Outflow of Prod uct Value (VEP), which cost R$103.4 million and 
R$356.2 million, respectively in 2007.28 
(c) Other domestic support measures 
38. The rural product certificate (CPR), created  by Law No. 8,929 of 22 August 1994, is a 
financial instrument through which the issuer (a farm er or a cooperative) sells their crop prior to the 
harvest and receives cash, assuming an obligation to deliver a certain amount of commodities at a future date in a specified place.  The CPR with financial liquidation, created by Law No. 10,200 of 
14 February 2001, allows for liquidation at a reference price or at a price agreed by the parties.  The CPR is an alternative or complement to resort to  rural credit, acting as a financing instrument for 
future production.  The Banco do Brasil and othe r banks, as well as some insurance companies, offer 
guarantees for the CPR at a commission.  Credits may be offered to farmers, using CPRs as collateral, at an annual rate of 6.75%, the same rate applie d to credits with mandatory resources under the rural 
credit scheme. 
39. Agricultural producers and cooperatives who sell their production in the futures market and 
require the proceeds from the sale in advance,  may obtain financing for discounting a rural 
promissory note (NPR) or a rural duplicata (DR).  The NPR is issued by the purchaser and the DR by 
the seller, and they must be submitted to the Banco do Brasil or other financial institution for 
discount, at an annual interest rate of 6.75% if financed with mandatory resources, or at the SELIC 
rate if financed with free resources.  Up to 5% of mandatory resources used to finance rural credit 
may be devoted to discount NPRs. 
40. The programme of open sales, conducted by the CONAB, is aimed at ensuring the supply of 
agricultural inputs for small farmers;  the limit is 100 tonnes of rice and 10 tonnes of maize per farmer.  Supplies are generally taken from PGPM or option contract stocks.  In 2007, there were sales 
of rice (540 tonnes), acajou nuts (286 tonnes), and maize (219,488 tonnes), for a total of R$80.55 million. 
41. The Aid to the Development of the Agricultura l Sector Programme, regulated by Ministerial 
Act MAPA No. 367/2005, as amended by Ministerial Act No. 623 of 7 July 2008, is aimed at developing infrastructure in the sector, so as to increase competitiveness.  Projects supported by the 
programme range from development of  energy-related projects to the acquisition of tractors and other 
machinery and equipment;  they must be approved by the MAPA and are funded with resources from 
the Federal Budget.  The programme also supports actions for the development of the fruit industry.  
42. The Brazilian Coffee Fund (FUNCAFE), cr eated by Decree Law No. 2,295 of 
21 November 1986 and managed by the Banco do Bras il, finances research and infrastructure projects 
for the coffee industry.  Funds may also be used  to support prices and promote productivity gains.  
Resolution CMN No. 3,451 of 29 March 2007 establis hes the conditions for financing the harvesting 
                                                     
 
26 For example, Decree No. 6,266 of 22 November 2007 fixes minimum prices for a number of 
products for the 2007/08 summer harvest. 
27 Secretaria de Politica Agropecuaria (SPA) (2008). 
28 CONAB (2008). Brazil WT/TPR/S/212/Rev.1 
 Page 105 
 
 
and stocking of coffee with FUNCAFE resources.  The credit limit is R$750,000 per producer for 
stocking and R$1,440/hectare for harvesting.  Credits are granted at an interest rate of 9.5%, plus a 
bank commission of up to 4.5%.  In 2007 credits fo r R$1.64 billion were granted, of which R$1.24 
billion for production, R$399 million for marketing and R$36 million for investment. 
43. Although the Government encourages farmers to  obtain insurance from the private sector, it 
still provides guarantees through the PROAGRO (Agricultural Activities Guarantee Programme) 
created under Law No. 5,963/73.  PROAGRO is a short-term credit guarantee scheme regulated by 
the National Monetary Council (CMN) and administered  by the Central Bank.  The premium paid by 
the farmer is determined according to the crop risk;  it ranges from 1.2% to 6.7% of the total credit.  
Maximum coverage is 80% of the credit granted.  The programme is financed through revenue from 
insurance and through resources alloca ted from the federal budget.  It is geared mainly to medium and 
large farming units.  PROAGRO's indemnities reached  R$40 million (US$16.4 million) in 2005/06 
and R$44 million in 2006/07. 
44. The Government created the Household Agricu lture Insurance Programme (SEAF) in 2004, 
under PROAGRO laws and regulations, to provide gua rantees to small farmers.  The programme, 
better known as PROAGRO MAIS was established by Resolution CNM 3,234/2004, and covers 
exclusively farmers enrolled in the PRONAF progr amme.  Under this programme, farmers receive 
guarantees for 100% of the credit they receive plus 65% of estimated future net revenues, but only up 
to R$2,500 per farmer.  In 2006/07, 613,722 farm ing units befitted form the programme, representing 
a total of R$2.8 billion of insured value, and indemnities were R$66.8 million (US$37 million).   
45. The sugar crop guarantee programme Garantia Safra, a third federal scheme, assists 
PRONAF-enrolled small farmers in semi-arid areas.  Benefits under this scheme were 
R$174.8 million (US$97.2 m illion) in 2006/07.   
46. In December 2004, the Government announ ced a new biodiesel programme, regulated by 
Law No. 11,097 of 13 January 2005, Law No. 11,116 of 18 May 2005 and Law No. 10,848 of 15 March 2004, Decree No. 5,448 of 20 May 2005, Decree No. 6,006 of 28 December 2006, and 
Decree No. 6,606 of 21 October 2008.
29  The programme established a minimum blending ratio (as 
operated for ethanol, see section (4) below), and created  a certificate (the Social Fuel Stamp) that 
makes biodiesel manufacturers and importers eligible for official credit at reduced interest rates and 
for reduced rates on federal taxes such as the PIS/ PASEP and COFIN.  The blending ratio requires the 
share of biodiesel in diesel oil to be 2% from 2008 and 5% from 2013.  The certificate is given to 
biodiesel manufacturers who make a minimum proportion of their purchases from family farmers 
enrolled in PRONAF (set by region), and who meet other requirements, such as providing technical 
assistance.  Investment credit at reduced interest ra tes is provided to farmers who invest in biodiesel 
crops, such as soybeans and castorseed, as well as ot her oilseeds and several tropical crops.  For 
family farmers, this credit is provided via PRON AF Biodiesel and PRONAF Agro-Industry, while for 
commercial farmers, low interest credit is available from BNDES.30 
47. Until 2007, producers could also benefit fro m the BNDES Biodiesel Programme, from which 
micro, small, and medium-size enterprises could obtai n financing at the TJLP rate plus a spread of 
1-2%;  for large enterprises, the spread was of 3%. 
                                                      
29 Brazilian Biodiesel Programme online information.  Viewed at:  http://www.biodiesel.gov.br/. 
30 BNDES online information.  Viewed at:  ww w.bndes.gov.br/programas/infra/biodiesel.asp. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 106 
 
 
(iv) Forestry 
48. Brazil possesses a large forestry sector which, benefiting from a strong world demand, has 
made an increasingly important contribution to Br azil's merchandise exports.  No significant changes 
were made to the legal and institutional framewo rk governing forestry activities during the review 
period. 
(3) MINING  
49. During the period under review, benefiting fro m strong world demand, Brazilian mineral 
production has expanded considerably , with exports doubling in nominal value terms.  No significant 
changes were made to the legal and ins titutional framework governing the mining sector. 
(i) Main features 
50. Brazil has abundant mineral resources, with la rge reserves of niobium, tantalite, graphite, 
bauxite, and iron ore.  In 2007, production of iron, granite, bauxite, gold, and slate stone accounted for 
some 75% of the total value of mining production;  that year, Brazil was one of the world's largest 
exporters of iron, granite, ba uxite, niobium, and tantalite.31 
51. The contribution of mining activities (excludi ng metallurgy, construction materials, and 
hydrocarbons) to GDP was 1.1% in 2007, up from just over 0.5% in 2004.  Thus, during the review 
period the sector grew at a significantly higher average annual rate (36.2%) than the economy in 
general (see Chapter I).  Total investment in the sector grew almost fivefold, to US$5.2 billion in 
2007.  Mining activities employed some 164,000 in 2007.32  State participation in the mining sector is 
limited.  Companhia Vale do Rio Doce  (CVRD), the biggest iron producer in Brazil, has been a 
private company since 1997;  nevertheless, the Fede ral Government maintains a strategic presence in 
the company via BNDES and Previ (pension fund of the state-owned Bank of Brazil).33 
52. The strong increase in world demand for mineral products, particularly from China, had a 
positive effect on Brazilian mineral production, w hose value grew from US$7.8 billion in 2004 to 
US$19.7 billion in 2007.  This strong increase reflec ts both expanding volumes and sharp increases in 
international prices.  In 2007, mining exports  were US$18.9 billion while imports totalled 
US$5.8 billion, representing increases of 119% a nd 140%, respectively over 2004.  The main 
destinations for Brazilian mineral exports in 2007 were China, the EC, Japan, and the United States.  
Shipments to China increased by 221% between 2004 and 2007, as China acquired 35% of Brazil's iron ore exports in 2007.
34 
(ii) Regulatory framework 
53. According to Brazil's Constitution, all mineral resources belong to the Federal Government.  
The Constitution establishes that the exploration, e xploitation, and reprocessing and trade of nuclear 
mineral products are a monopoly of the State.  This monopoly is exercised by the National Commission of Nuclear Energy (CNEN).  However, the Constitution also determines that research 
and exploration of all other mi neral resources may be carried out via concessions by Brazilian 
                                                     
 
31 DNPM online information.  View ed at:  http://www .dnpm.gov.br/. 
32 MME online information.  Viewed at:  http://www.mme.gov.br/site/menu/select_main_menu_item. 
do?channelId=45.  
33 Vale online information.  Viewed at:  http://www .vale.com/vale/cgi/cgilua.exe/sys/start.htm?sid=99. 
34 WTO Secretariat, based on data from the UN Comtrade database. Brazil WT/TPR/S/212/Rev.1 
 Page 107 
 
 
individuals, or companies constituted in Brazil under Brazilian law, and w ith headquarters and 
administration in Brazil. 
54. The Ministry of Mines and Energy (MME), through its Secretariat of Geology, Mining and 
Mineral Processing, formulates general policy for the mining sector and grants concessions and 
licences for mining activities.  The National Department of Mining Production (DNPM), an 
autonomous government body linked to the MME, is responsible for the supervision of mining 
activities and for the implementation and enforcement of policy for the sector.35  The DNPM is also 
responsible for issuing authorizations and perm ission, and for giving advice on concessions and 
licences required for the exploitation of mineral resources. 
55. Since its last Review, Brazil has not introduced  significant changes to the legal framework 
that governs mining activities.  Law No. 227 of 28 Fe bruary 1967 (Mining Code), and Law No. 7,841 
of 8 August 1945 (Mineral Waters Code) set gene ral guidelines for the exploitation of mineral 
resources, and establish exploitation rights.  Neither  Code makes any distinction on the origin of 
ownership of the capital used, except for small-scale mining (artisanal alluvial mining). 
56. The Mining Code establishes different types of authorizations, licences, and permits for the 
exploration and extraction of mineral resources.36  Under Law No. 7,805/89, small-scale mining 
cooperatives are given priority for the exploration and exploitation of small reserves and deposits in 
areas where they are already estab lished and in those determined ( Reservas Garimpeiras ) by the 
Federal Government.  The authorities indicated that in practice this is lim ited to small cooperatives 
(garimpeiros ) benefiting from simplified procedures when applying for authorizations, licences, and 
permits.  This type of mining may only be undertaken by Braz ilian nationals or cooperatives of 
Brazilian nationals, and is allowe d for gold, diamonds, tantalite, a nd a number of other precious 
stones.  Permits under Law No. 7,805/89 are gran ted for a renewable period of five years. 
57. Mining activities are subject to the general cor porate taxation system (Chapter III(4)(i)).  In 
addition, there is a "financial compensation" char ge for the exploitation of mineral resources (CFEM), 
and an annual fee per hectare worked during the mineral exploration phase of R$1.90/ha, for up to 
three years.  The CFEM is paid to the Federa l Government on the value of the mineral resources 
extracted, with rates ranking to a maximum of 3%.  CFEM revenue is distributed to the state (23%) and municipality (65%) in which the mineral is extr acted, with the Federal Government retaining the 
remaining 12%.  In 2007, DNPM collected R$547.3 million (some US$305 million) in CFEM.
37  If 
the licence or concession holder does not own the la nd where work is to be done, a land royalty 
equivalent to 50% of the CFEM must be paid to the owner of the land.   
58. According to the authorities, BNDES has played  a fundamental role in the development of 
mining activities, as a provider of credit.38  Mining enterprises may benefit from FINAM, SUDAN, 
and SUDENE programmes (Chapter III(4)(iv)). 
59. Brazil adopted UN Resolutions 55/56 of 2000, an d applies the Kimberly Process Certification 
Scheme for the exportation and importation of rough diamonds.39 
                                                      
35 Law No. 8,876 of 2 May 1994. 
36 WTO (2005), Chapter IV (4)(ii). 
37 DNPM online information.  Viewed at:  http ://www.dnpm.gov.br/conteudo.asp?IDSecao=555&ID 
Pagina=51. 
38 DNPM (2006). 
39 Law No. 10,743 of 9 October 2003. WT/TPR/S/212/Rev.1 Trade Policy Review 
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(4) ENERGY  
60. Private companies established in Brazil may be involved, through concessions, in the 
petroleum and gas sector.  In practice, state- controlled PETROBRAS has a dominant position in the 
sector, holding virtually all of Brazil's refining capacity, and as a key price setter for petroleum-based 
fuels in the domestic market.  The granting of  exploration and extraction concessions, and the 
construction of PETROBRAS' new oil platforms are subject to local-content requirements.  
Discussions are under way on possible changes to the sector's regulatory framework in the light of 
recent petroleum discoveries.  The State also has a dom inant presence in the electricity sector;  a crisis 
in 2001 resulted in extensive regulatory changes in  2004.  Brazil is the world's largest exporter of 
ethanol and the second largest producer.40  This and other energy activities benefit from official credit 
and other support programmes.  
(i) Main features 
61. In 2007, the energy sector (including distribution of electricity, gas, and water) contributed 
approximately 4.0% to Brazil's GDP and 13.3% to total merchandise trade.41  Between 2003 and 2007 
primary energy production grew at an annual average rate of 5.1%.  In 2007, it amounted to 
1.8 billion barrels of oil equivalent (boe), of wh ich 52% corresponded to petroleum, natural gas, and 
coal, 16% to sugar cane (including both ethanol and bio-electricity), 15% to hydroelectric power generation, and 17% to other s ources such as uranium and biomass.
42 
62. In January 2007, the Federal Government unveiled a programme aimed at increasing 
investment in infra-structure through public/priva te partnerships, the so-called PAC.  The PAC 
foresees investment in the energy sector totalling R$275 billion (some US$152 billion) during 2007-
10:  65% in the petroleum and gas subsector (the vast majority via PETROBRAS);  24% in electricity 
generation;  6% in renewable fuels;  and 5% in electricity transmission.43  The authorities indicate that 
investment between January and August 2008 amounted to about US$22 billion. 
63. The Minister of Mines and Energy presides over the National Energy Policy Council (CNPE) 
and, in CNPE deliberations, defin es the general policy for the sector.  In the case of the ethanol (and 
sugar) industry, complementary to CNPE's general dir ectives, policy is also formulated by the Inter-
ministerial Council for Sugar and Alcohol (CIMA).44 
64. Regulatory agencies in the energy sector are organized as autonomous entities linked to the 
Ministry of Mines and Energy (MME).  The Na tional Agency for Petroleum, Natural Gas and 
Biofuels (ANP) implements public  policy and regulates all matters concerning hydrocarbons and 
biofuels.45  Regulation of natural gas supply through lo w-pressure distribution pipelines is carried out 
at state level.  The National Electric Energy Ag ency (ANEEL) is responsible for regulation and 
supervision of the electricity sector.46  Recent studies suggest that both ANP and ANEEL's ability to 
                                                      
