WORLD TRADE  
ORGANIZATION  G/SCM/N/123/BRA 
20 October 2005 
 (05-4818) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
  
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI:1 of  
the GATT 1994 and Article 25 of the Agreement  
on Subsidies and Countervailing Measures  
 
BRAZIL 
  
 The following communication, dated 18 October 2005, is being circulated at the request of 
the Delegation of Brazil. 
_______________ 
 
 
 The following notification provides details  on federal programmes for fiscal years of 
2003/2004. 
  This notification does not prejudge the nature  of the programmes herein with respect to 
Articles 1 and 2 of the Agreement on Subsidies.  Data may reflect approximations, estimates, or 
preliminary information.  Technical or legal inaccu racies may have been inadvertently introduced in 
the text given the attempt to make the description of the programmes sufficiently illustrative, but also 
straightforward and concise.  This notification ma y be supplemented, in due time, to incorporate 
further elements or clarifications. G/SCM/N/123/BRA 
Page 2  
 
 TABLE OF CONTENTS 
  I. INDUSTRIAL PROGRAMMES...............................................................................................3  
• CAPACITY-BUILDING AND COMPETITIVITY OF  
INFORMATICS AND AUTOMATION SECTORS ...............................................................3  
• INDUSTRIAL TECHNOLOGY DE VELOPMENT PROGRAMME...................................4 
 
II. REGIONAL INCENTIVES.......................................................................................................5  
 
• ADA AND ADENE (FORMER SUDAM AND SUDENE) .....................................................5 
 
• FINAM/FINOR.................................................................................................................... .......7 
 
• FNE/FNO/FCO .................................................................................................................... .......9 
   
 
   G/SCM/N/123/BRA 
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 I. INDUSTRIAL PROGRAMMES 
 
• CAPACITY-BUILDING AND COMPETITIVITY OF INFORMATICS AND 
AUTOMATION SECTORS 
 1.  Title of the subsidy programme if relevant or brief description or subsidy identification: 
 
 Capacity-building and competitivity of  informatics and automation sectors. 
 
2. Period covered by the notification:  
 
 From January 2002 to December 2004 
 
3. Policy objective and/or purpose of subsidy: 
 
 To encourage enterprises that make informati cs and automation goods to invest in Research 
and Development activities, create new products  and improve the country’s competitiveness. 
 
4. Subsidy background and authority (including identification of the legislation under 
which it is granted): 
 
 Law 8248/91, firstly modified by Law 10176/01 and more recently modified by Law 11077/04. 
 
 The Ministry of Science and Technology, the Mi nistry of Development, Industry and Foreign 
Commerce and the Ministry of Economy themselves, observing their respective areas of responsibility, manage the provision of benefits such  as partial tax exemption and the follow-up of the 
execution of research and development programmes carried out as counterparts. 
 
5.  Form of subsidy (i.e. grant, loan, concession): 
 
 Partial exemption of the Tax on Industriali zed Products (IPI) for informatics and automation 
goods.  Partial exemption of IPI for raw material s, intermediate goods and material from used 
packages. 
 
 As a condition for eligibility, enterprises must i nvest 5% of their royalties into research and 
development activities.  
6. To whom and how the subsidy is provide d (whether to producers, to exporters, or 
others; through what mechanisms:  whether a fixed or fluctuating amount per unit; if 
the latter, how determined): 
 
- Industrial enterprises, through credit provided by  the Federal Government at the amount of 
due deductive taxes. 
 
- Research Institutes, Centers and Laboratori es, through financial support from industrial 
enterprises which chose to outsource th e execution of their R&D projects. 
 
7. Subsidy per unit in cases where this is no t possible, the total amount at the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per unit subsidy information (for the year G/SCM/N/123/BRA 
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 covered by the notification, for the previous  year, or both) is not possible, a full 
explanation: 
 
 2002 – R$ 747 million;  2003 – R$ 962 million; 
 2004 – R$ 957 million (estimate). 
 
