**Figure 6. NTM coverage: Brazil vs other countries, 2015 (%)**

<!-- Start of picture text --> 100.0 89.0<br>80.0<br>66.4 64.6<br>61.1<br>60.0 47.5<br>40.0<br>25.8 22.6<br>20.0<br>5.9<br>0.0<br>Sanitary and Technical Quantity Price<br>phytosanitary barriers controls controls<br>Brazil Other<br><!-- End of picture text --> Source: World Bank staff elaboration using UNCTAD TRAINS data and UN COMTRADE data Note: coverage ratios capture how much trade is subject to a NTM measure. It does not reflect the level of NTM restrictiveness, just the incidence. It doesn’t include local content requirement.

**Figure 7.  Services trade restrictiveness index, Brazil relative to LAC average**

<!-- Start of picture text --> 70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Brazil LAC average<br>Source: World Bank staff elaboration using World Bank STRI<br>dataset<br><!-- End of picture text --> Note: higher values mean more restrictive regimes.

Among NTMs, Brazil is imposing local content requirements (LCRs) to an increasing number of products. For instance, in 2012, the Brazilian authorities issued regulations related to the industrial and trade regime for the automotive sector. The use of local content requirements was also prevalent in the oil and gas sectors, a tendency reversed in the more recent licensing rounds. A recent analysis conducted by Stone, Messent and Flaig (2015) maps the use of LCR measures applied between 2008 and April 2014 in several countries around the world. Results show that, in this period, Brazil was second only to Indonesia in the number of LCRs used, with 17 LCRs in force.<sup>11</sup> Trade in services, a key enabler of GVC integration and productivity growth, is hampered by policy and regulatory barriers as well as by a distortive tax structure. The internationalization of production and subsequently trading in the GVC also requires attention to the role of services. Next to the fact that many services are used as inputs into the production of GVC goods, they are also essential in the smooth operation of the GVC to connect different production sides across borders. A clear example is logistics services. The latest OECD-WTO TiVA data for 2011 show that the value added of the service sector (both from domestic and foreign sources) contained in Brazil’s gross exports (49 percent) is above the average of Latin American and the Caribbean (LAC) peers (42.3 percent) but below the OECD average (54 percent). In addition, only one-tenth of the total services content of exports originates from foreign providers. This limited contribution is somehow influenced by substantial policy barriers in the service sector. On average, Brazil has more restrictions to trade in services than the average in the LAC region, according to the World

> 11  Overall, the use of LCR tends to undermine export competitiveness over the long run and lead to suboptimal resource allocation that further affect productivity, since the price hike associated with the change from cheaper foreign suppliers to more expensive domestic suppliers leads to substitution away from these now more expensive, though more efficient, goods and services in the rest of the economy. Estimations presented also by Stone, Messent and Flaig (2015) show that the use of LCRs has caused a decline in global imports and total exports in every region. The estimated permanent reduction in total exports from Brazil due to these measures amounts to 0.65 percent.

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