40 Ethanol statistics online information.  Vi ewed at:  http://www.ethanolstatistics.com/. 
41 WTO Secretariat.  The sector's contribution to  GDP was calculated on data from IBGE and MME, 
while the contribution to trade was based on UN Comtrade database. 
42 EPE online information.  Viewed at:  https://ben.epe.gov.br/default.aspx. 
43 Federal Government online information.  Viewed at:  http://www.brasil.gov.br/pac/conheca/infra_ 
estrutura/energia/pac_no2. 
44 The Minister of Agriculture, Livestock and Food Supply (MAPA) presides over the CIMA, which 
also comprises representatives of the Ministries of Mines and Energy (MME);  Finance (MF);  and Industry, 
Development and Foreign Trade (MDIC). 
45 Law No. 9,478 of 6 August 1997. 
46 Law No. 9,427 of 26 December 1996. Brazil WT/TPR/S/212/Rev.1 
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fulfil their objectives has been weakened by budgeta ry constraints and the delayed appointment of 
managing directors.47 
65. According to the Constitution, all minerals (inc luding petroleum and gas) and hydro energy 
sources belong to the Brazilian State, irrespective of the ownership of the land where they are located.  
(ii) Hydrocarbons 
(a) Market features 
66. As in the previous review period, Brazil c ontinued to reduce its dependency on foreign 
petroleum during 2004-07.  In 2007, for the first time in its history, Brazil exported more crude 
petroleum than it imported;  some 161.9 million a nd 158.4 million barrels of oil equivalent (boe), 
respectively.  However, Brazil is not self-sufficien t in refined petroleum products as it does not have 
the capacity to refine the heavy crude it produces.48  Production levels of cr ude petroleum and natural 
gas increased respectively by 17% and 15% between 2003 and 2007, while production of refined petroleum products grew at a slower pace due to the increased use of alternativ e fuels, such as ethanol 
and other biofuels.
49  In 2007, Brazil produced 668.9 m illion barrels of crude petroleum and 
18.2 billion cubic meters of natural gas.  Natu ral gas imports increased by 74% between 2003 and 
2007 in value terms.50 
67. PETROBRAS continues to dominate the production,  refining, and distribution of petroleum 
and natural gas throughout Brazil.  In 2007, it re ported gross operating re venue of R$170.3 billion 
(some US$95 billion), and invested some US$25.2 bi llion (twice as much as in 2004), of which 41% 
was for exploration and production.  Brazil's re fining capacity has not changed over the review 
period;51  refineries controlled by PETROBRAS produced 99% of Brazil's total output of 1.82 million 
barrels per day in 2007.52 
68. By law, PETROBRAS is established as a mixed joint-stock corporation, which must be 
controlled by the Federal Government via owners hip of 50% plus one share of its voting capital.53  
The Federal Government held 55.7% of PETROBRAS' ordinary voting shares, but the majority of its 
capital stock is in the hands of private investors,  many of which foreigners (as at November 2008).54 
69. On 31 December 2007, Brazil's proven reserves of crude petroleum were close to 
12,623 million barrels, while reserves of natural gas were 365 billion cubic meters.  With respect to 
2004, crude petroleum reserves increased by 12.3%, while natural gas reserves decreased by 11.9%.55  
However, these figures do not include discoveries made by PETROBRAS during 2007-08, which, if 
confirmed, could substantially increase the value of Brazil's proven reserves. 
                                                      
47 OECD (2008c);  and Parente et al. (2007). 
48 The bulk of Brazil’s petroleum output is heavy crude, i.e. 14° to 17° API (American Petroleum 
Institute gravity index). 
49 ANP online information.  Viewed at:  http ://www.anp.gov.br/petro/ dados_estatisticos.asp. 
50 ANP online information.  Viewed at:  http ://www.anp.gov.br/petro/ dados_estatisticos.asp. 
51 EPE online information.  Viewed at:  https://www.ben.epe.gov.br/default.aspx. 
52 PETROBRAS (2007).   
53 PETROBRAS online information.  Viewed at:  http://www2.petrobras.com.br/ri/ing/Conheca 
Petrobras/ EstatutoSocial/Capitulos.asp#1. 
54 PETROBRAS online information.  Viewed at: http://www2.petrobras.com.br/ri/ing/Informacoes 
Acionistas/ComposicaoCapitalSocial.asp. 
55 Information provided by the Brazilian authorities. WT/TPR/S/212/Rev.1 Trade Policy Review 
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(b) Regulatory framework 
70. The Federal Government holds exclusive right s over the exploration of all hydrocarbons, 
extraction, refining, importation, and exportation of  petroleum and natural gas and their derivatives, 
and maritime and pipeline transpor tation of Brazilian petroleum, na tural gas, and their derivatives.56  
However, it may authorize private companies, cons tituted under Brazilian law, to exercise these rights 
through concessions granted by the ANP.57 
71. The ANP has the authority to carry out rounds of  concessions for the exploration of petroleum 
and gas.  Two rounds of concessions took place duri ng the review period, generating revenues to the 
ANP of some R$2.7 billion (some US$1.5 billion).58  In 2006, the eighth round of concessions was 
suspended by court order due to complaints concerning the granting criteria.59  Apart from 
PETROBRAS, there are 71 domestic and foreign concessionaries with the right to explore approximately 61% of the total expl oration area granted up to October 2008.
60  In 2008, Brazil 
temporarily suspended the granting of offshore fields th at were scheduled to be auctioned, in order to 
re-evaluate their potential in light of the recent discoveries. 
72. Extraction of hydrocarbons (including by PETROBRAS) is subject to the payment of 
royalties, which may vary from 5% to 10% of gross revenues, depending on the concession contract.  
Large or very profitable exploration areas are also s ubject to a "special participation" fee collected on 
net income at progressive rates (10-40%)61;  the authorities note that in practice this fee has rarely 
been applied.  At end 2008, the Government and the Congress were discussing possible changes to the 
system of royalties as well as to other rules governing extraction of hydrocarbons.62 
73. Since the first round of concessions in 1999, ANP  has imposed local-content requirements for 
the granting of concessions.  The general rule re quires the winning company to buy from domestic 
suppliers whenever their price and conditions are equivalent to a foreign supplier.  As from the 
seventh round of concessions in 2005, bidding companies may offe r percentages of local content 
within a minimum and maximum range established by ANP.  The bidding company may also distribute their local-content commitments be tween the exploration and production phases.
63  
Moreover, in 2008, PETROBRAS announced that it w ill maintain the requirement of 55% to 65% 
domestic content in the construction of new platforms.64 
74. All companies interested in establishing petroleu m refineries or plants to process and store 
natural gas must apply for an authorization.  The ANP may set economic, technical and legal requirements for granting these authorizations.
65 
75. There have been no changes to the regulations  on imports and exports of petroleum-based 
products, which continue to require an authorization from the ANP.  On average, 40,000, authorization applications were received per year during 2004-07, of which around 95% were 
                                                     
 
56 Article 177 of the Brazilian Constitution. 
57 Article 177 of the Brazilian Constitution and Article 5 of Law No. 9,478 of 6 August 1997. 
58 Revenues correspond only to signature bonuses. 
59 The results of the tenth round of con cessions were expected in December 2008. 
60 Information provided by the Brazilian authorities. 
61 Decree No. 2,705 of 3 August 1998. 
62 Agencia Brasil online information.  Viewed at:  http://www.agenciabrasil.gov.br/noticias/ 
2008/07/24/materia.2008-07-24.5787108581/view. 
63 ANP online information.  Viewed at:  ht tp://www.anp.gov.br/petro/conteudo_local.asp. 
64 Agencia Brasil online information.  Viewed at:  http://www.agenciabrasil.gov.br/noticias/ 
2008/03/13/materia.2008-03-13.7314619980/view. 
65 Law No. 9,478 of 6 August 1997. Brazil WT/TPR/S/212/Rev.1 
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approved;  approval took on average two days.  Importers must also be registered in the Suppliers 
Unified Registry System (SICA).  In 2007, PETR OBRAS was responsible for some 80% (in weight 
terms) of all imports of  petroleum-based products.66 
76. According to the Brazilian legislation, prices of refined petroleum products are to be set freely 
by the market.67  However, since, in practice, PETROBRAS has a quasi-monopoly over Brazil's 
refining capacity, it alone sets the domestic ex-refinery  price of fuels (before taxes).  For example, 
PETROBRAS decided to keep the price of gasolin e practically unchanged between September 2005 
and May 2008, because its price-setting decisions ar e based on long-term international prices rather 
than short-term fluctuations.68 
77. There have been no significant changes in the pr icing of natural gas, which continues to be 
applied in three categories:  (i) domestically produ ced natural gas;  (ii) imported natural gas;  and 
(iii) natural gas used in the Ther moelectric Priority Programme (PPT).  The maximum price of natural 
gas sold by PETROBRAS to power plants under the PPT is set by regulation;  an average price based 
on a portfolio of 20% domestic gas and 80% impor ted gas was established for thermoelectric power 
plants that exclusively use the more expensive imported gas.69   
78. The importation and commercializa tion of petroleum and natural gas, their derivatives, and 
ethanol is subject to the contribution for intervention in the economic domain (CIDE).70  C I D E  
revenues may have different uses, including subsidies for fuel transportation.71  In May 2008, in order 
to offset the increase in gasolin e prices decided by PETROBRAS, the Federal Government reduced 
the CIDE rate applied to the sales of fuels.72   
79. The Help-Gas programme ( Auxílio Gás ) established in 2002 to help low income families have 
access to subsidized LPG is scheduled to be te rminated on 31 December 2008;  since 2004 this 
programme has been merged into a larg er social assistance programme called Bolsa Família .73 
(iii) Ethanol 
80. Brazil is the world's second largest producer of ethanol and the first exporter, and its entire 
production comes from sugar cane.  Brazil produced  22.6 million cubic metres of ethanol fuels 
(anhydrous and hydrated ethyl alcohol) in 2007,  an 11.7% annual average increase since 2003.  
Production is estimated to have reached almost 27 million cubic meters in 2008.  During the 2007/08 crop year, about half of the sugar cane production was used to produce ethanol.
74  Data provided by 
the authorities indicates that some 60% of all s ugar cane production was used for the production of 
ethanol in the 2008/09 crop year.  Exports of etha nol tripled during the review period, to reach 
US$1.5 billion in 2007 (3.5 million cubic metres), confirming Brazil's leadership in ethanol world 
markets.  Exports are estimated to have reached 4. 2 million cubic meters in 2008.  In 2007, the main 
destinations were the United States, Central Am erica and Caribbean countries, and the Netherlands 
                                                      
66 ANP online information.  Viewed at:  http ://www.anp.gov.br/petro/ autorizacoes_2008.asp. 
67 WTO (2005), Chapter IV (6)(i). 
68 PETROBRAS online information.  View ed at:  http://www2.petrobras.com.br. 
69 ANP online information.  Viewed at:  ht tp://www.anp.gov.br/gas/gas_precotarifas.asp. 
70 Law No. 10,336 of 19 December 2001, as amended. 
71 Law No. 10,453 of 13 May 2002, Law No. 10,636 of 30 December 2002, and Decree No. 4,353 of 
30 August 2002. 
72 Agencia Brasil online information.  Viewed at:  http://www.agenciabrasil.gov.br/noticias/ 
2008/05/05/materia.2008-05-05.0256082527/view. 
73 Decree No. 6,392 of 12 March 2008. 
74 Information provided by the Brazilian authorities. WT/TPR/S/212/Rev.1 Trade Policy Review 
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with respectively 50%, 14%, and 10% of total ethanol exports (by volume).75  The authorities noted 
that Brazilian ethanol exported to the Caribbean  countries, tended to be re-exported to the 
United States under the CBI and the CAFTA. 
81. The commercialization of ethanol in Brazil was de-regulated in 1998, and since then the price 
has been determined by the market.  The price of ethanol rose by 45% during 2002-07.76 
82. The Ethyl Alcohol Fuel Stock Financing Programme (PFEAEC) is a support programme 
financed by the CIDE (see above).77  Its objective is to ensure fuel supply throughout the year, taking 
into account that alcohol production depends on the s ugar cane harvest, which is concentrated in the 
first half of each year.  The programme is administ ered by the Ministry of Agriculture (MAPA) and 
was established with an initial credit of R$500 milli on.  However, this programme has been inactive 
since 2005.   
83. In addition to the credit traditionally provided by BNDES for the development of the ethanol 
industry, the Government plans to offer an extra R$6.4 billion (some US$3.6 billion) of credit via BNDES to investments projects in the ethanol in dustry during 2008-11.  Th e Brazilian Agricultural 
Research Corporation (EMBRAPA) has a special programme for research and development 
of agricultural energy, which is focused on ethanol;  funds for this programme are expected to amount 
to R$1 billion (US$0.6 billion) during 2007-10.
78  Moreover, PETROBRAS is planning to invest 
US$1.6 billion in the production, storage, tran sport, and distribution of ethanol until 2011. 
(iv) Electricity 
(a) Market features 
84. Brazil has an installed potential capacity of 100. 4 Giga watts, which represents a 6.1% annual 
average increase over its 2003 level.  Most of th e installed capacity is hydroelectric (76%) and 
thermoelectric (22%).  The extent of the tran smission grid has grown by 12% since 2003, to 
87,568 km of transmission lines.79  In 2007, Brazil generated 447.7 TW h of electricity, of which 90% 
came from the public system power plants and 10 % from autonomous producers (i.e. power plants 
usually linked to large industria l operations).  In the same year, Brazil was a net importer of 
electricity, importing the equivalent of 9.3% of its  generating capacity (40.9 TWh) from Venezuela;  
Brazil exported electricity to Uruguay and Argentina.80 
85. During the review period, the average price of  electricity increased by some 27%, reaching 
R$0.25 per kWh (around US$0.14 per kWh) in August 2008.  The average price paid by residential 
customers is 13% higher than th e average electricity price (US$0. 16 per KWh), while the agricultural 
price is 28% lower (US$0.09 per kWh).  During the review period, the average price for industrial 
users increased by 60%, which wa s faster than for other user  groups, from R$0.14 per kWh to 
R$0.22 per kWh (US$0.08 to US$0.12 per kWh).81 
                                                      
75 UNICA online information based on SECEX fi gures.  Viewed at:  http://www.unica.com. 
br/dadosCotacao/estatistica/. 
76 UNICA online information.  Viewed at:  ht tp://www.unica.com.br/da dosCotacao/estatistica/. 
77 Resolution CIMA No. 24 of 12 September 2002. 
78 MDIC online information.  Viewed at:  http ://www.desenvolvimento.gov.br/pdp/index.php/sitio/ 
inicial.   
79 ANEEL online information.  Viewed at:  http://www.aneel.gov.br/area.cfm?idArea=131. 
80 Information provided by the Brazilian authorities. 
81 ANEEL online information.  Viewed at:  http://www.aneel.gov.br/.  Brazil WT/TPR/S/212/Rev.1 
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86. ELETROBRÁS remains the largest electricity prod ucer in Brazil, representing 40% of total 
generation and owning 56% of transmission lines with  capacity of over 230 kilo volts.  The Federal 
Government directly holds 54% of ELETROBRÁS voting shares. 
87. Companies owned by the state and municipal governments have lost significant share in total 
generation capacity since Brazil's last Review.  Including plants under construction, as well as the 
concessions already granted by ANEEL, the private sector represents about 31% of total generation 
capacity.82  Transmission lines not owned by ELETROBRÁS are mostly owned by state companies, 
with very few lines under private control.  Electricity distribution is provided by 64 companies, some state-owned and some privately owned by foreign and domestic investors.  
(b) Regulatory framework 
88. ANEEL (see section (i) above) handles concessi ons for the production, transmission, and 
distribution of electricity, and settles disputes am ongst agents.  The ANP supervises and mediates the 
negotiations on transport costs for natural gas and fo ssil fuels used for electricity generation.  The 
Electric Energy Commercialization Chamber (CCEE), a non-profit private entity regulated by ANEEL, was created in 2004 to succeed the Electrici ty Wholesale Market.  The CCEE is responsible 
for operating the commercial electricity market  and its auction system.  The rules and 
commercialization procedures that regulate CCEE's activities are approved by ANEEL. 
89. Brazil's electricity sector is organized around the National Integrated System (SIN), to which 
power plants (including some autonomous producer s) and distribution concessionaries are connected;  
some public electricity systems located in the no rth region, so-called "iso lated systems", operate 
separately from the SIN.
83  Distribution operators under the SIN must guarantee the provision of 
electricity to all of their markets through regulated contracts established by concessions.  
90. There are no limitations to the participation of  foreign investors in electricity generation, 
transmission or distribution. 
91. As described in Brazil's previous Review, in  early 2004 the Government reorganized the 
sector under a new electricity trade model.  Severa l new regulations were issued, most importantly 
Law 10,848 of 15 March 2004 and Decree No. 5,163 of 30 July 2004.  The new model provides for 
the establishment of energy auctions as the pr imary procurement mechanism for distribution 
companies to acquire energy.84 
92. Auctions for "existing" capacity must occur a fe w years in advance of the forecast delivery.  
Adjustment auctions are carried out to allow dist ributors to comply with the 100% guaranteed supply 
requirement.85  Auctions of "new" generation capacity are expected to be held three or five years in 
advance of delivery dates;  the objective is to ensu re that plants are built only after they have secured 
long-term contracts for the energy they will produce.  Since the first auction for "existing" capacity in 
December 2004, the CCEE has administered six aucti ons for "existing" energy, six for "new" energy, 
six for adjustments, and one for alternative energy sources.86 
                                                      
