RESTRICTED
WORLD TRADE G/SCM/N/16/BRA
5July1996
ORGANIZATION(96-2621)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Updating Notifications Pursuant toArticle XVI:1 oftheGATT 1994
andArticle 25oftheAgreement onSubsidies and
Countervailing Measures
BRAZIL
Thefollowing communication, dated 30June1996, hasbeenreceived from thePermanent
Mission ofBrazil.
_______________
With regard toprogrammes notified byBrazil indocument G/SCM/N/3/BRA, dated
18March 1996, theBrazilian Congress approved thebudget for1996, asfollows:
I. Export Financing Programme (PROEX)
Financing: US$52.87 million
Equalization: US$445.75 million
Total: US$498.62 million
IV. Regional Incentives (SUDAM/SUDENE)
Fiscal benefits (budget)
SUDENE: US$387.8 million
SUDAM: US$261.3 million
V. FINAM/FINOR
Fiscal benefits (budget)
FINOR: US$351.1 million
FINAM: US$438.9 million
VI. Constitutional Funds
FNO: US$325.4 million
FCO: US$325.4 million
FNE: US$976.1 millionG/SCM/N/16/BRA
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VII. Industrial Technology Development Programme
1. Titleofthesubsidy programme ifrelevant orbriefdescription oridentification ofthesubsidy:
Industrial Technology Development Programme (PDTI) andAgriculture/Cattle Breeding
Technology Development Programme (PTDA).
Bothprovide forincentive forresearch anddevelopment.
2. Period covered bythenotification:
From January toDecember 1996.
3. Policy objective and/or purpose ofthesubsidy:
Tofoster technological capacitation ofindustrial andagricultural/cattle breeding enterprises,
withaview tothecreation ofnewproducts andprocesses, ortheevident improvement oftheir
characteristics, through theexecution ofresearch anddevelopment projects bytheenterprise itselfor
execution secured witharesearch anddevelopment institution.
4. Background andauthority forthesubsidy
Theconcession offiscal incentives isbased onLawNo.8661, dated 2June1993, andis
regulated byDecree No.949,dated 5October 1993. TheMinistry ofScience andTechnology is
responsible fortheadministration oftheincentive.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession):
(a) Deduction ofupto8percentoftheIncome Taxowed, ofavalue equivalent totheapplication
oftheIncome Taxtothesumoftheexpenses intechnological research anddevelopment
activities, intheindustrial andagricultural/cattle breeding sectors, during thebase-year;
(b) Exemption from theTaxonIndustrialized Products (IPI) thatischarged onequipment,
machinery anddevices which aredestined forresearch andtechnological development and
ontheinstruments, accessories andtools thataccompany these goods.
(c) Forpurposes ofcalculating theIncome Tax,accelerated depreciation calculated through the
application oftheusual depreciation ratemultiplied bytwo,without prejudice ofthenormal
depreciation ofnewmachinery, equipment, devices andinstruments destined forutilization
onresearch anddevelopment activities, intheindustrial andagricultural/cattle breeding sectors.
(d) Accelerated amortization, forpurposes ofcalculating theIncome Tax,through theirdeduction
ascostsoroperational expenses, ofexpenses related totheacquisition ofintangible goods linked
toresearch anddevelopment activities.
(e) Credit of50percentoftheIncome Taxthatwasretained bytheRevenue anda50percent
reduction oftheFinancial Operations Taxcharged onvalues payed, sent, orcredited to
beneficiaries thatreside orliveaborad, intheform ofroyalties, orasaresult oftechnical or
scientific assistance ortherendering ofspecialized services, provided forintechnology transfer
contracts;G/SCM/N/16/BRA
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(f) Deduction, asoperational expenses, from theindustrial and/or agricultural/cattle breeding
enterprises which possess stateofthearttechnology ornon-serialized capital goods, ofthe
sumofthepayments indomestic orforeign currency -intheform ofroyalties ortechnical
orscientific assistance, uptothelimitof10percentoftheliquid receipts ofsalesofgoods
produced withtheapplication ofthetechnology thatwastheobject ofthepayments.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, orothers;
through whatmechanisms; whether afixed orfluctuating amount perunit; ifthelatter, how
determined):
Thebeneficiaries oftheincentives aretheindustrial andagricultural/cattle breeding enterprises,
theenterprises thatdevelop integrated circuits andenterprises thatproduce software. Inthecaseof
deductions oftheIncome Taxdue,thevalue oftheincentives granted totheenterprise depends on
thevalue ofexpenses onresearch anddevelopment. Inthecaseofexemption oftheIPI,itdepends
onthevalue ofmachinery andequipment thatwasbought.