8. Duration of subsidy and/or any other time  limits attached to it, including date of 
inception/commencement: 
 
 Beginning in 2005, subsidies will be progressively  diminished, in order to be phased out by 
the year 2019.  
9. Statistical data permitting as assessment of the trade effects of the subsidy.  The specific 
and scope of such statistics is left to the judgment of the notifying Member.  To the 
extent possible, relevant and/or determinable, however, it is desirable that such 
information includes statistics of production , consumption, imports and exports of the 
subsidized product (s) or sector (s): 
 
 N. A. 
 
 
• INDUSTRIAL TECHNOLOGY DEVELOPMENT PROGRAMME 
 
1. Title of the subsidy programme if relevant or brief description or subsidy identification: 
 
 Industrial Technology Development Programme  (PDTI) and Agriculture/Cattle Breeding 
Technology Development Programme (PDTA).  The obj ective is to provide incentive for research and 
development in those areas. 
 
2. Period covered by the notification: 
 
 From January 2003 to December 2004 
 3. Policy objective and/or purpose of subsidy: 
 
 To foster technological improvement for industrial and agricultural/cattle breeding 
enterprises, through research and development initia tives, in order to create projects processes or 
improving existing projects, as well as promoting industr ial and agricultural training.  It also includes 
the building up of partnership between research cen ters and universities, institutes and enterprises 
managed by the enterprises thought a permanen t infrastructure of technological management. 
 
4. Subsidy background and authority (including identification of the legislation under 
which it is granted): 
  The Programme was established by Law Nº 8.66 1, of 2 June 1993, regulated by Decree 949, 
of 5 October 1993.  The Ministry of Science and Technology is responsible for the incentive 
administration.   In 1997 benefits granted to Brazilian enterp rises research and development programmes were 
reduced by Law 9532, of 10 December 1997, resu lting the enterprises slowdown in research and 
development programmes.  G/SCM/N/123/BRA 
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5.  Form of subsidy (i.e. grant, loan, concession): 
 
 Deductions of income tax due on the sum of  the expenses in technological research and 
development activities and of IPI (Tax on Industria lized Products) due on equipment, machinery and 
devices directly allocated to research and technological development and also on instruments, 
accessories and tools associated with those goods. 
 
6. To whom and how the subsidy is provide d (whether to producers, to exporters, or 
others; through what mechanisms: whether a fixed or fluctuating amount per unit; if 
the latter, how determined): 
 
 The beneficiaries are industrial and agricultural/cattle breeding enterprises.  The amount of the subsidy is contingent upon the value of the e xpenses on research and development.  For instance, 
the amount of IPI tax break depends on the value of machinery and equipment acquired for research 
and development purposes. 
 
7. Subsidy per unit in cases where this is no t possible, the total amount at the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per unit subsidy information (for the year covered by the notification, for the previous  year, or both) is not possible, a full 
explanation: 
 
 Total subsidization under PDTA/PDTI´s amount ed R$ 20 million (previously estimated at 
R$ 88 million), in 2002, R$ 7,9 million, in 20 03, and R$ 7,4 million, until June 2004.   
 
8. Duration of subsidy and/or any other time  limits attached to it, including date of 
inception/commencement: 
 
 The programme was stated by Decree 949, of 5 October 1993.  It does not have a pre-established time limit.  Subsidies will solely benefit enterprises that are engage d in a PDTI or a PDTA 
project.  The maximum time for executing a project is five years.   9. Statistical data permitting as assessment of the trade effects of the subsidy.  The specific 
and scope of such statistics is left to the judgment of the notifying Member.  To the 
extent possible, relevant and/or determinable, however, it is desirable that such information includes statistics of production , consumption, imports and exports of the 
subsidized product (s) or sector (s): 
 
 N. A.   
II. REGIONAL INCENTIVES 
 
• ADA AND ADENE (FORMER SUDAM AND SUDENE) 
 