82 World Bank (2007). 
83 Isolated systems represent only 3.4% of Braz il's electricity production capacity.  ONS online 
information.  Viewed at:  http://www.ons.org .br/conheca_sistema/o_que_e_sin.aspx. 
84 World Bank (2007).  
85 Adjustment auctions should not exceed 1% of the distributor's market demand. 
86 CCEE online information.  Viewed  at:  http://www.ccee.org.br/. WT/TPR/S/212/Rev.1 Trade Policy Review 
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93. Thermoelectric and hydroelectric power plants with generation capacities equal to or lower 
than 5MW and 1MW, respectively, need only regist er with ANEEL.  Thermoelectric plants with a 
capacity of more than 5MW require an authorizati on from ANEEL;  the same applies to hydroelectric 
plants with a capacity greater than 1MW but equal to or lower than 30MW (autonomous generators).  
However, hydroelectric projects with capacity great er than 1MW must obtain concessions as a public 
provider in order to trade part of their electricity via auctions.  Authorizations for new thermoelectric 
generators are granted for a maximum of 15 year s and for a renewable period of 35 years for new 
hydroelectric generators. 
94. The transmission and distribution industries are re gulated.  In order to provide these activities, 
a company must obtain a concession from ANEEL, granted for a renewable period of 35 years.  
95. Private and state-owned electricity generato rs must negotiate the commercialization of 
electricity with distribution concessionaries through the auction mechanism in the SIN.  The price 
paid by the final consumer may only contain the cost of electricity paid by distributors plus taxes.  The transmission cost and the price paid by th e final consumer are regulated by ANEEL and are 
adjusted annually based on an infla tion index (IGP-M) and other factors.
87 
96. Imports and exports of electricity may only take place through the SIN and require 
authorization from ANEEL.  This process is carried out as non-automatic licensing, and applications 
can be made via SISCOMEX (see Chapter III(2)(vii)).88 
97. The Alternative Sources of Electric Energy Programme (PROINFA), administered by the 
MME, is aimed at promoting the diversification of Br azil's energy matrix via greater use of alternative 
energy sources.  Under this programme, ELETROBRÁS buys 3,300 MW of electricity at a minimum 
guaranteed price from small hydroelectric plants, biomass, and wind power sources (1,100 MW from 
each).89  ELETROBRÁS also administers an Energy De velopment Account (CDE) used to promote, 
inter alia , the development of the energy sector at th e state level, and the competitiveness of energy 
production from alternative sources.  In 2 007, the CDE disbursed  R$459 million (some 
US$255 million) in funds.90 
98. A universal service programme, Light for Ever yone (LPT), was established at the end of 2003 
to provide electricity to rural populations.  The programme is coordinated by the MME with the 
participation of the ELETROBRÁS system.  By law,  the programme is funded from various sources, 
such as the CDE, and contributions from distribu tion concessionaires and state governments.  In 2007, 
total resources spent on this programme am ounted to R$807 million (some US$450 million).  
99. The electricity sector also benefits from various BNDES incentive programmes (see 
Chapter III(4)(iv)).91  Energy efficiency regulations establish maximum allowable electricity 
consumption levels for domestic  and imported equipment;  INM ETRO oversees the implementation 
of related guidelines (see Chapter III(2)(viii)). 
                                                      
87 ANEEL online information.  Viewed at:  http ://www.aneel.gov.br/area.cf m?idArea=96&idPerfil=2. 
88 SRF Normative Instruction No. 649 of 28 April 2006. 
89 MME online information.  Viewed at:  http ://www.mme.gov.br/programs_display.do?prg=5. 
90 ELETROBRÁS online information.  Viewed at:  h ttp://www.eletrobras.gov.br /elb/portal/data/Pages/ 
LUMISB29596DDPTBRIE.htm. 
91 BNDES online information.  Viewed at:  http ://www.bndes.gov.br/infraestrutura/default.asp. Brazil WT/TPR/S/212/Rev.1 
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(5) MANUFACTURING  
100. Brazil has historically given priority to the development of its manufacturing sector.  With 
this aim, it provides favourable conditions fo r long-term financing as well as assistance through 
border measures, such as tariff peaks and tariff escalation, and internal instruments like tax 
concessions.  An enhanced support strategy for 2008-10, launched in  2008, includes total credit lines 
worth about US$140 billion in addition to US$3.7 billion in tax exemptions.  The manufacturing 
sector has remained of great economic importance for Br azil, in part as a result of the support policies 
in place.  However, it will be important to ensure that the implementation of industrial policy does not 
make it more difficult for other sectors to attract  factors of production, which would hinder their 
growth.  Moreover, in particular with respect to industries where Brazilian producers are already 
world-class players, reducing the levels of eff ective tariff protection would encourage greater 
productivity and benefit consumers. 
101. During the period under review, the manufacturi ng sector's contribution to GDP (including 
construction but excluding electricity, gas and wa ter production and distribution) stayed fairly 
constant at around 21.9% (Table I.2).  In 200 7, civil construction represented 23% of the 
manufacturing sector, while the processing industries represented the rest.92  Among processing 
industries the most important are:  food and beve rages, metallurgy, machinery and equipment, pulp 
and paper, motor vehicles, chemical products, and plastic products.  In 2007, the manufacturing sector 
employed some 8.4 million people.  After civil construction, which employed some 19.2% of workers 
in the sector, apparel and accessories, food and beve rage, and metallurgy are the most significant 
employers.93 
102. Manufactured goods (excluding f ood and beverages) represented 47.2% of the total value of 
Brazil's merchandise exports in 2007 (equivalent to US$76 billion), four percentage points less than in 
2003.  Imports of manufacturing goods  represented 70.6% of total imports.  In nominal value terms, 
however, manufacturing exports and imports increa sed by 49% and 90%, respectively, between 2004 
and 2007 (Chapter I(6)(i)).94 
103. A recent study published by the BNDES found that the import coefficient of the 
manufacturing sector (i.e. the participation of imports  in the consumption of a particular industry, 
measured as production minus exports pl us imports) increased by 32% during 2004-07.95  According 
to the study, the import coefficient of engineering- and technology-intensive industries grew faster and reached the highest coefficient in the sector.
96  Furthermore, the increase in imports for most 
industries that are scale, and/or engineering- and technology-intensive, was matched by a significant 
increase in production, which suggests that domestic  production has been complemented (rather than 
substituted) by imports.  This is particularly tr ue for the automotive and machinery and equipment 
industries.97 
104. According to an OECD study, labour produc tivity in the manufacturing sector as a whole 
increased between 2004 and 2006 (latest year available).98  The metallurgy, food and beverages, and 
                                                      
92 IBGE quarterly data.  View ed at:  www.ibge.gov.br. 
93 MDIC (2008). 
94 WTO Secretariat, based on UN Comtrade database. 
95 Puga (2008a). 
96 According to the OECD's sector classification in four groups:  (a) engineering and technology 
intensive;  (b) scale intensive;  (c) natural resources intensive;  and (d) labour intensive.  
97 Puga (2008b). 
98 OECD (2006). WT/TPR/S/212/Rev.1 Trade Policy Review 
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automotive industries showed particularly high le vels of labour productivity growth, as well as an 
increase in innovation intensity. 
105. The Industrial, Technological and Foreign Trade Policy (PITCE) document, issued by the 
government in 2003, represents Brazil's main po licy framework for the manufacturing sector.  The 
policy aims to promote innovation, technological upgrade, and exports, and to reduce the fiscal 
burden on the sector.  In accordance with this po licy, during the review period the Government 
proposed, and the Congress passed, four new laws:  the Innovation Law, the Informatics Law, the 
Bio-security Law (Chapter III(2)(ix)), and Law No. 11,196/2005.99  The latter was aimed at 
simplifying some tax collection procedures, includ ing for export-oriented activities, and providing 
fiscal incentives to innovation. 
106. In May 2008, the Government launched the Productive Development Policy as an 
enhancement to the PITCE.  The new policy establish es four macroeconomic goals to be met by 2010:  
to increase general fixed investment, private invest ment in R&D, Brazil's participation in world 
exports, and the number of small and medium-size ente rprises engaged in exports.  In order to reach 
these goals, the authorities plan to offer R$252 billion  (some US$140 billion) in total credit lines until 
2010, of which 84% through BNDES and 16% thr ough technology capacity building programmes 
under the MDIC.100  As part of the new policy, the government is also implementing measures to 
reduce the cost of credit and simplify export and im port procedures.  The policy also encompasses the 
granting of various new tax exemptions estimated  at some US$3.7 billion until 2010.  These measures 
are in principle aimed at any manufacturing activity.  However, some apply only to specific activities 
that the Government deems have particularly si gnificant multiplying effects.  Among these, there are 
activities where Brazil is considered by an OECD study to have a revealed comparative advantage 
(e.g. the production of non-metallic products, machinery and equipment, and motor vehicles).101 
107. The average MFN applied tariff for manufacturing products (ISIC definition) was 11.8% in 
January 2008 (Table III.1).  Brazil's tariff structur e continues to present tariff escalation, as tariffs on 
fully-processed products are higher than for product s at the first stage of processing and for semi-
processed products (Table III.1).  As noted by the OECD, this structure may induce the misallocation 
of resources towards selected inefficient import-substitution activities.102 
108. Manufacturing production has also been stimulated by the prohibition on the importation of 
used goods, which the authorities note are in place for environmental and safety reasons (Chapter III(2)(vii)).  The manufacturing sector in general also benefits from tariff and other tax 
concessions, financing schemes and incentive programmes managed by BNDES 
(see Chapter III(3)(iv)(v) and (4)(iv)). 
109. Since Brazil's last Review, the number of anti-dumping (AD) measures in force on imports of 
manufacturing products has increased.  The authorities note that this reflects the significant increase in 
the value of manufacturing imports over the period.   The activities most affected by AD duties are 
production of chemical, base metal, plastic, machin ery, and textile products.  During the review 
period, Brazil also applied two countervailing du ties on imports of stainless steel and PET films 
(Chapter III(2)(vi)). 
                                                     
 
99 Law No. 10,973 of 2 December 2004, Law No. 11,077 of 30 December 2004, Law No. 11.105 of 
23 November 2005, and Law No. 11.196 of 21 November 2005, respectively. 
100 These new credit lines may also be used to fi nance mining, hydrocarbon, and services activities. 
101 OECD (2008a).  In this OECD study, revealed co mparative advantage is measured by the ratio of a 
country's exports of a product to that country's total exports, divided by the ratio of world exports of the product 
to total world exports. 
102 OECD (2008a). Brazil WT/TPR/S/212/Rev.1 
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110. The pharmaceutical sector benefits from a special BNDES finance scheme, PROFARMA.  
Credit is provided for production and for research and development.  The programme covers up to 
90% of the total cost of a project with repayment peri ods of up to ten years.  Interest rates are, as a 
general rule, based on the long-run interest rate (T JLP) plus a margin for BNDES (between 1% and 
1.5%).  The programme is set to end on 31 July 2012.103  According to the authorities, the scheme is 
no longer limited to companies under the c ontrol of persons residing in Brazil. 
(6) SERVICES  
(i) Introduction 
111. Services contributed to some 65.8% of GDP at basic prices in 2007, up from 64.7% in 2003.  
The most important subsectors during the period were government services (15% of GDP) and 
distribution trade (11%);  real estate (8.8%), fina nce (7.6%), and transportation (5.5%), were also 
important.  Brazil is a net importer of services, a nd runs a traditional deficit in the services account 
(Chapter I).  This deficit increased considerab ly during the period under review, from US$4.9 billion 
in 2003, to US$13 billion in 2007 (Table AI.5).  
112. Brazil's specific commitments under the GATS cover only 38 of the 160 services subsectors or 
seven of the 12 broad areas defined in the Services Sectoral Classification List104:  business services, 
communication services, construction and related engineering services, distribution services, financial services, tourism and travel related services, and transport services (Table AIV.1). 
113. Brazil scheduled horizontal market access limitations on the movement of natural persons, 
investment, commercial presence, and subsidies.  Wi th respect to the movement of natural persons, 
market access is guaranteed only to specialized technicians, highly qualified professionals, and 
managers and directors working under temporary contracts.  Special conditions apply to the 
appointment of managers to affiliates of foreign co mpanies.  Brazil has also retained the right to 
require foreign companies wishing to supply a service  to be organized as a legal entity as foreseen by 
Brazilian law. 
114. Brazil listed exemptions to MFN treatment unde r the Annex on Article II Exemptions to the 
GATS Agreement regarding maritime transport ag reements on cargo sharing and cargo reservations, 
and measures providing for access to cargo on a reciprocal basis.
105  Brazil has signed such 
agreements with Argentina, Chile, and Uruguay, among others. 
115. Brazil participated in the WTO negotiations on basic telecommunications but, as at 
September 2008, it had not ratified the Fourth Protocol on basic telecommunications services.  Due to 
difficulties in the domestic ratification process, Brazil withdrew its draft schedule of specific 
commitments in basic telecommunications.106  In 2001, Brazil had submitted a new schedule of GATS 
commitments in telecommunication services for certif ication, after the enactment of the Brazilian 
General Telecommunications Law of July 1998.107  Japan and Hong Kong, China objected to this 
proposal on the grounds that the Brazilian Governme nt reserved the right to limit foreign participation 
in the sector (see section (iii) below).108  As a result of these objections, Brazil withdrew its 2001 
                                                      
103 BNDES online information.  Viewed at:  ht tp://www.bndes.gov.br/english/profarma_in.asp. 
104 WTO document MTN.GNS/W/120, 10 July 1991. 
105 WTO document GATS/EL/13, 14 April 1997. 
106 WTO document S/L/98, 26 July 2001. 
107 WTO document S/C/W/191 of 27 April 2001. 
108 WTO documents S/L/95 and S/L/97 of 11 June 2001. WT/TPR/S/212/Rev.1 Trade Policy Review 
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GATS schedule of commitments, and currently has no GATS commitments in telecommunications in 
force;  it has not adopted the Reference Paper.109 
116. Brazil also took part in the WTO negotiations on financial services but, as at September 2008, 
it had not ratified the Fifth Protocol on Financial Services.  Changes to Brazilian insurance legislation 
contained in Supplementary Law No. 126 of 15 Janua ry 2007 made the ratification of the Protocol 
compatible with Brazilian law.  In a June 200 8 meeting of the Committee on Trade in Financial 
Services, Brazil stated that the Fifth Protocol ha d passed the second reading in the upper House of the 
Brazilian Congress, but due to procedural matters had not yet been adopted and it was not possible to indicate when this would happen.
110   
117. Brazil did not include any commitments on maritime  or air transport in its GATS Schedule.  It 
left unbound in general the cross- border provision and consumption abroad of professional services.111  
Commercial presence was bound for accounting, auditing,  and bookkeeping, on the condition that the 
foreign supplier allows the use of its name to Br azilian professionals, to constitute a new legal person 
within Brazil and exercise full participation in it.  Non-residents are allowed to participate in legal 
entities providing professional services controlled by Brazilian nationals.  Commercial presence 
limitations apply to other professional service subsect ors.  For example, foreign participation in 
advertising services is limited to one third of the foot age of advertising films;  larger participation is 
conditional on the use of Brazilian nationals and domestic  production-house facilities.  In addition, 
foreign participation is limited to 49% of the ca pital of companies estab lished in Brazil, and 
leadership must remain with Brazilian partners.  Movement of natural pe rsons was left unbound, 
except for highly qualified professionals and foreign specialized technicians. 
118. Brazil is an active participant in the negotiati ons on services in the DDA.  Brazil tabled an 
initial offer in July 2004112;  and a revised offer in June 2005. 
119. The MERCOSUR Protocol of Montevideo on Trade in Services entered into force on 
7 December 2005, and was notified to the Council fo r Trade in Services (CTS) on 5 December 2006.  
The Protocol establishes a programme for the liberaliza tion of intra-trade in services within an overall 
implementation period of ten years from the date of entry into force, i.e. by December 2015. 
(Chapter II(5)(b)). 
(ii) Financial services 
120. The degree of financial intermediation in Braz il increased during the period under review.  
Interest rates spreads were reduced but, at over 28 percentage points in November 2008, remain wide.  
Moreover, the supply of medium and long-term priv ate credit for small and medium-size enterprises 
is very limited.  This reflects a number of factors,  including:  asymmetry of information arising from a 
sizeable informal non-financial sector, high taxes;  significant delinquency rates;  difficulty in access 
to credit;  and high administrative costs.  A large share of medium- and long-term financing is undertaken by state banks, where interest rates are considerably below those charged by private 
banks, and lower than short-term in terest rates.  This, however, is not a substitute for identifying and 
correcting the causes of the high cost of credit. 
121. The establishment of new foreign financial institutions requires a pproval by Presidential 
Decree.  In practice, the establishment of new fore ign financial institutions has been allowed, and 
                                                     
