TRADE-BRAZIL: Gov’t Lays Out Plans to Fuel Exports

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Nov 17 2000 (IPS) - The Brazilian government has announced new credits, as well as measures to fight the protectionism of industrialised countries, in order to stimulate the nation’s exports – but the business community is focussing its demands on tax cuts.

Pessimism marked the opening of the 20th National Meeting on Foreign Trade, a two-day gathering of exporters in Rio de Janeiro. The participants are primarily concerned about the 42 million- dollar trade deficit accumulated since January.

At the beginning of the year, economic authorities had predicted there would be a 4.4 billion dollar surplus. But now they are hoping to limit the negative balance to less than 200 million dollars, a goal business leaders say is optimistic, as they predict at least twice that sum.

A trade surplus is considered essential for Brazil to improve its foreign accounts and reduce its vulnerability to future international financial turbulence, which is already threatening to expand from neighbouring Argentina.

Vice-President Marco Maciel opened the foreign trade conference Thursday affirming that the government’s objective is to boost total exports to 100 billion dollars in coming years, compared to the 57 billion dollars estimated for this year.

To achieve this, the government promises stimulus measures, such as increased credits, with lower interest rates, tax cuts, informational support and improved transport.

Maciel announced the creation of an Internet site to better inform exporters about opportunities and markets, as well as an intelligence service in the Special Programme for Export, which supports those sectors that show greatest potential for expansion.

Alcides Tapias, Minister of Development, Industry and Trade, said the government is maintaining a broad policy for export support, but that companies have failed to take full advantage of it.

Brazil will not return to the practice of subsidies, affirmed Tapias, who defended national market liberalisation, initiated in 1990, as a positive factor for increasing the technological capacity of industry and of human resources.

Friday, Tapias outlined 11 measures to stimulate exports next year, including improvements in equipment and technology for Brazil’s ports, the simplification of the transport bureaucracy, tax exemptions for promotional expenses for overseas trade, greater credits and export insurance.

The Development Minister said this package is expected to increase exports 20 percent annually beginning in 2001.

But industrialised countries continue to protect their agricultural sectors with subsidies that total one billion dollars a day. This hurts the chances for developing countries without financial power to compete, stated Minister of Agriculture Marcus Pratini de Moraes.

The current response to such policies consists of increasing tariff barriers, said the minister. The Southern Cone Common Market (Mercosur) was forced to raise its common external tariff on dairy products from 24 to 35 percent in January, and is considering similar measures for rice and garlic imports.

Tapias said the barriers imposed by the European Union, the United States and Japan on some Brazilian products are unfair. Tokyo taxes sugar imported from Brazil while exempting lower- quality sugar coming from other countries, he cited as an example.

But the difficulties are not only on the foreign front. Other serious problems include the high taxes and bureaucracy exporters must face, pointed out the president of the Brazilian Association of Foreign Trade (AEB), Benedito Fonseca Moreira.

“We don’t want subsidies, we want conditions in which we can compete,” he stated.

A tax reform, that could lower export costs, has been under parliamentary discussion for several years, but no progress has been made, largely due to the resistance of fiscal and financial authorities.

Development Minister Tapias acknowledged that the tax on exports is excessive and promised it would be reduced by 2002 through tax reforms and the conclusion of fiscal adjustments at the end of 2001.

The outlook for Brazil’s foreign trade, however, is not encouraging. The growth in exports, of 15 percent this year, is not satisfactory, according to Jose Augusto de Castro, the AEB technical co-ordinator.

Imports rose to nearly the same extent and are likely to maintain the trend through next year if the country’s economy grows five percent, as predicted. Such expansion would require more foreign purchases of capital goods, power-generating wind turbines and electronic components, which are the major source of Brazil’s trade deficit.

Meanwhile, the state-run Bank of Brazil announced that it would expand financial resources for exports to 10.5 billion dollars next year, one billion more than it designated this year. Priority will be given to small and medium companies, affirmed Delmar Schmidt, the bank’s international division manager.

Another state-run institution, the National Bank of Economic and Social Development, will expand its operations in the sector, providing 4.5 million dollars annually to finance exports and imports.

The secretary of the Inter-Ministerial Chamber of Foreign Commerce, Giannetti da Fonseca, announced the creation of a Permanent Chamber of Integrated Logistics that is to improve transport systems and packaging options to benefit exports.

Agricultural Minister Pratini de Moraes recognised that Brazil’s participation in the international market had dropped from 1.0 percent in the 1980s to 0.85 percent in 1999, but he forecast a recovery, with the country becoming the world’s leading agricultural producer within 10 to 12 years.

Brazil could double its cultivated area, reaching 90 million hectares. The land is available to do so, the country just needs to conquer foreign markets, he pointed out.