 “Superintendência para o Desenvolvimento da Amazônia” (SUDAM),  the Amazon Region 
Development Authority, was establ ished by Law 5174, dated 27 Octobe r 1966.  “Superint endência para 
o Desenvolvimento do Nordeste” (SUDENE), the Northeast Region Development Authority, was 
established by Law 3692, dated 15 Dece mber 1959.  Provisi onal Measures 2156-5 and 2157-5, of 
August 2001, extinguished SUDAM and SUDENE and the programmes they administered.  However, 
contractual obligations incurred prior to those me asures will be upheld and disbursements be made G/SCM/N/123/BRA 
Page 6  
 
 until 2013 by the development agencies which re placed both SUDAM and SUDENE (“Agência do 
Desenvolvimento da Amazônia – ADA”  and “Agência de Desenvolvi mento do Nordeste – ADENE”). 
 
1. Title of the subsidy
1 programme if relevant or  brief description or identification of the 
subsidy: 
 
 Former SUDAM and SUDENE  programmes provide assist ance to the economically 
disadvantaged Amazon and Northeast Re gions by means of tax breaks.   
 
2. Period covered by the notification: 
 
 January 2003 to December 2004. 
 
3.   Policy objective and/or purpose of the subsidy: 
 
 To reduce economic and social imbalances among the Brazilian regions by means of compensatory mechanisms for the development of the North and Northeast Regions. 
  The area covered by SUDAM/ADA is denominat ed Legal Amazonia, or the Amazon Region, 
and encompasses the States of Acre, Amapá, Am azonas, Mato Grosso, Pará, Rondônia, Roraima, 
Tocantins and part of Maranhão.  The Amazon Region is an area of continental dimensions covering 
5,046,143 square kilometers and corresponding to 59 per cent of the nation’s territory and 
approximately 70 per cent of the so-called Pa n-Amazon or Continental Amazon, which has a 
population of approximately 22 million inhabitants heavily concentrated in urban areas and scattered 
widely across a vast rural area.  The jurisdiction of  SUDENE/ADENE encompasses the federal states of Maranhão, Piauí, Ceará, Rio Gr ande do Norte, Paraíba, Pernambuco,  Alagoas, Sergipe and Bahia, in 
addition to an area of the State of  Minas Gerais included in the so -called “polígono das secas” (drought 
area in Northeastern Brazil).  
 
4. Background and authority for the subsidy (including identification of the legislation 
under which it is granted): 
 
 Programmes, formerly ad ministered by SUDAM and SUDENE, are now under the 
responsibility of the Mini stry if National Integration until they completely phase-out.  Law 9532/97 has 
regulated the tax exemptions and reductions.  Provisional Measure 2 199/01 is the most recent regulation 
on the matter.  
5.  Form of the subsidy (i.e . grant. loan. tax concession): 
 
 Income tax exemptions and reductions.   
                                                     
 
 1 The Constitution of Brazil, in its article 3, item III of Ti tle I, regarding the Fundamental Principles, considers that 
"the fundamental objectives of the Federative Republic of Braz il are to eradicate poverty and substandard living conditions 
and to reduce social and regional inequal ities". In Section IV (article 43, paragr aph 2, item III) of Chapter VII, Title III, 
which refers to the Organization of the State considers that  "the regional incentives shal l include, besides others, as 
prescribed by law, exemptions, reductions or temporary deferment of federal taxes ow ed by individuals or by legal entities". 
In article 151, item  I, Section II of Title VI, regard ing Taxation and Budget considers that "it is forbidden for the Union: to  
institute a tribute which is not uniform throughout the entire na tional territory (...), it being allowed to grant tax incentiv es 
for the purposes of promoting the balanced social and economic  development of the various regions of the country".  In 
article 165, paragraphs 6 and 7, Section II of Chapter II, Public Finances, of the pr evious Title, consid ers that "the budget b ill 
shall be accompanied by a regionalized statement on the effect on revenues and expens es, deriving from exemptions, 
amnesties, remissions, subsidies and benefits  of a financial, tributary and credit nature (§ 6).  The budget set forth (...) in  
consistence with the pluriannual plan, shall include the f unctions of reducing interregional inequalities, according to 
population criteria (§ 7).   G/SCM/N/123/BRA 
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 6. To whom and how the subsidy is provide d (whether to producers, to exporters, or 
others:  through what mechanisms:  whether a fixed or fluctuating amount per unit:  if the latter, how determined): 
 