 
109 WTO document S/C/W/160 of 13 July 2000. 
110 WTO document S/FIN/M/56, 16 June 2008. 
111 WTO document GATS/SC/13, 15 April 1994. 
112 WTO document TN/S/O/BRA, 21 July 2004. Brazil WT/TPR/S/212/Rev.1 
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23% of assets are in the hands of foreign banks.  Brazil participated in the WTO negotiations on 
financial services;  although it has not ratified the Fi fth Protocol, amendments made to its insurance 
legislation in 2007 may make this possible.  Am ong other things, the amendments allow, under 
certain conditions, the cross-border supply of insu rance services, which was previously forbidden. 
(a) Main features 
122. Financial services accounted for 7.6% of GDP in  2007, up from 7.1% in 2003.  During 2006-
07 Brazil ran a trade surplus in financial services, in  contrast with past deficits.  In 2007, excluding 
insurance services, exports totalled US$1.09 billi on and imports were US$807 million, while exports 
and imports of insurance services we re US$543 million and US$1.31 billion.113 
123. The number of institutions in the Brazilian fina ncial system has continued to decline, from 
2,133 in December 2004 to 2,100 in October 2008.114  This reduction reflects mainly mergers and 
acquisitions, as banks sought to expand their ope rations considering the increase in economic and 
business activity, as well as liquidations, cancellations of operating authorizations, and transformation 
into other types of financial institutions.115  A total of 2,417 institutions comprised the Financial 
System (SFN) in September 2008, roughly the same as in 2003.116  The assets of the Brazilian 
financial system were US$1.56 trillion at end Ma rch 2008, equivalent to over 100% of (2007) GDP.117  
Of these assets, 99.2% were in the hands of banks , and the rest in credit cooperatives and other non-
bank financial institutions. 
124. The SFN is regulated primarily by the Nationa l Monetary Council (CMN), but also by the 
Central Bank of Brazil, the Securities Excha nge Commission (CVM), and the Private Insurance 
Superintendence (SUSEP).  Closed entities offering complementary pensions are supervised by the 
State Secretariat for Pension Funds (SPC),  under the Ministry of Social Security. 
125. The CMN created by Law 4,595/64 and presided by  the Minister of Finance is the highest 
regulatory entity within the SFN.118  The CMN sets policies and regulations for financial institutions 
and markets based on recommendations from the Central Bank and other regulators;  all SFN members, including the Central Bank and the CV M, must comply with CMN Resolutions.  The 
Central Bank executes the CMN policies, authori zes financial institutions, and supervises deposit-
taking financial institutions, othe r financial institutions, financia l intermediaries, and auxiliary 
institutions.  The Central Bank and the CVM jointl y supervise investment banks, securities brokers 
and dealers, the clearing and settlement system, a nd foreign investor portfolios.  The Central Bank 
supervises prudential aspects and financial operations  and CVM capital market operations.  Stock and 
                                                     
 
113 Central Bank of Brazil (2008i), Vol. 23. 
114 The financial system comprises multiple banks (139 as at October 2008), commercial banks (19), 
development banks (4), savings banks (1), investment banks (18), consumer finance companies (SCFI, 55), 
security brokerage co mpanies (SCTVM, 106), exchange brokerage co mpanies (SCC, 46), security distribution 
companies (SDTVM, 136), leasing companies (SAM, 36), real estate credit companies and savings and loans 
associations (SCI & APE, 17), mortgage companies (CH, 6), and development ag encies (12), credit union 
cooperatives (1,460), and micro-financing institutions  (SCM, 45).  Central Bank online information at:  
http://www.bcb.gov.br/htms/deorf/d200810/Quadro%2001%20-%20Quantitativo%20de%20instituições%20por 
%20segmento.pdf. 
115 Central Bank of Brazil (2007), Chapter 4. 
116 Total supervised institutions comprise the SFN plus consortium management companies (317), 
which are not considered financial institutions, despite the fact that the Central Bank regulates and supervise 
them. 
117 Central Bank of Brazil (2008l), p.33. 
118 Ministry of Finance online information.  View ed at:  http://www.fazenda.gov.br/portugues/orgaos/ 
cmn/cmn.asp. WT/TPR/S/212/Rev.1 Trade Policy Review 
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futures exchanges, mutual funds , securities issuers, broker/deal ers, portfolio managers, and 
individuals acting in the securities business are supervised by the CVM. 
126. Commercial presence restrictions apply in princi ple to financial services.  The Temporary 
Constitutional Provisions Act states that, until the cond itions for the participation of foreign capital in 
financial institutions are determined, the establis hment in Brazil of new branches of financial 
institutions domiciled abroad, as well as the increa se in the participation of individuals domiciled 
abroad or foreign entities in the capital of financ ial institutions with headquarters in Brazil, is 
prohibited.  This does not apply to authorizations resulting from international agreements, reciprocity, 
or as a matter of national interest.  In this respect , and although the conditions  for the participation of 
foreign capital in financial institu tions have not been determined, the establishment and increase of 
capital of domestic and foreign banks has been recogni zed as a matter of national interest by Ministry 
of Finance's Statement of Principles No. 311, of 23 August 1995.  As a result, the installation of new foreign financial institutions is s ubject to approval by Presidential D ecree, which gives way to Central 
Bank authorizations. 
127. Financial institutions headquartered abroad seek ing authorization to operate in Brazil must 
submit company information to the Central Bank.   The Central Bank makes a recommendation to the 
CMN, which in turn makes a recommendation to the President of the Republic for approval.  The minimum capital requirements vary by type of bank  or financial institution, generally ranging from 
R$200,000 to R$111,000 for a microfinance institution to R$110 million for a multiple bank (US$61.1 million).
119  In the case of multiple banks, minimum capital requirements depend upon the 
types of portfolios held and are calculated on the su m of requirements in each portfolio.  Financial 
institutions may request the installation of up to te n branches without additional capital requirements;  
beyond this limit, a 2% requirement is added to th e required paid-in capital and net equity per branch 
in the states of Rio de Janeiro and São Paulo, an d 1% per branch in other states.  Also, capital 
requirements can be reduced by 30% in regions ou tside the Rio de Janeiro and São Paulo states.  
These requirements apply to both foreig n and domestic institutions alike. 
128. Conditions for approval for a fo reign financial institution to set up a branch in Brazil are 
contained in CMN Resolution No. 3,040, of 28  November 2002, and Central Bank Circular 
No. 3,317, of 29 March 2006.  In accordance with the latter, applications filed by foreign investors to 
operate in the Brazilian financial sector must sp ecify, among other things, the amount of foreign 
participation in the total capital;  the benefits to  the Brazilian economy (e.g. new technologies, greater 
variety of products and services);  and a detailed description of existing activities of the foreign 
investor in the Brazilian financial system, includi ng any participation in local economic groups.   
(b) Banking 
General features and market developments 
129. Mergers among private banks continued durin g the review period, and the number of 
institutions participating in the system continued to  decline.  There is significant participation by 
foreign banks in the Brazilian market:  in mid 2007, there were 135 multiple banks, of which 83 were 
domestic, 43 were controlled by fore ign capital, and 6 had foreign capital participation.  There were 
also 20 commercial banks (12 domestic and 8 bran ches of foreign banks), 4 development banks, 
17 investment banks, and 1 savings bank.120  There was foreign capital participation in the ownership 
of some 214 financial institutions, or about a th ird of the total.  Total banking assets reached 
US$1.52 trillion in March 2008.  Th e top 50 banks account for 86.6%  of banking assets, and deposits 
                                                      
119 Central Bank of Brazil (2008d). 
120 Central Bank of Brazil (2007). Brazil WT/TPR/S/212/Rev.1 
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taken by these banks are 91.7% of total banking syst em deposits.  Six are federal-government owned, 
four are state-owned, 19 are domestic private, 20 ar e foreign-controlled private, and one is a private 
bank with foreign participation.  During the pe riod under review, the share of total assets of both 
foreign and domestic private banks increased.  Th e largest bank is the federally owned Banco do 
Brasil, with 14.4% of total assets in 2007.121 
130. The Credit Guarantee Fund (FGC) is a manda tory, privately funded deposit insurance 
scheme, with its legal basis in  Resolution CMN No. 3,251/2004 of 16 December 2004 modified by 
Resolution 3,400 of 6 September 2006.  The Fund is  financed with contributions from the banks 
equivalent to 0.0125% of the balance of the acc ounts guaranteed (current accounts, savings accounts, 
and term deposits).  The amount guaranteed by  the fund is up to R$60,000 (some US$33,300) per 
person per financial institution.  Guaranteed deposits were 99.8% of total SFN deposits in 
December 2007, totalling R$301.7 billion.122 
131. The banking system's assets rose to 78.7% of GDP in December 2007, from 62.6% in 
December 2003.  The scope of financial intermediati on has expanded since Brazil's previous review.  
Total credit allocated by the financial system in creased from 30% of GDP in 2003 to 37% in July 
2008.  The share of directed credit also increas ed:  earmarked credit represented 10.5% of GDP, up 
from 9.8% in December 2006.  Credits considered  by the Central Bank to be "normal" risk 
represented 92.2% of total credits in July 2008.  De faults accounted for 3.6% of total credits, while 
provisions for losses were 6.2%.123  In December 2007, the banking system's return on liquid assets 
was at 22.7%, up from 15.9% in December 2003.124  Banks capital ratios have increased and exceed 
both Basel and domestic standard requirements.  In December 2007, the system's ratio of net worth to 
total assets, weighted by risk, was at 17.2%, we ll above the 11% required by Brazilian regulations, 
and more than twice the Basel requirement (8%).  The Central Bank's stress tests, carried out with 138 banks and based on data up to December 2007, c ontinue to shown the system's resilience to 
exchange, interest rate, and credit shocks.
125  However, those conducted in 2007 show a higher 
vulnerability to interest rates shocks than previous tests. 
132. Although progress has been made during the review period, in reducing interest rates spreads, 
these remain large and indicate that, as pointed out in the previous Review, some inefficiencies 
remain in the banking sector.  In October 2008, th e average lending rate was 42.9%, while the average 
savings rate was 14.5%, yielding a spread of 28. 4%, down from 40.5% reported in February 2004;  
the spread for individuals (39.7%) was more th an twice as high as that for companies (17.5%).126 
133. According to the Central Bank, the main com ponents of the high spreads is the delinquency 
rate, followed by asymmetry of information arisin g from a sizeable informal non-financial sector, 
high taxes;  significant delinquency rates;  difficulty in access to credit;  and high taxation and administrative costs.
127  The Central Bank has also linked high spreads with lack of competition and 
transparency in the market and has identified a number of measures to this end, including a 
strengthening of the regulatory system to enforce competition.128  Additionally, compulsory lending to 
                                                      
121 Central Bank of Brazil (2007). 
122 Central Bank of Brazil (2008c). 
123 Central Bank of Brazil online information.  Viewed at:  http://www.bcb.gov.br/ftp/NotaEcon/ 
NI200808pmi.zip. 
124 Central Bank of Brazil (2008c). 
125 Central Bank of Brazil (2008c). 
126 Central Bank online information.  Viewed at:  http://www.bcb.gov.br/pec/indeco/Port/ie2-31.xls, 
and http://www.bcb.gov.br/ftp/NotaEcon/NI200808pmi.zip. 
127 Central Bank of Brazil (2008j).  
128 Central Bank of Brazil (2004).  WT/TPR/S/212/Rev.1 Trade Policy Review 
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agriculture at rates below those prevailing in the domestic market could also contribute to the high 
cost of credit, since rural credit operations represente d 14.9% of total credit operations (see below).  
The authorities do not consider, however, that this  is a significant factor, since these operations 
represent only 1.2% of the banking system's total lia bilities, and they are financed from a variety of 
sources. 
134. Brazil's financial system has also been charact erized for many years by the absence of long-
term credit provided by commercial banks.  Instea d, long-term credit in the domestic market is 
virtually all supplied by State-controlled financia l institutions.  As a result, there are no market-
determined long-term interest rates in Brazil, with  the observed rates established administratively by 
the institutions providing official long-term credit.  These official interest rates, slightly over 6% 
(November 2008), are significantly lower than short-run market rates129, an atypical situation that has 
prevailed for many years in Brazil.  This strongl y suggests a level of assistance to credit recipients 
since, if there were a market for medium and long-te rm credit in Brazil, in all likelihood, the relevant 
interest rates would be much higher than the rates fixed for official credit at present. 
Legal and regulatory framework 
135. Banking and other financial services are regulated  at the federal level.  No major changes 
have taken place in the legal framework for banking since Brazil's previous review.  The main legislation regulating the banking sector remains:  Article 192 of the Federal Constitution;  Article 52 
of the Temporary Constitutional Provisions Act;  Law No. 4,595 of 31 of December of 1964;  Law 
No. 4,728 of 14 of July of 1965;  Law No. 6,024 of 13 March 1974;  and Resolution No. 3,040/2002.  
Most banking regulations are compiled in the Central Bank of Brazil's Manual of Norms and 
Instructions, which is  constantly updated.
130 
136. Banks incorporated in Brazil may be 100% owne d by foreign capital.  Foreign banks must be 
established as a subsidiary or branch to be able to take deposits or to lend in Brazil.  Once established, 
foreign banks may in principle engage in the sam e activities and are subject to the same prudential 
requirements as domestic banks.  The same require ments to obtain a licence apply to nationals and 
foreigners;  they are established by the CMN a nd include minimum capital requirements, prudential 
regulations, and specifications regarding the qualifica tions of the administrators of the institution.  
However, foreign banks established in Brazil before 5 October 1988 may not open new local 
branches.  Representatives and directors of financ ial institutions are not required to be Brazilian 
nationals but must be Brazilian residents. 
137. Resolution No. 2,592 of 25 February 1999 a nd its complementary regulations govern the 
commercial presence of financial or similar institutio ns with their head offi ce abroad.  Representation 
within Brazil of a financial institution with its head  office abroad requires prior authorization by the 
Central Bank of Brazil, and may only be a natu ral or legal person(s) domiciled in Brazil.  
Representative offices are not allowed to receive  deposits or to undertake other commercial 
transactions.  Cross-border supply of banking services is not permitted.  There are no legal provisions 
in Brazil with respect to  consumption abroad of banking services. 
138. Private and public banks must engage in th e National System of Rural Credit (SNCR), 
regulated by the CMN, which seeks to ensure that funds are provided to farmers from both public and 
private sources.  Interest rates for these credits ar e fixed by the CMN.  Banks must set aside 25% of 
their demand deposits (called mandatory resources) for credits to the agricultural sector;  alternatively, 
                                                      