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount oftheannual amount
budgeted forthatsubsidy
PTDA/PDTI Budget
1995: US$300million
1996: US$350million
8. Duration ofthesubsidy and/or anyother time limits attached toit,including dateof
inception/commencement:
Theduration oftheconcession ofthefiscal incentive isindeterminate. Nevertheless, the
enterprise canonlybenefit from theincentive aslongasitisdeveloping aPDTI oraPTDA.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy
Datanotavailable.
VIII. Financing ofStudies andProjects
1. Titleofthesubsidy programme ifrelevant orbriefdescription oridentification ofthesubsidy:
FINEP -Financing ofStudies andProjects -Technological Development ofEnterprises.
2. Period covered bythenotification:
From January toDecember 1996.
3. Policy objective and/or purpose ofthesubsidy:
Tofacilitate thedevelopment andimprovement ofproducts, processes andservices, aswell
astheincorporation ofproduct technology.G/SCM/N/16/BRA
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4. Background andauthority forthesubsidy
Decree-Law No.200,dated 25February 1967, authorizes thecreation ofFINEP, andDecree
No.61056, dated 24July1967, creates theinstitution.
On31August 1976, thePresident oftheRepublic approved thebasic directives forthe
programme offinancing fortechnological support fordomestic enterprises.
Decree No.1808, dated 7February 1996, approved thenewregulations ofFINEP.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession):
Financing withreturns tofundamental andapplied research projects. Theimprovement and
development ofnewprocesses, products andservices, acquisition andabsorbtion ofnational orforeign
technology, development ofprototypes.
Financing conditions involves interest rate(Long Term Interest Rate+annual spreads of2.5to
8percent), nopayments must bemade foruptothree years. Amortization termisofuptoseven
years.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, orothers;
through whatmechanisms; whether afixed orfluctuating amount perunit; ifthelatter, how
determined):
Thebeneficiaries oftheprogramme aretheenterprises which areinstalled inBrazil andwhich
haveprojects andprocesses implemented inBrazilian territory.
Theconcession offinancing isconditioned bythepresentation ofdetailed projects which are
analyzed byamulti-disciplinary teamofFINEP and/or consultants.
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount oftheannual amount
budgeted forthatsubsidy
Budget
1995: BRL196million
1996: BRL313million (estimate)
8. Duration ofthesubsidy and/or anyother time limits attached toit,including dateof
inception/commencement:
Indeterminate.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy
Datanotavailable.
IX. National Fund forScientific andTechnological Development
1. Titleofthesubsidy programme ifrelevant orbriefdescription oridentification ofthesubsidy:
FNDCT -National Fund forScientific andTechnological Development.G/SCM/N/16/BRA
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2. Period covered bythenotification:
From January toDecember 1996.
3. Policy objective and/or purpose ofthesubsidy:
Tosupportfundamentalandappliedresearchprogrammesandprojects;humanresourcetraining;
technical andscientific cooperation between research groups associated withinstitutions andnational
andforeign companies, withtheobjective ofdeveloping orimproving thedomestic scientific and
technological capacity. Italsofinances theinstallation andthefurnishing ofequipment ofresearch
centres andlaboratories which constitute thebasicnational scientific andthetechnological infrastructure.
4. Background andauthority forthesubsidy (including identification ofthelegislation under which
itisgranted):
Decree LawNo.719, dated 31July1969, creates FNDCT. Decree No.68748, dated
15June1971, determines thatFINEP istheExecutive Bureau ofFNDCT.
LawNo.8172, dated 18January 1991.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession):
Financing without returns to:
(a) applied andfundamental research;
(b) improvement ofprocesses andproducts;
(c) quality control;
(d) R&D infrastructure;
(e) scientific andtechnological services information andlibrary; and
(f) scientific andtechnological events.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, orothers;
through whatmechanisms; whether afixed orfluctuating amount perunit; ifthelatter, how
determined):
Thebeneficiaries oftheprogramme are:universities, research institutions andpublic orprivate
non-profit entities dedicated toscience andtechnology.
Theconcession offinancing isconditioned bythepresentation ofdetailed projects which are
analyzed byamulti-disciplinary teamofFINEP and/or consultants.G/SCM/N/16/BRA
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7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount oftheannual amount
budgeted forthatsubsidy
Budget
1995: BRL50million
1996: BRL64million (estimate)
8. Duration ofthesubsidy and/or anyother time limits attached toit,including dateof
inception/commencement:
Indeterminate.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy
Datanotavailable.