Announces Comprehensive Plan to Promote Domestic Industry

The Brazilian government has unveiled a new broad-ranging industrial plan that according to a statement from President Dilma Rousseff is designed to defend domestic manufacturers “against the often-unfair competition in the international marketplace” while at the same time increasing production and employment in Brazil.

The so-called “Brasil Maior” (Bigger Brazil) plan was formally established on 3 August with the issuance of Decree 7540-2011 to “accelerate the growth of productive investment and technological and innovation efforts of domestic companies, and enhance the competitiveness of domestic goods and services.” It comprises a wide array of measures in several areas of interest to manufacturers and exporters in Brazil and overseas, including new fiscal incentives and export financing options for Brazilian exports, a renewed focus on trade remedies to combat unfair imports, enhanced export promotion activities, and various other policies designed to encourage domestic industrial activity, investment and innovation.

The plan’s protectionist overtones echo steps recently taken by neighbouring Argentina to ease a worsening trade balance and illustrate that trade restrictions remain an option for countries continuing to struggle with an uncertain global economy.Hong Kong and mainland Chinese companies are therefore advised to closely monitor the implementation of this plan in the weeks and months ahead in order to keep abreast of any developments that may potentially negatively affect their exports to or investments in Brazil.

Among other things, the Bigger Brazil plan aims to step up efforts in the area of trade remedies and import compliance by (i) reducing from 15 to 10 months the timeframe for completing antidumping investigations and from 240 to 120 days the timeframe for applying provisional measures in these investigations; (ii) applying AD or CV duties to goods that attempt to circumvent an existing AD/CV duty order; (iii) increasing from 30 to 120 the number of investigators at the Ministry of Development, Industry and Trade; (iv) denying import licences to goods whose origin is falsely declared; (v) stepping up administrative scrutiny of import prices to identify cases of undervaluation; (vi) supporting the creation of a mechanism within the framework of the Southern Cone Common Market (Mercosur) to increase import duties; (vii) expanding the list of imports subject to mandatory certification and strengthening customs oversight efforts through the development of co-operative arrangements between relevant government agencies; (viii) addressing industrial property rights violations and non-compliance with mandatory certification requirements; and (ix) suspending preferential duty treatment for used machinery and equipment.

With respect to the anti-circumvention of AD/CV duty orders and country of origin investigations, press reports indicate that Brazilian authorities specifically intend to crack down on imports from mainland China that are funnelled through third countries to disguise their origin. Press reports also indicate that Brazil will ask its Mercosur partners to increase external tariffs on about 100 products.

Other measures of interest included in the Bigger Brazil plan are the creation of a private export financing fund (Proex Financiamento) for companies with revenues of up to US$60 million, the impending entry into force of the ATA carnet system in Brazil, the adoption of a strategy to promote exports of priority goods and services to selected markets, and the implementation of various tax and other incentives to promote exports. According to press sources, the Bigger Brazil plan will also exempt producers in the apparel, footwear, software and furniture industries from a 20 % payroll tax through 2012. Exporters of industrial goods will receive a refund of 0.5 % of the export tax, an amount that could eventually rise to four %. Government procurement contracts will favour domestic suppliers in the health, defence and information technology sectors up to a price discrepancy of 25 %. Other measures include incentives for the production of automobiles and auto parts, a 12-month extension of tax breaks for the purchase of capital goods and accelerated payment of tax rebates owed to companies.