129 The money market spot rate (CDI) was over 14% in November 2008;  average lending rates are 
considerably higher than the CDI:  for Nove mber 2008, they were at over 42%.   
130 Viewed at:  https://www3.bcb. gov.br/msv/pesquisa/homepdf.jsp. Brazil WT/TPR/S/212/Rev.1 
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they may choose to hold 25% of their demand deposits as obligatory reserves ( exigibilidades ) at the 
Central Bank at zero interest.  In 2008, 118 fina ncial institutions (banks  and cooperatives) were 
subject to rural credit exigibilities.   
139. Rural credit through "mandatory resources" is gran ted at an annual interest rate of 6.75%, and 
limits vary according to the crop or type of operati on (see section (2) above).  The rationale of this 
compulsory credit is the promotion of invest ment, facilitation of production financing, and 
improvement in productivity in the agriculture sector.  Agricultural credit has its legal support in Law 
No. 4,829, of 5 November 1965, Law No. 8,171 of 17 January 1991, as amended, most recently by Law No. 11,718, of 20 June 2008, and in Resolution CMN 3,556 of 27 March 2008.
131  Agricultural 
credit regulations are contained in the Central Bank's Rural Credit Manual . 
140. Banks must adjust their internal control syst ems to comply with Basel Principles, since 
31 December 1999, as mandated by Resolution CM N No. 2,554 of 24 September 1998.  Prudential 
requirements, which are the same for domestic and foreign banks, were adjusted upwards in 2001 and 
2002 and updated to a Basel II simplified standard ized approach in 2007.  Capital adequacy 
requirements vary by type of financial institu tion and are generally more stringent than the 
requirements of the Basel Principles (8%).  The requ irements are:  11% for banks;  and 13%, 15% or 
17% for credit cooperatives, depending on their size and structure.  Resolution CMN No. 3,490 of 29 August 2007 introduced new rules for the calcula tion of reference capital requirements (PRE) in 
accordance with the rules of Basel II.   The new rules are applicable since 1 July 2008.  The changes 
are expected to enhance the authorities' risk -assessment capacity in line with Basel II. 
141. The authorities note that several prudential regulation elements precede and go beyond the 
implementation of Basel II.  This includes internal controls and general risk-management requirements and client exposure limits.  Since 1999 there has been pruden tial regulation regarding 
loan loss provisions, based on inte rnal borrowers and transactions ra tings;  and guides for liquidity 
risk management, including contingency plans and st ress tests, have been in force since 2000.  In 
2008 the Central Bank issued Circular No. 3,393/ 2008 requiring more information on liquidity 
management from supervised institutions. 
142. Brazil has information-sharing agreements w ith the financial supervisory authorities of 
Argentina, Germany, Mexico, Pana ma, Paraguay, Portugal, Spain, the United States, the Bahamas, 
and the Cayman Islands, and is e xploring an agreement with Korea.   Informal arrangements are in 
place with the Netherlands, and the United Kingdom. 
(c) Insurance 
143. Insurance activities account for an estimated 3. 3% of GDP.  The total market value of 
premiums, investment plan income, and receipts from open private pension contributions was around R$84.2 billion (some US$50 billion) in 2007.
132  Total premiums were R$66.5 billion in 
December 2007, 59.6% for life and health insurance, 25.3% for motor vehicle insurance, and the rest 
for fire, transportation, and other risks.  In July  2008, there were some 131 insurance companies (of 
which 14 health insurance companies).  There were also 17 investment plan companies, and 29 open 
private pension fund societies in operation. 
                                                      
131 For the text of this resolution see Central Bank of Brazil online information.  Viewed at:  
http://www.bcb.gov.br/ Htms/N ormativ/RESOLUCAO3556.pdf. 
132 National Federation of Insurance Services Provid ers (FENASEG) online information.  Viewed at:  
http://www.fenaseg.org.br/. WT/TPR/S/212/Rev.1 Trade Policy Review 
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144. The situation of the Brazilian reinsurance mark et changed substantially during the review 
period.  There are currently 21 reinsurance comp anies operating (August 2008), three local, ten as 
admitted and eight as occasional;  all re ceived authorization to operate in 2008.133  Until 2007, IRB-
Brasil Resseguros remained the sole provider of reinsurance in Brazil. 
145. The Brazilian national insurance system (SNSP)  is composed of the National Council of 
Private Insurance (CNSP), the Superintenden ce of Private Insurance (SUSEP), the Brazilian 
Reinsurance Institute (IRB BRASIL Re), private insu rance companies, and authorized brokers.  The 
CNSP is the main body responsible for setting polici es for the private insurance industry, including 
fixing the characteristics of the different insurance contracts, and for the regulation of the national 
insurance system.  SUSEP, an autonomous body under the organizational structure of the Ministry of 
Finance, has responsibility for the control and supe rvision of insurance, reinsurance, open private 
pension funds, and capitalization (investment plan s) operations.  SUSEP executes the CNSP policies.  
Supervision of the health insurance business is the responsibility of the National Health Agency 
(ANS), under the organizational chart of the Ministry of Health. 
146. The provision of insurance services in Brazil is governed by Decree Law No. 73 of 
21 November 1966, as modified by Decree No. 60,459 of 13 March 1967, Law No. 261 of 
28 February 1967, Law No. 10,190 of 14 Febr uary 2001, Supplementary Law No. 109 of 
29 May 2001, and Supplementary Law No. 126 of 15 January 2007.  CNSP Resolutions and SUSEP 
Circulars regulate the industry's day-to-day activities.   Insurance companies that provide only health 
insurance are subject to ANS regulations. 
147. Supplementary Law No. 126 of 15 January 2007, contains provisions on reinsurance, co-
insurance operations, cross-border s upply of insurance services, and operations in foreign currency.134  
This Law amended Brazilian legisl ation to allow for insurance and reinsurance operations to be 
conducted in foreign currency.  While risks that ta ke place in Brazil must be insured domestically, the 
Law provides for a few exceptions, allowing the taking out of insurance abroad by natural persons or 
legal persons resident in Brazil to:  cover risks for which there is no provision of insurance in Brazil, 
provided that this represents no violation of existing legislation;  cover risks abroad where the insured 
is a natural person resident in Brazil, for which the term of the insurance contract is limited 
exclusively to the period in which the insured person is abroad;  insurance policies that are the subject 
of international agreements ratified by the National Congress;  and insurance contracted abroad before 
the date of publication of the Supplementary Law.  The law allows Brazilian le gal persons to take out 
insurance abroad to cover risks abroad, provided this is notified to the SUSEP. 
148. Prior to Supplementary Law No. 126, cross- border supply of insurance services was not 
allowed, except if coverage was not available in the country and with prior IRB authorization, if 
covering the risk domestically was deemed not conveni ent to the national interest, or if the insurance 
was for vessels with Special Brazilian Registry (REB), provided the price of the premium was lower 
outside Brazil. 
149. Insurance companies may not engage in other financial activities.  They do not need to 
specialize in a specific line of insurance a nd may be composite (life and non-life);  the only 
exceptions apply to export credit insurance, whic h must be specialized;  life insurance companies 
authorized to deal in open pension funds;  health insurance companies;  and reinsurance companies.  
                                                      
133 SUSEP online information.  Viewed at:  http s://www.susep.gov.br/menuatendimento/resseguros/ 
resseguradoras.asp. 
134 SUSEP online information.  Viewed at:  h ttps://www.susep.gov.br/te xtos/LC126-2007.pdf. Brazil WT/TPR/S/212/Rev.1 
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Foreign insurance companies providing insurance of any kind, except reinsurance, are required to be 
incorporated under Brazilian law, in the form of a corporation.135 
150. Establishment of a foreign life or non-life insurance company requires prior approval from 
SUSEP, followed by a Minister of Finance Act.  Au thorizations to operate are granted directly by 
SUSEP.  Once a foreign company is authorized to ope rate in Brazil, national treatment is granted. 
151. In accordance with Resolution CNSP No. 73/2002, amended by Resolution CNSP 
No. 178/2007, minimum capital requirements vary according to the region of operation, the company's internal risk management model, and the type of activity.
136  There are no barriers to the 
internal trade of insurance services as long as a company complies with these minimum capital 
requirements.137 
152. Insurance brokers must be registered at the SUSEP.  Pre-approval is required only for brokers 
wishing to sell non-life insurance.  The SUSEP ma y forbid the commercialization of any product 
considered incompatible with the industry's regulat ory framework or specific provisions thereof, or 
deemed to be not technically feasible or badly struct ured.  Life insurance products that offer long-term 
savings and annuities, capitalization plans, and open  pension products require  prior approval from the 
SUSEP;  other new insurance products do not need pre-approval by the SUSEP, but must be notified. 
153. Supplementary Law No. 126 of 15 January 2007 brought in significant changes to 
the reinsurance business, opening the subsector to  private, including foreign-owned and based 
re-insurance companies. In accordan ce with this Law, reinsurance and retrocession can be held with a 
local reinsurer (established as a corporation, with  the sole object of conducting operations of 
reinsurance and retrocession);  an admitted re-insur er (based abroad, with a representative office in 
Brazil, registered in SUSEP to carry out reinsuran ce and retrocession);  or an eventual re-insurer 
(foreign reinsurance company based ab road without a representative office in Brazil, also registered 
as such in SUSEP). 
(d) Securities 
154. After the merger of Brazil's stock and futur es exchanges, the São Paulo Stock Exchange 
(BM&F BOVESPA) remains the only exchange in Braz il.  The BM&F BOVESPA is the largest stock 
exchange in Latin America;  in July 2008, th ere were 397 companies registered in the BM&F 
BOVESPA, with a market value of R$2.14 trillion (US$1.37 trillion).138  This is equivalent to some 
90% of Brazilian GDP. 
155. The Securities and Exchange Commission (CVM),  an independent government entity under 
the organizational structure of the Ministry of Fina nce, is in charge of supervision of the securities 
markets in Brazil, with the exception of governme nt bonds and private bonds, which are regulated by 
the Central Bank.  The CVM has the power to issue complementary rules to laws and CMN 
resolutions, including instructions and deliberations.139  Stock exchanges and other market 
                                                      
135 WTO document GATS/SC/13 /Suppl.3, 26 February 1998. 
136 Insurance companies must maintain not less than R$1.2 million in fixed capital, plus a variable 
amount up to R$6 million if they intend to operate in the whole country (a total of R$7.2 million or 
US$4 million).  Investment plans must maintain R$1.8 million, and R$10.8 million (US$6 million), 
respectively.  For details, see SUSEP online information.   Viewed at:  http://www.susep.gov.br/menumercado/ 
capitalmin.asp. 
137 SUSEP online information.  Viewed at:  h ttp://www.susep.gov.br/menumercado/capitalmin.asp. 
138 BOVESPA online information.  Viewed a t:  http://www.bovespa.com.br/indexi.asp. 
139 CVM online information.  Viewed at:  http://www.cvm.gov.br/ingl/indexing.asp. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 126 
 
 
associations have been granted self-regulatory power  and are considered as auxiliary entities of the 
CVM. 
156. The main laws that guide the securities ma rket, are Law No. 6,385/76, as amended (the 
Securities Law);  and Law No. 6,404/76 (the Cor poration Law).  Law No. 10,303 of 31 October 2001 
and Law No. 10,411 of 26 February 2002 modified  the previous two laws, especially regarding 
minority shareholding rights.  Law No. 11,638 of 28 December 2007 introduced further modifications, particularly regarding p ublic disclosure of financial accounts. 
157. CVM registration and authorization is required for the distribution of securities issues on the 
market;  the purchase of securities for resale;  inte rmediation or brokerage on operations involving 
securities;  and the clearing and settlement of such ope rations.  Only authorized agents registered with 
the CVM may engage in securities mediation or br okerage activities outside the stock exchange.  
Issuers of publicly distributed securities must be in corporated in Brazil as publicly held companies. 
158. Resolution 2,689/2000 grants foreign investors acce ss to all the investment products available 
to domestic investors, including forward, futu res, and options contracts of farm products.
140  Funds 
brought into Brazil under the terms of Resolution 2,689/ 2000 must be declared and registered at the 
Central Bank.  Foreign entities may invest in Braz ilian capital markets through authorized investment 
companies or using depositary receipts.141  Non-resident individual investors must appoint a Brazilian 
resident as their representative r esponsible for registration procedur es with the Central Bank and the 
CVM.  Overseas transfers of custody positions betw een non-resident investors is only allowed due to 
mergers, incorporations, spinning-o ff processes, and other restructuring, or to hereditary succession;  
it requires prior authorization from the CVM.  N on-resident investors may not acquire or sell 
securities of publicly listed companies across non-orga nized over-the-counter markets or organized by 
entities not authorized by the CVM.  Foreign invest ors receive national tax treatment in relation to 
operations in the financial and capital markets.  In some cases, however, they receive better tax treatment than nationals in relation to opera tions in the financial and capital markets. 
(iii) Telecommunications 
159. Brazil participated in the WTO negotiations on  basic telecommunications, but it did not ratify 
the Fourth Protocol and has no GATS specific commitm ents in this area.  The Executive Branch has 
the right to limit new foreign participation in the telecom sector.  However, in practice, any company 
established in Brazil, regardless of the origin of cap ital, has been able to participate in the sector.  
Foreign participation in paid cable television services is limited to 49% of voting shares.  In certain 
cases, the use of Brazilian satellites is given prio rity over foreign satellites.  Brazil's telecom 
regulatory structure follows international best pr actice, and during the review period the authorities 
aimed to improve it by introducing changes in ar eas like billing and pricing, interconnection fees, 
number portability, and universal service targets.   Strengthening the regulatory agency would 
consolidate this enhancement process. 
(a) Market structure and performance 
160. Revenues from telecom and broadcasting services, pa rticularly data transmission, grew during 
the period under review, to a total of  R$141 billion (US$78  billion) in 2007.
142  The sector's 
                                                      
140 BOVESPA online information.  Viewed at:  http://www.bovespa.com.br/. 
141 Resolution CMN No. 2,763 of 9 August 2000 contains provisions on Brazilian Depositary Receipts. 
142 Teleco online information.  Viewed at:  www.teleco.com.br. Brazil WT/TPR/S/212/Rev.1 
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contribution to GDP stayed constant at 3.3%.143  Investments by the main operators in fixed and 
mobile telephony increased to R$11.2 billi on in 2007144, which is below the average annual 
investment of R$14.6 billion (US$8.1 billion) registered over 2004-07.  
161. The total number of fixed telephone lines in ser vice has remained fairly constant;  in March 
2008, fixed teledensity was 21.5 lines per 100 inhabita nts.  In contrast, the mobile telephony market 
has continued to grow rapidly:  the number of mob ile lines increased nearly threefold and penetration 
reached 69.5 mobile lines per 100 inhabitants in Ju ne 2008;  some 81% of the lines were pre-paid.  
Unlike earlier years, mobile telephony's growth was si gnificant in all regions.  In 2007, the number of 
Internet users was estimated to be 45 million, and there were 7.7 million broadband connections 
(equivalent to 4.2 connecti ons per 100 inhabitants).145  In September 2008, there were 6.5 million 
paid-TV subscribers (equivalent to 3.2 subscriptio ns per 100 inhabitants), out of which some 60% 
were receiving the service via cable.146 
162. While available estimates suggest that the average nominal price for fixed local telephony 
service did not change between 2004 and 2007, the average price per minute of mobile telephony and 
the price for broadband services seem to have declined.147  The price of paid TV services' basic 
subscription increased by approximately 20% over 2004-07. 
163. The quality of fixed and mobile telephony ser vices in Brazil improved over 2004-07, but it 
remains relatively low in certain areas, particularly in call completion rates and customer services availability.
148  At end 2008, the Government was implem enting a procedure established in July 2005 
for collection and publication of data on quality for paid-TV services.149 
164. Brazil's telecom sector was privatized in 1998 and further liberalized in 2001-02.150  In order 
to promote competition, the Brazilian territory was divided into geographical regions according to the type of service provided.  In each region, the le gislation established a duopoly between the privatized 
state monopoly and a "mirror" company in the case  of fixed telephony, and between two licensed 
operators in the case of mobile telephony.
151 
165. Liberalization of the fixed telephony market e nvisioned a transition period ending in 2002.  
Since then, new authorizations have been grante d for the provision of fixed-local, national, and 
international long-distance services, out of which 39 were operational at end 2008.  Most of these new 
operators opted to use voice over IP (VoIP) technology.152  The liberalization also allowed for 
horizontal consolidation, with four  main holding companies acquiring other operators in the four main 
                                                      