 Beneficiaries are industrial and agricultural enterprises with undertakings in the Amazon or 
Northeast Regions. 
 
7.  Subsidy per unit, or in cases where this is  not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per unit subsidy information (for the year 
covered by the notification, for the previous  year, or both) is not possible, a full 
explanation: 
 
Tax Exemption/Reduction (R$ thousand) 
 
YEAR SUDAM SUDENE 
2003 801.953 841.936 
2004 417.702 522.263 
Source: National Treasury Secretariat 
 
8.  Duration of the subsidy and/or any other time limits attached to it, including data of 
inception/ commencement: 
  As of 2003, credit terms of subsidies gran ted by former SUDAM and SUDENE will be 
adjusted to comply with the deadline of December 2013 established by law.  
 
9. Statistical data permitting an assessment of the trade effects of the subsidy.  The specific 
and scope of such statistics is left to the judgment of the notifying Member.  To the 
extent possible, relevant an/or determinable , however, it is desirable that such 
information include statistics of production , consumption, imports and exports of the 
subsidized product (s) or sector (s): 
 
 Not available.  
 
• FINAM/FINOR 
 
1.  Title of the subsidy programme if relevant or brief description or identification of the 
subsidy: 
  “Fundo de Investimento da Amazônia”  (FINAM) and “Fundo de Investimento do Nordeste” 
(FINOR) - Financial support for the devel opment of the Amazon and Northeast Regions. 
 
2.  Period covered by the notification: 
 
 January 2003 to December 2004 
 
3.  Policy objective and/or purpose of the subsidy: 
 
 To reduce economic and social imbalances among the Brazilian regions by means of 
compensatory mechanisms for the development of the North and Northeast Regions.  G/SCM/N/123/BRA 
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 4.  Background and authority for the subsidy (including identification of the legislation 
under which it is granted): 
 
 The Secretariat of Federal Revenue and the Na tional Treasury Secretariat of the Ministry of 
Finance are charged with the funding mechanisms of resources of FINAM and FINOR. Programmes 
previously administered by SUDA M and SUDENE are now under the res ponsibility of the Ministry of 
National Integration - MI.    Banco da Amazônia (BASA) and Banco do Nord este do Brasil (BNB) are the financial agents 
of FINAM and FINOR.  
 
 The main legislation is the following: Laws 8167, dated 16 January 1991; 9532, dated 
10 December 1997, and 9808, dated 20 July 1999.  
5.  Form of the subsidy (i.e . grant. loan. tax concession): 
 
 Risk capital investments through pr imary subscription of debentures convertible into stock, at 
a ratio of 70 per cent in convertible debentures and 30 per cent in nonconvertible debentures.  In 2000, 
Provisional Measure 2058 extinguishe d nonconvertible debentures. 
 
6.  To whom and how the subsidy is provi ded (whether to producers, to exporters, or 
others:  through what mechanisms:  whether a fixed or fluctuating amount per unit:  if 
the latter, how determined): 
 
 The beneficiaries are legal entities that receive  incentives to implement a project considered 
to be relevant to the region.  The project, in  order to be implemented with FINAM and FINOR 
financial assistance, should involve activiti es that foster regional development. 
 