143 The Brazilian Institute of Statistics (IBGE) organizes  the sector under the definition of  "information 
services", which includes:  telecommunication services;  software and hardware related services;  Internet-
related services;  radio and television broadcasting se rvices, including cable TV;  film production;  and 
journalism.  IBGE online information.  Viewed a t:  http://www.ibge.gov.br/home/estatistica/indicadores/ 
pib/defaultcnt.shtm. 
144 Teleco online information.  Viewed at:  www.teleco.com.br. 
145 The figure for broadband connections does not include connections that use dedicated IP, satellite or 
mobile telephony technologies.  
146 Teleco online information.  Viewed at:  www.teleco.com.br. 
147 CADE (2008);  ANATEL (2006);  and Teleco online in formation.  Viewed at:  www.teleco.com.br.   
148 ANATEL online information.  Viewed at:  http://www.anatel.gov.br/. 
149 Teleco online information.  Viewed at:  www.teleco.com.br. 
150 WTO (2005). 
151 WTO (2005). 
152 VoIP (Voice over Internet Protocol) technology enables the transmission of voice over internet 
networks.  WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 128 
 
 
telecom services' markets.153  Furthermore, in early 2008 a Brazilian-controlled holding company 
(Telemar/Oi), which already owns  an operator of fixed telephony, announced the acquisition of 
another incumbent (Brasil Telecom) from a different region (see below).  The State maintains a strategic presence in Telemar/Oi through BNDES a nd the pension funds of state-owned enterprises.
154  
166. In Brazil's previous Review, it was noted that liberalization had helped to increase 
competition in the sector, a trend that seems to ha ve continued during 2004-08.   Although incumbents 
continue to control more than 90% of the fixed lines in service, like in other countries, the fixed-mobile substitution effect seems to be strong, w ith fixed telephony facing increasing competition from 
mobile telephony.
155  In mid 2008, there were between three and five mobile telephony service 
providers competing in each geographical region.156  Also, competition in the broadband market has 
increased with the advent of intern et access provision by paid-TV companies.157 
(b) Regulatory framework 
167. Policy for the sector is formulated by the Secretary of Telecommunications, which is part of 
the Ministry of Communications (MC).  The main policy objectives are:  to provide telecom services 
at affordable tariffs and prices;  to implement un iversal services;  to foster competition;  and to 
promote the sector's development in accordance with the country's social development goals.158 
168. The sector's main regulatory agency is the National Telecommunications Agency (ANATEL), 
which regulates and enforces all aspects of telecom services in Brazil.  ANATEL is an administratively independent and financially autono mous regulatory agency, with a fixed mandate to 
implement the national policies set by the MC.
159  The legislation establishes that ANATEL has the 
authority to deal with competition breaches that ar e not under the responsibility of the Administrative 
Council for Economic Defence (CADE);  otherwise, it redirects possible breaches to CADE (see Chapter III(4)(ii)).
160 
169. In a recent study, the OECD noted that although the Brazilian regulatory structure follows 
international best practice in general terms, servi ng as a "signal of the country’s commitment to open 
trade and investment policies", additional regulatory action is needed "in order to prevent and solve 
market bottlenecks, facilitate universal access in the context of modern technologies, and better 
integrate the consumer perspective."161  In that respect, the OECD su ggests that ANATEL's ability to 
fulfil its defined objectives was weakened by measu res that strictly reduced its actual budget.  
Moreover, the delayed appointment of one of ANA TEL's five managing directors hindered its rule-
making work since, by law, all its decisions (i ncluding the approval of new regulations) must be 
approved by an absolute majority of ANATEL's board of directors.162 
                                                      
153 There are two holding companies controlled by foreign telecom companies (i.e. Telefónica and 
Telmex);  one controlled by both foreign and domestic investors;  and one controlled solely by domestic investors, which include the Brazilian developmen t bank (BNDES) and pension funds of state-owned 
enterprises. 
154 Telemar online information.  Viewed at:  http://www.novaoi.com.br/p ortal/site/RI/menuitem. 
b08d7238c83baa5467106457f26d02a0/?vgnextoid=fcbf22496b027110VgnVCM10000090cb200aRCRD. 
155 Teleco online information.  Viewed at:  www.teleco.com.br. 
156 ANATEL online information.  Viewed at:  http://www.anatel.gov.br/. 
157 CADE (2008).  
158 Law No. 9,472 of 16 July 1997. 
159 Law No. 9,472 of 16 July 1997 (General Telecommunications Law, LGT). 
160 Law No. 9,472 of 16 July 1997 and Ministerial Act ANATEL CADE No. 1 of 9 September 1998. 
161 OECD (2008c).   
162 Article 31 of Decree No. 2,338 of 7 October 1997. Brazil WT/TPR/S/212/Rev.1 
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170. The sector is primarily regulated by Law No. 9,472 of 16 July 1997 (General 
Telecommunications Law, LGT), which covers all telecommunication services (but not audiovisual 
services).  The LGT provides the Executive Branch with  the right to limit foreign participation in the 
telecom sector, while, under Decree 2,617 of 1998 , concessions and authorizations may only be 
granted to companies established in Brazil under domest ic law.  However, the legislation in force 
makes no distinction between foreign and domestic cap ital.  On the other hand, for paid-television 
services provided via cable, companies must be established in Brazil and at least 51% of their capital must be owned by Brazilians or foreigners that have had Brazilian citizenship for the preceding ten 
years.
163  These provisions do not apply for paid-television services provided via multichannel 
multipoint distribution service (MMDS) or via direct-to-home (DTH) technologies. 
171. In October 2008, ANATEL modified the market c oncentration disciplines in the General Plan 
of Concessions to, inter alia , allow telecom companies to own fixed telephony incumbents in more 
than one region.164  The changes were approved by Presidential Decree No. 6,654 of 
20 November 2008, and will bring th e acquisition of Brasil Telecom by Telemar/Oi (see above) into 
line with the regulation. 
172. Concessions (under the public regime) apply to incumbent operators of fixed telephony, while 
authorizations (under the private regime) have been granted to new operators.  Concessions are 
generally subject to stricter requirements than au thorizations (e.g. in relation to universal service 
requirements and price controls).  All concessions we re renewed in January 2006 for 20 years.  There 
is no limit on the number of new authorizations that can be granted by region or in Brazil as a whole.  
From 2005, long-distance authorizations can be obt ained separately from local service authorizations, 
and coverage requirements have been eliminated.  Permits are used for temporary services in an 
"exceptional situation".   
173. An authorization is required for the provision of  mobile telephony services.  An authorization 
grants the right to use a certain frequency of th e electromagnetic spectrum in a particular region.  
Authorizations are auctioned by ANATEL, which d ecides the number of competing frequencies that 
should be granted in each region.  An authorization is also required for the provision of broadcasting 
services via MMDS and DTH, while a concession is required paid cable television services. 
174. Value-added services are not regarded as telecom services per se ;  providers of these services 
are considered to be "users of telecom services".  However, the provision of value-added services 
must be coupled with a telecom service regulated by ANATEL;  for example, the provision of broadband services requires an authorization for th e telecom service that supports the connection, 
irrespective of the technology used. 
175. There are no specific regulations on VoIP services.  ANATEL has stated that Brazilian 
regulation in general is technology-neutral and that VoIP is treated as a voice telephony service.
165  
VoIP services that are any-to-any communication enabled (i.e. providers that use public telecom 
networks) require an authorization for the associated service, while those that are not (i.e. computer to 
computer only) do not require an authorization. 
176. Resale of telecom services is not covered by the legislation, nor it is provided in practice.  
However, the authorities note that ANATEL plans to issue regulations to authorize the resale of 
telecom services.  Private networks do not require any type of authorization.166  
                                                      
163 Law No. 8,977 of 6 January 1995 (Cable Law).  
164 ANATEL online information.  Viewed at:  http://www.anatel.gov.br/. 
165 ANATEL online information.  Viewed at:  www.anatel.gov.br. 
166 Teleco online information.  Viewed at:  www.teleco.com.br. WT/TPR/S/212/Rev.1 Trade Policy Review 
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177. The LGT authorizes ANATEL to control the price of fixed telephony services provided under 
a concession (the public regime), which in prac tice covers only incumbents.  If ANATEL considers 
the market to be competitive three years after the start of a concession, it may allow concessionaries 
to freely set their prices.  National long-distance ca lls are subject to a price matrix that combines 
distance and period of the day criteria, and prices for international calls depend on the country to 
which the calls are made, as well as the period of the day.167  In mid 2007, in order to improve 
transparency, all operators were required to cha nge the billing method of fixed calls from pulse to 
minutes. 
178. To ensure that companies do not obtain above -normal profits, a formula involving a price cap 
is used to adjust prices for suppliers of both fi xed and mobile telephony.  Until December 2005, the 
adjustment depended on the General Price Index – Internal Supply (IGP-DI) and a productivity factor.  
A new methodology was introduced in January 2006 (the Telecommunication Services Index) to improve the accuracy of the productivity factor and decrease the weight of the IGP-DI by including eight other price indexes.
168  The indexation of telecom services' prices has been questioned due to its 
inflationary nature (see Chapter I(4)).169   
179. Any provider of telecom networks and services,  as defined in the LGT, has the right and 
obligation to negotiate interconnec tion terms with other operators for the provision of public telecom 
services.  The regulation on interconnection prohibits the use of cross-subsidies, special discounts, 
and other anti-competitive practices.170  Fixed interconnection pri ces are defined by ANATEL, while 
mobile interconnection prices are freely negotiated by  the parties but must be notified to ANATEL.  
Interconnection prices charged by operators with significant market power (as determined by 
ANATEL171) are subject to a price cap;  a new cost-ba sed methodology to calculate price caps was 
introduced in 2007, but has not yet entered into for ce.  In practice, almost all interconnection prices 
are set at their cap level.172  
180. If 60 days after a request for interconnection the parties have not reached agreement, either 
party may request ANATEL arbitration.  The legi slation establishes an administrative appeal 
procedure available to the parties involved, but does not establish a maximum duration for the 
arbitration process.  There were 27 requests for arbi tration in 2004, 22 in 2 005, 36 in 2006, and 6 in 
2007.  The process does not exempt the parties from interconnection obligations already accorded.  
During 2004-07, ANATEL imposed various fines on par ties that did not comply with interconnection 
regulation or contract obligations.173 
181. The right for local loop unbundling (LLU) is established in the LGT;  at end 2008, ANATEL 
was taking steps to issue implemen tation regulations.  WiMax technol ogy could be used to connect 
the "last mile" as an alternative to the LLU of fixed networks, however ANATEL has not yet started the process for granting the respective radio frequencies.
174 
                                                      
167 Regulation for the pricing of fixed telephony serv ices under the public regime, annexed to ANATEL 
Resolution No. 424 of 6 December of 2005. 
168 Norm for the calculation of the IST, annexed to ANATEL Resolution No. 420 of 25 November 
2005. 
169 Modenesi et Modenesi (2005), and Central Bank online information.  Viewed at:  
http://www4.bcb.gov.br/?FOCUSPERG.  
170 General Regulation on Interconnection, annexed to ANATEL Resolution No. 410 of 11 July 2005.  
171 The criteria used by ANATEL to determine whic h operators have significant market power are 
listed in Chapter II of the Annex to Resolution No. 458 of 8 February 2008 and Chapter II of the Annex to Resolution No. 438 of 10 July 2006. 
172 Teleco online information.  Viewed at:  www.teleco.com.br. 
173 Information provided by the Brazilian authorities. 
174 WiMax technology provides for wireless transmission of data over medium-range distances. Brazil WT/TPR/S/212/Rev.1 
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182. Number portability was approved by ANATEL in March 2007.175  At a cost, subscribers of 
both fixed and mobile telephony services will be able to carry their numbers when changing 
operators;  implementation will be complete between August 2008  and March 2009 depending on the 
region. 
183. The use of Brazilian satellites is given priority over foreign satellites, if technical and 
economic conditions are equivalent;  however, this does not apply to paid-television services.  Some 
restrictions apply to foreigners with respect to the launching and orbital positioning of satellites.176  
No significant regulatory changes were introduced in this regard during the review period.   
184. Telecom operators under a concession (the public regime) are mandated to provide universal 
and continuous services.177  In 2007, ANATEL issued a new Universal Service Plan (PGMU)178, 
which replaced targets for the installation of pu blic telephones by targets for the expansion of 
broadband services.  The new PGMU established that by December 2010 operators have to 
collectively bring broadband Internet access to all Brazilian municipalities and some 3,000 other 
localities.  The Universal Telecommunications Services Fund (FUST) was established to complement 
universalization efforts;  FUST is funded, inter alia , by the federal budget and compulsory 
contributions by the operators.  The Fund reached so me R$6 billion (US$3.3 billion) at the beginning 
of 2008. 
185. A Telecommunications Technology Developmen t Fund (FUNTTEL) in place since 2000, is 
aimed at promoting research and development in the sector.  FUNTTEL totalled approximately 
US$27 million in May 2008 (see Chapter III(4)(iv)).179 
(iv) Air transport 
186. Brazil's commercial aviation industry continue d to face problems during the period under 
review.  Market concentration remains high, with  two companies controlling 92% of the domestic 
passenger market in 2007.  This may reflect in part  the requirement for domestic air transport to be 
provided only by companies managed by Brazilians and in which 80% of the voting rights are in 
Brazilian hands.  All major airports are owned an d operated by the State.  Moreover, in spite of 
revisions to make them more flexible, Brazil's bi lateral air agreements establish relatively strict 
conditions for the provision of services.  Thus, c onsumers might benefit from measures to foster 
greater competition and service quality, including re laxation of existing restrictions on foreign 
investment. 
(a) Main features 
187. During 2004-07, Brazil's regular domestic passenge r traffic grew by 53% (in terms of seats 
per km flown), boosted by strong economic growth.  Airport capacity also expanded, although at a 
slower pace than demand.  The air transport sector was seriously affected by air traffic accidents, repeated strike actions by air-traffic controllers, flight cancellations, and the replacement of aviation 
authorities.  On average in 2007, nearly 40% of domestic flights were delayed by 15 minutes or more 
(10% in 2006), and 37% of inte rnational flights provided by Brazilian airlines were delayed by 
30 minutes or more (11% in 2006).
180 
                                                      
175 ANATEL Resolution No. 460 of 19 March 2007. 
176 ANATEL Resolution No. 220 of 5 April 2000. 
177 Law No. 9,472 of 16 July 1997 (LGT). 
178 Decree No. 6,424 of 4 April 2008. 
179 BNDES online information.  Viewed at: h ttp://www.bndes.gov.br/empresa/fundos/funttel/ 
demonstracoes_contabeis.asp. 
180 Anac online information.  Viewed at:  http ://www.anac.gov.br/esta tistica/regpon2007.asp. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 132 
 
 
188. The bankruptcy of Varig, one of Brazil's major airlines, in 2006, contributed significantly to a 
drop of 31% between 2004 and 2007 in the volume of regular intern ational passenger traffic.  Varig's 
commercial passenger subsidiary was acquired by Go l Airlines, which, along with TAM, controlled 
92% of the domestic passenger market in 2007.  In the same year, approximately 71% of international 
passenger traffic was carried by foreign air lines and the remaining 29% by Brazilian airlines.181 
189. Just over 12.7% of Brazilian trad e, by value, was moved via ai r cargo in 2007.  Between 2004 
and 2007, international air cargo increased by 13 5% as measured by net weight of merchandise 
transported.182  Cargo terminals located in two airports in the metropolitan area of Sao Paulo are 
responsible for 70% of the country's total inte rnational cargo (by volume).  In 2007, foreign 
companies had 62% of the international air cargo market and Brazilian-based companies 38%;  the 
two leading Brazilian-based air cargo companies are partially owned by foreigners. 
190. There are 2,498 airports and airstrips in  Brazil, 1,759 private and 739 state-owned.183  The  
Brazilian Enterprise for Airport Infrastructure (IN FRAERO) is responsible for the operation and 
administration of the 67 largest airports that provide public services and 80 air navigation support 
stations.  In 2007, the airports managed by INFRAE RO accounted for 97% of regular air transport in 
Brazil, equivalent to 1.9 million take-offs and landings and the transportation of some 110 million 
passengers (54% increase over 2003) and 1.3 million tonnes of freight (up 8% over 2003).184  
191. INFRAERO is a private-law public enterprise subordi nated to the Ministry of Defence.  It is 
financed by the fees charged for its services.  The airports administered by INFRAERO are owned by 
the federal government solely or in associ ation with the states and municipalities. 
192. The Ministry of Defence is ultimately respons ible for the implementation of civil aviation 
policy.185  The Civil Aviation Council (CONAC), chaired by the Minister of Defence, is in charge of 
advising the President in matters of civil aviation policy formulation186;  it also establishes directives 
for Brazilian participation in international civ il aviation conventions, agreements, and treaties. 
193. In March 2006, the Civil Aviation Authority ( DAC) was replaced by the National Agency for 
Civil Aviation (Anac).187  Unlike the DAC, which was subordinate d to the Ministry of Defence, Anac 
is an independent body, which is pa rt of the organizational structure of the Ministry of Defence.  Anac 
has virtually the same responsibiliti es as the DAC: to regulate and supervise civil aviation activities, 
including granting airport concessions and airline op eration permissions and concessions.  Anac is 
also responsible for maintaining the Brazilian Aero nautic Registry (RAB), in which all Brazilian 
aircraft must be registered. 
(b) Legal framework 
194. Air transport services are regulated by th e Brazilian Aviation Code of 1986, as amended.188  
International air transport services are governed by 68 bilateral agreements and four memoranda of 
understanding signed by Brazil, of  which 49 are in force (end 2008).189  All bilateral agreements in 
                                                      
181 Anac (2007). 
182 MDIC online information.  Viewed at:  http://aliceweb.desenvolvimento.gov.br. 
183 Anac online information.  Viewed at:  ht tp://www.anac.gov.br/estatistica/estat27.asp. 
184 INFRAERO online information.  Viewed at:  http://www.infraero.gov.br/. 
185 See WTO (2005). 
186 Decree No. 3,564 of 17 August 2000. 
187 Law No. 11,182 of 27 September of 2005, and Decree No. 5,731 of 20 March 2006. 
188 Law No. 7,565 of 19 December 1986. 
189 Ministry of Foreign Relations online information.  Viewed at:  http://www2.mre.gov.br/dai/aereo. 
htm. Brazil WT/TPR/S/212/Rev.1 
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force establish third and fourth freedoms rights, a nd some grant, in addition, fifth and/or sixth 
freedom rights for passenger traffic.  None of the bilateral agreements signed or in force can be 
considered an open skies agreement.  However, the authorities note that the Government has been 
proposing more flexible agreements to its trad ing partners, particularly in South America. 
195. Brazil's 20 main bilateral agreements in terms of traffic (Table IV.5), covered 97.4% of 
Brazil's international passenger traffic in 2007.  Mo st of these agreements are with Latin American 
and European countries, and all require the air lines designated for the agreed services to be 
substantially owned and effectivel y controlled by nationals of the signatory countries, with the 
exception of some agreements with Member States of the EC, which have been updated recently in 
light of Commission Regulation EC 874/2004.  They all also include provisions on traffic volumes, 
frequency or recurrence of flights, and/or type of airplane that can be used.  None establish eight 
freedom (cabotage) rights. 
Table IV.5 
Traffic information and characteristics of Br azil's main air services agreements, end 2008 
Partner (entry into force) Traffic rights 
(freedoms) Prices Multiple 
designationa/ 
cooperationb Exchange of 
statisticsc 
Argentina (29.11.1966) 
(19.10.2006)e 1st – 6th Country of origin Yes/Yes Yes 
Bolivia (10.11.1978) 1st - 5thd Dual approval Yes/No No 
Canada (09.03.1990) 1st – 6th Dual approval Yes/Yes  Yes 
Chile (03.10.1952) 1st – 6th Dual approval Yes/Yes  Yes 
Colombia (02.07.1975) 1st - 5thd Dual approval Yes/Yes  Yes 
France (16.06.1967)/(13.03.2008)e 1st – 5th Country of origin Yes/Yes  Yes 
Germany (29.08.1957) 1st - 5th Dual approval Yes/Yes  Yes 
Italy (10.09.1952) 1st - 6thd Dual approval Yes/No  No 
Mexico (03.12.1970) 1st - 5thd Dual approval Yes/Yes  No 
Netherlands (12.12.1977) 1st - 5th Dual approval Yes/Yes  No 
Panama (25.05.07) 1st – 5th Country of origin Yes/Yes  Yes 
Paraguay (20.05.1954) 1st – 6th Country of origin Yes/Yes  Yes 
Peru (21.08.1957)/(Aug. 2008)e 1st – 6th Regional free 
pricing/country of origin Yes/Yes  No 
Portugal (04.07.1994)/(April 2006)e 1st - 5thd Dual approval Dual 
designation/Yes  Yes 
South Africa (27.08.2001)/ 
(Aug. 2008)e 1st - 6th Country of origin Yes/Yes Yes 
Spain (11.03.1954)/(13.07.2007)e 1st - 5th Country of origin Yes/Yes Yes 
Switzerland (15.02.1971)/ 
(June 2000)e 1st - 5thd Country of origin Yes/Yes Yes 
United Kingdom 
(31.10.1946)/(22.10.2008)e 1st - 6thd Country of origin Yes/Yes No   
United States (07.02.1992) 
(June 2008)e 1st - 5th Country of origin Yes/Yes  No 
Uruguay (29.02.1972) 
(18.09.2008)e 1st - 6th Regional free 
pricing/country of origin Yes/Yes Yes 
 
a Parties are allowed to grant authorization to mo re than one airline to exploit the rights agreed. 
b One parties' airlines may sign code-share  and other cooperation agreements with the other parties' airlines and with third 
countries' airlines. 
c The agreement contains a clause requiring the exchange of statistics between the authorities. 
d The 5th freedom is limited to certa in flights within the total capacity. 
e Agreement updated and signed. 
 
Source : WTO Secretariat, based on the Ministry of Foreign Affairs and Anac online information.  Viewed at:  
 http://www2.mre.gov.br/dai/aereo.h tm, and http:// www.anac.gov.br/. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 134 
 
 
196. In 2008, Brazil and the United States decide d to enhance their air services agreement, 
increasing by nearly 50% the number of passenger and freight flights and eliminating restrictions on 
the number of airlines that may fly the routes;  these new provisions will be  implemented gradually 
between July 2008 and October 2010.  Brazil is also  part of the Fortaleza Agreement (FA) on regional 
air transport services together with Argentina, Bo livia, Chile, Paraguay, Peru, and Uruguay;  the 
parties are trying to extend the agre ement to all South American countries.190  Only provisions of 
bilateral air services agreements between signatories of  the FA that are consistent with the FA may be 
applied.191 
197. Brazil has not scheduled any GATS specific commitments on air transport activities listed in 
the GATS Air Transport Annex.192  However, it scheduled specifi c commitments on auxiliary services 
to all modes of transport;  these include cargo handling and storage and warehousing services, for 
which Brazil committed to allow commercial presence without restrictions.193 
198. CONAC Resolution No. 007/2007 of 20 July 2007 sets out guidelines for the insertion of 
Brazilian aviation in international markets.194  It establishes that the expansion of air transport services 
should be achieved through new inte rnational air services agreements.  As in the previous regulation, 
the resolution classifies the international operation of Brazilian airlines as a strategic trade policy 
instrument, granting it the same fiscal and credit treatment as export activities, and hence eligibility 
for export financing and other schemes (see Chapter III(3)(iv)). 
199. Concessions to provide passenge r and merchandise transportation services within Brazil 
(cabotage) are granted only to companies with headquarters in Brazil, managed exclusively by 
Brazilians, and in which four fifths of voting righ ts are in Brazilian hands;  non-voting shares can be 
issued to a maximum of twice the number of voting shares.195 
200. CONAC Resolution No. 002/2003 of 30 October 2003 establishes guidelines for the 
economic regulation of regular air transport ser vices in the domestic market.  In 2007, CONAC 
revised the guidelines, instructing Anac to regul ate the provision of air transport public services.196 
201. Although seemingly not applied in practice, under Brazilian legislation, a fee equivalent to 
1% of domestic ticket sales proceeds of domestic ai rline companies must be allocated to airlines 
servicing unprofitable routes. 
202. During the review period, there were no changes to the regulation of domestic air fares, which 
continue to be freely determined by domestic air lines.  However, as a general rule, fares and their 
calculation methodology must be registered with An ac at most five days after the commencement of 
their application.  Anac calculates reference fare i ndices, based on the average operational costs of the 
Brazilian regular air transport indus try.  Passenger promotional fares below 35% of the reference fare 
must be registered with Anac at least five da ys before the commencement of their application.197 
                                                      
190 Ministry of Foreign Relations online information.  Viewed at:  http://www2.mre.gov.br/dai/ 
servaereos.htm. 
191 WTO document S/C/W/270/Add.2, 28 September 2007, p. 126. 
192 Computer reservation systems, selling and marketing of transport services, and aircraft repair and 
maintenance services. 
193 WTO document GATS/SC/13 of 15 April 1994. 
194 Replacing CONAC Resolution No. 004/2003. 
195 Articles No. 180 and 181 of Law No. 7,565 of 19 December 1986. 
196 CONAC Resolution No. 015/2007 of 20 July 2007. 
197 Ministerial Act DAC No. 447DGAC of 13 May 2004. Brazil WT/TPR/S/212/Rev.1 
 Page 135 
 
 
203. Under Law No. 10,744 of 9 October 2003, the Federal Government assumes civil 
responsibility for third-party liability in the case of a terrorist act or act of war against Brazilian 
registered aircraft operated by Brazilian public ai r transport companies, excluding air taxis, up to a 
limit of US$1 billion. 
204. The Brazilian Aeronautical Code stipulates that public airports must be built, maintained, and 
operated by the State;  by specialized companies of the federal administration or its subsidiaries;  through agreement with states and municipaliti es;  or through concession or authorization.
198  There 
are no legal restrictions for the participation of fo reign investors in Brazilian airports.  However, in 
practice, all large public airports are managed by INFRAERO.199  The authorities note that BNDES is 
carrying out studies on possible changes to the current airport management model. 
205. Anac is responsible for granting authorization to construct and opera te airports, and to 
provide auxiliary services.  Foreign airlines are auto matically authorized to provide auxiliary services 
to their own aircraft as long as Brazilian airlines receive reciprocal treatment in their home country.200  
Other operators, domestic or foreign, are required to  establish a company in Brazil in order to provide 
auxiliary services.201 
206. Domestic and foreign companies may provide aircraft maintenance services in Brazil.  
Companies require Brazilian maintenance-shop certifi cation, for which they must meet a number of 
requirements, as well as a Certification of Approval of the Company, issued by Anac.202  Brazilian 
airlines may also contract maintenance services abroad. 
207. The allocation of slots for regular domestic pass enger flights in public airports operating at 
the limit of their capacity is regulated by Anac Reso lution No. 2 of 3 July 2006.  The regulation aims 
to ensure that slots are also made available for new entrants, rather th an only airlines that historically 
operate in a particular airport.  All companies that obtain a concession from Anac to operate domestic 
passenger flights may apply for slots. 
208. Airport services such as take off, landing, and pa rking of airplanes, and storage of air cargo 
are subject to the Additional Airport Tax (ATAERO) , applied at a rate of 50% on service prices.203 
209. The Airspace Control Department (DECEA), subordinated to the Aeronautics Command and 
the Ministry of Defence, has a de jure  monopoly over navigation and air traffic control services. 
(v) Maritime transport and ports 
210. In principle, only Brazilian flag vessels ma y engage in cabotage activities or in the 
transportation of public entities' cargoes, of goods  benefiting from official fiscal or credit 
programmes, and of imports and e xports of crude oil and of derivatives produced in Brazil.  Brazilian 
flag vessels must be owned by Brazilian residents or  by firms established in Brazil.  Brazil requires 
reciprocity in international maritime transportati on services.  Brazil applies a tax, the AFRMM, on the 
cost of maritime freight;  the rate applied on inte rnational routes is 25% while that on cabotage is 
                                                      
198 Law No. 7,565 of 19 December 1986. 
199 INFRAERO does not have concessions to operate public airports, it does so via Ministerial Acts 
issued in the 1970s. 
200 Ministerial Act No. 467/GM5 of 3 June 1993. 
201 Ministerial Act DAC No. 382/DGAC of 28 April 2004 establishes detailed rules for the provision of 
auxiliary services. 
202 Ministerial Act DAC No. 142/DGAC of 9 April 1990, as amended. 
203 Law No. 7,920 of 12 D ecember 1989, and Law No. 6, 009 of 26 December 1973. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 136 
 
 
10%, with exports excluded from the tax.  The tax does not apply to operators from countries with 
which Brazil has agreements in this respect.  Pr oceeds from the AFRMM are used to finance the 
domestic shipbuilding industry;  the financing with these proceeds in some cases is subject to local 
content requirements.  Brazil collects a lighthou se fee (TUF) exclusively on foreign flag vessels. 
211. In 2007, Brazil's exports and imports of maritime transport services reached US$3.3 billion 
and US$5.6 billion.  Brazil's trade deficit in mariti me transport services increased considerably during 
the period under review, reflecting the increase in international trade. 
212. The Brazilian sea and support navigation fleet comprises some 1,100 vessels, with a total 
carriage capacity of 3.0 million deadweight tons (T PB).  Oil tankers, all owned by PETROBRAS, and 
bulk carriers represent only 10% of the vessels nu mber, but they account for 76.2% of the full 
capacity.204  As noted in Brazil's last Review, liberalizat ion of maritime transport in the 1990s resulted 
in a reduction in the cost of maritime freight, but al so in the shrinkage of the Brazilian merchant fleet.  
In 2008, there were 216 Brazilian shipping compani es authorized to provide maritime transport 
services.205  The companies were either Brazilian-owne d or foreign-owned established in Brazil. 
213. The National Waterways Transport Agency (ANTAQ), a public-law independent agency 
linked to the Ministry of Transport, is the regulat ory agency for maritime services in Brazil.  ANTAQ, 
created by Law No. 10,233 of 5 June 2001, regulates the Port Authority (SPO), the federal waterway 
infrastructure, private-use terminals, and shipping companies.206  ANTAQ establishes the rules for the 
use of shipping services, bestows grants for sh ipping companies, inspects shipping companies 
operating in Brazil, and authorizes contracts to charter foreign vessels, as well as government cargo 
transportation.  A recent study shows that th e performance of the firms regulated by ANTAQ, 
improved after the entity was established, in terms of efficiency and pricing.207 
214. Maritime and other types of water-borne tran sportation are regulated by Law No. 9,432 of 
8 January 1997 and Law No. 10,233, of 5 June 2001 .  Law No. 9,432/97 sets out the conditions under 
which foreign vessels may participate in mariti me and inland waterway transport of goods. 
215. Brazilian flag vessels must be owned by natural persons resident and domiciled in Brazil or 
by a Brazilian shipping company (EBN).  To receive authorization to operate as an EBN a firm must 
be established in Brazil, in accordance with Brazili an Law, and own at least one ship technically 
adequate for the trade envisaged.  There are no restri ctions on the national origin of the capital.  The 
ANTAQ is responsible for granting these authorizati ons.  The captain, the chief engineer, and two 
thirds of the crew of a Brazilian flag vessel, must  be Brazilian nationals;  where vessels carry a 
Special Brazilian Registry (REB), the captain and th e chief engineer must be Brazilian nationals.   
216. Under Law No. 7,652/88 Brazilian ships must be registered in the Registry of Maritime 
Property.  Brazilian flag vessels may also be register ed in the Special Brazilian Registry (REB);  this 
option is offered to EBNs that have ships under co nstruction in a shipyard established in Brazil, and 
opens the way for a number of benefits designe d to foster the development of the Brazilian 
shipbuilding industry (see below).  To operate in Brazil, a foreign non-vessel-operating common 
carrier (NVOCC, a transporter for small volumes for export), must name a Brazilian representative 
and register with the Merchant Marine Fund De partment of the Ministry of Transport.  
                                                      