7.  Subsidy per unit, or in cases where this is  not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per unit subsidy information (for the year covered by the notification, for the previous  year, or both) is not possible, a full 
explanation: 
 
FINOR/FINAM – Fiscal benefits (in lending) 
(R$ thousand) 
 
Year 
Funds 2003 2004 
FINAM 0 0 
FINOR 190.000 0 
Source: National Treasury Secretariat 
 
8. Duration of the subsidy and/or any other time limits attached to it, including data of 
inception/ commencement: 
 
 Expiration is scheduled for December 2013 (Law 9532/97).  
 
9.  Statistical data permitting an assessment of the trade effects of the subsidy.  The specific 
and scope of such statistics is left to the judgment of the notifying Member.  To the 
extent possible, relevant an/or determinable , however, it is desirable that such  G/SCM/N/123/BRA 
 Page 9 
 
 
 information include statistics of production , consumption, imports and exports of the 
subsidized product (s) or sector (s): 
 
 Not available.  
 
• FNE/FNO/FCO 
 
 Constitutional Funds for the Financing of the Northeast, the North and the Midwest Regions 
 
1.  Title of the subsidy programme if relevant or brief description or identification of the 
subsidy: 
 
 “Fundos Constitucionais de Financiamento do Nordeste, do Norte e do Centro-Oeste” 
(FNE/FNO/FCO):  Constitutional Funds for the Financing of the North, Northeast and Midwest Regions.  2. Period covered by the notification: 
 
 January 2003 to December 2004.  
3.   Policy objective and/or purpose of the subsidy: 
   To reduce economic and social imbalances among the Brazilian regions by means of 
compensatory mechanisms for the development of  the North, Northeast and Midwest Regions. 
 
4.  Background and authority for the subsidy (including identification of the legislation 
under which it is granted): 
  The Ministry of National Integration and the Deliberative Council of the Development 
Authorities of the North, Northeast Regions a nd the Deliberative Council of the Central-West 
Constitutional Financing Fund are the authorities.    The relevant legislation is the following  (art. 14 of Law 7827/89, as amended by Law 10177, 
dated 12 January 2001).  
  Banco da Amazônia S.A. (BASA), Banco do Nordeste do Brasil S.A (BNB) and Banco do 
Brasil S.A. are the financial agents of the Funds.  
5.  Form of the subsidy (i.e . grant. loan. tax concession): 
 
 Loans.  
6. To whom and how the subsidy is provided (whe ther to producers, to exporters, or others; 
through what mechanisms;  whether a fixed or fluctuating amount per unit;  if the latter, 
how determined): 
 
 According to the terms of art. 4 of Law 7,827 of 27 September 1989, as amended  by Law nº 10,177 of 12 January 2001, the beneficiaries of loans backed by Constitutional Fund resources are 
producers and companies, whether individual pe rsons or legal entities, as well as production 
cooperatives, that carry out productive activities in the crop/livestock, mineral, industrial and agro-G/SCM/N/123/BRA 
Page 10  
 
 industrial, tourism, infra-structure, commerce and ser vice sectors of the North, Northeast and Central-
West Regions.  
7. Subsidy per unit, or in cases where this is not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per unit subsidy information (for the year 
covered by the notification, for the previous  year, or both) is not possible, a full 
explanation: 
 
Contracted loans 
(R$ thousand) 
 
Year 
Funds 2003 2004 
FCO 919.815 1.172.084 
FNE 1.019.173 3.208.939 
FNO 1.075.125 1.321.092 
Source: Ministry of National Integration 
 
8.  Duration of the subsidy and/or any other time limits attached to it, including data of 
inception/ commencement: 
 
 Loans backed by Constitutional Financi ng Fund resources have been granted since 
September 1989. 
 
9. Statistical data permitting an assessment of the trade effects of the subsidy.  The specific 
and scope of such statistics is left to the judgment of the notifying Member.  To the 
extent possible, relevant an/or determinable , however, it is desirable that such 
information include statistics of production , consumption, imports and exports of the 
subsidized product(s) or sector(s): 
 
 N.A. 
 
__________