204 ANTAQ (2007) . 
205 Some companies have authorization to provide more than one service.  ANTAQ online information. 
Viewed at:  http://www.antaq.gov.br/Port al/Frota/ConsultarEmpresaAutorizada.aspx. 
206 ANTAQ online information.  Viewed at:  http ://www.antaq.gov.br/Porta l/pdf/Palestras/Nov06The 
RegulatoryDutiesofANTAQ.pdf. 
207 Mendes De Paula (2007). Brazil WT/TPR/S/212/Rev.1 
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217. Multimodal transport is regulated by Law No. 9, 611/98.  There are no restrictions on the 
origin of capital for the establishment of a multimodal transport operator in Brazil. 
218. Article 178 of the Constitution requires reciprocity  of treatment in Brazilian international 
maritime transportation services, as specified in the international agreements signed by Brazil.  Brazil 
has bilateral agreements on cargo sharing or alloca tion preferences (including on government cargoes) 
with Argentina, Bulgaria, Chile, China, France, Germany, Poland, Portugal, Romania, Russia, and 
Uruguay.  With the exception of bilateral agreem ents and certain Brazilian-flag reservations for 
government-controlled cargoes, there are no in stitutional arrangements for cargo allocation.208  
Brazil's bilateral agreements generally grant natio nal treatment for ships from the other party with 
respect to port service prices and conditions. 
219. Cabotage activities are restricted to domestic fl ag vessels operated by a Brazilian national or 
an EBN, in accordance with Article 7 of Law 9,432/97.   Foreign vessels are only allowed to engage in 
cabotage, interior navigation, a nd navigation within ports when chartered by an EBN, for which 
authorization is required.  Authorizations may be granted if:  a Brazilian flag vessel of the required 
type is not available;  there is declared public inte rest;  or if the foreign vessel substitutes for one that 
is under construction in Brazil. 
220. Exports of crude oil produced in Brazil must be transported by Brazilian flag vessels.  
Equipment and parts for Brazilian military organizati ons, must be transported in Brazilian flag vessels 
operated by domestic shipping compan ies.  Public entities' cargoes,  and goods benefiting from official 
fiscal or credit programmes must also be transported in Brazilian flag vessels, subject to international 
agreements.  When no Brazilian vessel is available or  rates are not deemed reasonable, a waiver may 
be given for the use of a foreign vessel.  
221. Brazil applies a tax on the cost of maritime freight; the Additional Tax for the Renovation of 
the Merchant Marine (AFRMM), created by Decree-Law No. 2,404,  of 23 December 1987, and with 
its current legal basis in Law No. 10,893 of 13 July 2004.  The charge is 10% of the freight, for transport between Brazilian ports;  25% for long- distance navigation (international routes) by both 
Brazilian and foreign carriers;  and 40% for inla nd waterway transportation of liquid bulk cargoes 
within the north and north-east regions of Brazil.  The AFRMM is not levied on cargoes in transit nor 
on exports.  It does not apply to countries with which Brazil has ne gotiated a specific clause in the 
LAIA Economic Complementary Agreements. 
222. Proceeds from the AFRMM are deposted in the Merchant Marine Fund (FMM), to be used to 
finance ship construction, repair or improvement activities in Brazil, as well as shipyards and facilities 
established or to be established in the country.  Th e funds are managed by the BNDES, on behalf of 
the FMM and the Ministry of Transport.  Credits are granted at preferential conditions, at the TJLP 
rate plus 1% to 6.25%, and amor tization periods of between 2 and 20 years.  Certain benefits granted 
to EBNs purchasing equipment or installations are subject to local-content requirements. 
223. The domestic shipping industry also benefits from other incentives.  Under Provisional 
Measure No. 2,158-35 of 24 August 2001, EBNs ' Freight receipts from the international 
transportation of merchandise in ships registered in the REB are exempt from the PIS and COFINS taxes.  The construction, maintenance, repair, and modernization of REB-registered ships in Brazilian 
shipyards benefit from the same fi scal treatment granted to exports  of industrial goods in general 
(e.g. reimbursement of domestic indirect taxes). 
                                                     
 
208 GATT document S/NGMTS/W/2, 21 October 1994. WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 138 
 
 
224. Brazil is a signatory of, but not a party to, the UN Convention on a Code of Conduct on Liner 
Conferences.209  It has ratified a number of conve ntions through the International Maritime 
Organization (IMO), including the Safety of Life at Sea 1974, Loadlines Convention 1996 (LL 96), Prevention of Pollution by Ships (MARPOL 73/78) , Civil Liability Convention and its protocols 
(1969, CLC 69), other International Regulations for Preventing Collisions at Sea (COLREG 1972), 
Convention on Facilitation of Maritime Traffic (FAL ), and Convention on the Prevention of Marine 
Pollution by Dumping of Wastes and other Matter (LC 72).
210 
225. Brazil has an agreement with Argentina and Urugua y to facilitate cargo transportation.  It also 
has a Multilateral Agreement for Inland Waterway Tran sportation in the Paraguay-Parana Rivers with 
Argentina, Bolivia, Paraguay, and Uruguay. 
Ports 
226. There are 34 public ports in Brazil;  the busiest in terms of cargo are:  Tubarão (Espírito 
Santo), Itaquí (Maranhão), Santos (São Paulo), a nd Itaguaí (Rio de Janeiro), which account for over 
56% of total cargo movements in Brazilian ports.  Of the 34 public ports, 12 are under public 
enterprise control, 1 under private enterprise contro l, 15 are managed by states, and 5 are managed by 
municipalities.  There are also 134 private-use terminals. 
227. Port cargo movement has continued to intensif y, along with Brazil's increasing participation 
in international trade, growing by an average annual rate of 7.2% betw een 2003 and 2007;  the 
volume of cargo moved through Brazilian ports rose from 529 million tonnes in 2002 to 755 million 
tonnes in 2007.211  Private-use terminals accounted for some two thirds of cargo movements and 
seven products accounted for two thirds of all cargo  moved:  iron ore (35.4%), petroleum (11.2%), 
petroleum products (5.8%), soy (4.3%), bauxite (3 .9%), fertilizers (2.4%), and sugar (2.1%).  Long-
haul transportation represented 74% of ca rgo movement from public ports in 2007. 
228. The Port Management and Performance Administration (GDP), part of the SPO, has 
developed a Port Performance System (SDP), intended  to provide a database and information to serve 
as reference for computing, operating and prices i ndexes, and to help asses the performance of the 
ports.  As a result, the SPO analysed prices for movi ng containers in ten diffe rent ports, and found that 
they varied considerably in 2005, from R$184.37 (US$10)  per container in the Port of Natal to almost 
R$500(US$278) in Port of Vila do Conde in Pará. 
229. Port activities are regulated by Law No. 8,630 of 25 February 1993 (Port Modernization 
Law), which provides for a decentralized system of port administration, with ports operating under 
federal, state, municipal, and private administrati on, and allows the granting of concessions, including 
to foreign service providers.  The Port Authorit y Council (CAP) regulates port operations together 
with the various port authorities, and participates in the determination of port service prices.  Firms supplying auxiliary port services (container and depot services, maritime agencies, forwarding services, cargo handling, storage and warehousing, cu stoms clearance, and vessel maintenance) must 
be established as legal entities in Brazil.  Fore ign capital may participate and receives national 
treatment in the provision of these services.  Similarly, port services are available on a non-discriminatory basis. 
                                                     
 
209 UN online information.  Viewed at:  http://unt reaty.un.org/ENGLISH/bib le/englishinternetbible/ 
partI/chapterXII/treaty15.asp. 
210 See CCA-IMO online information.  Vi ewed at:  www.ccaimo.mar.mil.br. 
211 ANTAQ online information.  Viewed at:  http:// www.antaq.gov.br/Portal/estatisticasanuario.asp#. Brazil WT/TPR/S/212/Rev.1 
 Page 139 
 
 
230. Brazil applies a lighthouse fee (TUF), establishe d by Decree-Law No. 1,023/69, and regulated 
by Decree No. 70,198 of 24 February 1972 and Decr ee No. 878 of 22 July 1993.  The TUF is applied 
only to foreign flag vessels, each time a foreign ship  uses a port in a different Brazilian state.  The fee 
is increased by 50% for ships over 50,000 tonnes, and by 100% for ships over 100,000 tonnes. 
231. Since 2004, Brazil has been implementing federa l security measures policy in Brazilian ports 
and terminals to comply with the IMO's Interna tional Ship and Port Facility Security Code (ISPS 
Code), which contains detailed security-related requi rements for Governments, port authorities, and 
shipping companies.  The authorities indicate that  226 ports have been certified under the ISPS code, 
and more than 600 persons have been qua lified as supervisors (as at November 2008). 
(vi) Professional services 
232. The practice of professions in Brazil is regulated  at the federal level.  Professionals with 
foreign qualifications must request revalidation of  their degree from a recognized university.  In 
addition, registration in professional associations is mandatory fo r provision of certain services, such 
as legal, accounting, architectural, and engineering.  No professions are reserved for nationals but the practice of the legal and other professions requires r esidence in Brazil, as part of the requirements of 
the immigration laws.  Foreign lawyers may establis h a consultancy in foreign law in Brazil but only 
if their country of origin offers reciprocity for Brazilians.  In architecture and engineering, 
commercial presence depends on foreign service supp liers joining Brazilian service suppliers, who 
should take the burden of civil liability. 
(a) General features 
233. Brazil's exports of professional and business se rvices totalled US$10.1 billion in 2007, while 
imports were US$3.8 billion.
212 
234. In accordance with Article 22 of the Constitu tion, the Union has the exclusive power to 
legislate on the practice of professions.  Registration on federal or regional coun cils is mandatory for 
some professions.  No professions are reserved for nationals, but foreigners must meet certain requirements established by law to exercise in Brazil. 
235. The National Education Council, through Reso lution No. 8 of 4 October 2007, regulates the 
recognition and validation of diplomas, titles, an d certificates issued by schools or educational 
institutions outside Brazil.  The Council is respons ible for issuing and implementing Resolutions and 
Directives governing the educational system in Brazil. 
236. MERCOSUR Decision No. 25/2003, which establi shed a general regulatory framework to 
engage in mutual career recognition,  is being implemented gradually. 
237. Professionals with foreign qualification must requ est revalidation of their title by a university, 
by producing an official copy of the original doc ument, accompanied by a transcript.  The degree is 
assessed by a commission of specialists from the uni versity.  Article 207 of the Constitution grants 
universities recognized by the Ministry of Edu cation, complete autonomy in the assessment and 
validation of foreign degrees.   
                                                     
 
212 Central Bank of Brazil (2008i). WT/TPR/S/212/Rev.1 Trade Policy Review 
Page 140 
 
 
(b) Legal services 
238. The exercise of the legal profession in Brazil is  regulated by Law No. 8,906 of 1994.  The 
Brazilian Bar Association (OAB), an autonomous no n-governmental institution, regulates and sets the 
standards of conduct for the lega l profession at the federal level.213  The OAB has 27 sectional 
councils headquartered in each capital of the Braz ilian federative units.  The Federal Council of the 
Brazilian Bar Association, a federation of the sec tional councils, is empowered to create rules, 
regulations, and codes of conduct for the legal profes sion.  Some 610,000 lawyers are registered with 
the OAB (August 2008). 
239. Foreign lawyers require accreditation, revalid ation of professional title, and registration in 
Brazil, except for consultants on foreign law.  Under Law No. 8,906 of 1994 only lawyers registered 
at the OAB may receive the title of attorney and exer cise the profession of attorney in Brazil.  Practice 
as a legal professional also requires residence in Brazil as part of immigration requirements.  This applies to Brazilians and foreigners  who have qualified outside of Br azil and wish to practice law in 
Brazil.  Qualification to practice law in Brazil is es sentially a two-tier process:  first, applicants must 
apply to have their degrees revalidated and pass the Bar exam;  second, they must register with the 
OAB.  An attorney's main registration must be at  the Sectional Council in the territory where they 
intend to establish professional domicile. 
240. Provision No. 91 of 13 March 2000 (Provision No. 91/2000) allows a foreign lawyer who is 
allowed to practise in his/her country of origin to establish a consultancy or a consultant partnership in 
foreign law in Brazil to the domestically established firm.
214  OAB authorization and registration are 
required and are granted for rene wable periods of three years.  Under Provision No. 91/2000, the 
applicant must show proof of residency in Brazil, a licence to practise law, an effective admission to 
the Bar in the country of qualification, proof of good conduct including an affidavit by three OAB-
registered Brazilian lawyers, and proof that there is an instrument for reciprocity for Brazilian 
attorneys wishing to practise law in the applicant's country of origin.215  The Provision forbids the 
offering of consultancy services or counselling in Braz ilian Law and the exercise of the function of an 
attorney-at-law. 
241. Provision No. 99 of 2002 created a Registry for Fo reign Law Consultants.  Consultancy firms 
providing foreign-law services must be constituted a nd registered in Brazil with the sole purpose of 
providing this type of services, and all its lawyers mu st be authorized by the OAB to provide foreign-
law consultancy services. 
(c) Accounting and auditing services 
242. The Federal Accounting Council (CFC) regulates the accountancy profession in Brazil.  The 
CFC is responsible for issuing the Directives that govern the profession as well as for overseeing 
professional conduct.  The CFC, created by Decr ee-Law No. 9,295 of 27 May 1946 and regulated by 
Resolution CFC No. 960/03, of 6 May 2003, is a pr ivate law institution providing a public service.216  
The Regional Accounting Councils (CRCs), subor dinate to the CFC, are responsible for 
                                                      
213 Brazilian Bar Association (OAB) online informa tion.  Viewed at:  http://www.oab.org.br. 
214 For the text of the provision see OAB online in formation.  Viewed at:  http://www.oab.org.br. 
215 OAB online information.  Viewed at:  http ://www.oab.org.br/ari/files/Provimento91-2000.pdf. 
216 Federal Accounting Council online informati on.  Viewed at:  http://www.cfc.org.br/. Brazil WT/TPR/S/212/Rev.1 
 Page 141 
 
 
administration of the CFC Directiv es, as well as for the regist ration of accountants and general 
supervision of the profession.217 
243. Brazil participated in the preparation of guide lines for mutual recognition agreements in the 
accountancy sector in the WTO Working Party on  Professional Services and submitted responses to 
the questionnaire on this sector.218 
244. Brazilian law recognizes two kinds of accounti ng professionals:  accountants, who require 
university study;  and accounting technicians.219  In accordance with Resolution CFC No. 496 of 
5 October 1979, the relevant diploma must be register ed with the CRC.  This applies to nationals and 
foreigners.220  Auditors wishing to act in the area of secu rities must also register at the Securities 
Exchange Commission, either as independent a uditors/natural persons, or as independent 
auditors/juridical persons, in accordance with La w No. 6,385/76.  There are 207,000 registered 
accountants in Brazil (June 2008) , 192,000 accounting technicians,  and 67,000 accounting firms.221 
(d) Architectural and engineering services 
245. Law No. 5,194/66 and Law No. 6, 496/77, and Resolution 1,010/05 regulate the professions of 
architect and engineer.  The Federal Council of Engineering, Architecture and Agronomy (CONFEA) 
regulates and oversees the exercise of these professions.  Architects and engineers must be registered 
with CONFEA;  as at August 2008, some 900,000 were registered.222  For registration, a recognized 
professional title is required;  in the case of fo reign titles, professional must undergo the validation 
process described in section (a) above.  Law No. 5,194/66 does not specify any areas that are limited for the exercise of foreign or foreign-trade prof essionals.  However, commercial presence depends on 
foreign service suppliers joining Brazilian service suppliers in a specific type of legal entity 
(consórcio ), where the Brazilian takes the burden of civ il liability.  Foreign architects and engineers 
may work in Brazil only after proving that there are no Brazilian professionals capable of carrying out 
the work. 
246. Under the CONFEA there is a regional council (CREA) in each state, in charge of overseeing 
the exercise of the professions and the implementati on of CONFEA regulations in its jurisdiction.  
Professionals must be registered in the CREA of the state in which they exercise their profession. 
                                                     
 
217 University of São Paulo's Technology and Information Systems Laboratory online information.  
Viewed at:  http://w ww.tecsi.fea.usp.br. 
218 WTO document S/WPPS/W/7/ Add.22, 5 November 1996. 
219 WTO document S/WPPS/W/7/ Add.22, 5 November 1996. 
220 Federal Accounting Council online information.  Viewed at:  http://www.cfc.org.br/exame/ 
detalhes.asp?cod=1013. 
221 CFC online information.  Viewed at:  ht tp://www.cfc.org.br/uparq/Ativos_200806.pdf. 
222 CONFEA online information.  Viewed at:  h ttp://www.confea.org.br/publique/cgi/cgilua.exe/ 
sys/start.htm?sid=140&pai=4&sub=21. Brazil WT/TPR/S/212/Rev.1 
 Page 143 
 
 
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Anac (2007), Anuario Estatistico do Transporte Aéreo .  Viewed at:  http://www.anac.gov.br/e 
statistica/estatisticas1.asp.  
ANATEL (2006), Relatório Anual .  Viewed at:  http://www.anat el.gov.br/hotsites/relatorio_ 
anual_2006/cap_02.htm.  ANTAQ (2007 ), Waterway Prospect , Volume 1 – Jan/2007.  Viewed at:  http://www.antaq.gov.br/ 
Portal/Pdf/PanoramaAquaviario1Ing.pdf. 
 
BNDES (2006), Fundo de Garantia para  a Promoção da Competitividade.  Prestação de Contas 2006 .  
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CADE (2006a), Annual Report on Competition Policy .  Viewed at:  http://www.cade.gov.br. 
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CADE (2007), Annual Report on Competition Policy - 2006 .  Viewed at:  http://www.cade.gov.br. 
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C3%AAnciaP%C3%BAblicaConverg%C 3%AAnciaTecnol%C3%B3gica.pdf. 
 
Central Bank of Brazil (2004), Economia Bancária e Crédito 2003 – Avaliação de 4 anos do projeto.  
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 Central Bank of Brazil (2007), Financial Stability Report - November, Vol. 6 - N. 2.  Viewed at:  
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