RESTRICTED
WORLD TRADE G/SCM/N/3/BRA
18March 1996
ORGANIZATION(96-0934)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
NOTIFICATIONS PURSUANT TOARTICLE XVI:1 OFTHE GATT 1994
AND ARTICLE 25OFTHE AGREEMENT ONSUBSIDIES AND
COUNTERVAILING MEASURES
BRAZIL
Thefollowing communication, dated 22February 1996, hasbeenreceived fromthePermanent
Mission ofBrazil.
_______________
TABLE OFCONTENTS
Page
NOTIFICATION ONSUBSIDIES
I. Export Financing Programme (PROEX) 2
II. Special Export Programmes (BEFIEX) 4
III. Steel Industry 9
IV. Regional Incentives (SUDAM/SUDENE) 11
V. FINAM/FINOR 14
VI. Constitutional Funds 16G/SCM/N/3/BRA
Page2
I. Export Financing Programme
1. Titleofthesubsidy programme ifrelevant orbriefdescription oridentification ofthesubsidy.
Export Financing Programme (PROEX)
2. Period covered bythenotification.
January toDecember 1995.
3. Policy objective and/or purpose ofthesubsidy.
Theobjective ofthePROEX istoincrease Brazilian exports byfacilitating access toexport
financing, inparticular ofgoods thatrequire medium andlongtermloans.
4. Background andauthority forthesubsidy (including identification ofthelegislation under
which itisgranted).
Ministry ofIndustry, Commerce andTourism (Foreign Trade Bureau); Ministry ofFinance
(National Treasury Bureau).
Legislation: LawNo.8,187, dated 1June1991; Decree No.1139, dated 11April 1994; Resolutions
No.1844and1845, dated 1June1991, Resolution No.1998, dated 30June1993, Resolution No.2005,
dated 20July1993, Resolution No.2214, dated 29November 1995, Resolution No.2244, dated
20December 1995, oftheNational Monetary Council; Ministry Order No. 314, dated
28December 1995; Ministry Order No.368, dated 5December 1995, Ministry Order No.15,
12January 1996, oftheMinistry ofIndustry, Commerce andTourism; Circular-Letter No.2,601,
dated 29November 1995, oftheCentral Bank ofBrazil.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Interest rateequalization (internationally comparable rates).
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, orothers;
through what mechanisms; whether afixed orfluctuating amount perunit; ifthelatter,
howdetermined).
Financingtotheexporter(suppliers‘)and/orimporter(buyers‘)ofmachinery,equipment,durable
goods andservices. Equalization levels arebased onthematurity ofeachspecific loan, varying from
1to10yeartermperiods.G/SCM/N/3/BRA
Page3
7. Subsidy perunit, orincases where thisisnotpossible, thetotal amount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunitsubsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
Budget (inUS$million)
Type/year 1991 1992 1993 1994 1995
Financing 1,200.00 494.00 620.40 217.77 142.19
Equalization 394.22 133.20 819.99 763.61 927.60
Total 1,594.22 627.20 1,440.39 981.38 1,069.79
Note: 1991 datareferonlytoPROEX (starting 1June1991)
From1993onwards,figuresrelatedtoequalizationreflecttheissuanceofnon-negotiabletreasury
notes (“Notas doTesouro Nacional -Série I”-NTN-I) forthefullperiod ofrelevant operations: 1
to10years (averaging 5to7years).
Expenditure (inUS$million)
Type/year 1991 1992 1993 1994 1995
Financing 170.37 137.84 155.56 74.70 38.64
Equalization 171.43 76.75 41.47 46.12 84.89
Total 341.81 214.59 197.03 120.82 123.54
Note: 1991 data refer only toPROEX (starting 1June 1991)
These figures reflect theactual disbursements undertaken fortherelevant period.
8. Duration ofthesubsidy and/or anyother time limits attached toit,including date of
inception/commencement.
Indeterminate.
9. Statistical data permitting anassessment ofthetrade effects ofthesubsidy. Thespecific
andscope ofsuch statistics islefttothejudgment ofthenotifying Member. Totheextent
possible,relevantand/ordeterminable,however,itisdesirablethatsuchinformationinclude
statistics ofproduction, consumption, imports andexports ofthesubsidized product(s)
orsector(s).
Global Exports ofGoods andServices Covered byPROEX
Year Number of
TransactionsAmount Approved
(inUS$ million)(*)
1991/1993 439 3,914.38
1994 701 2,364.25
1995 1,111 2,084.47
(*)Onaverage, 85percent oftheapproved operations become actual exports.G/SCM/N/3/BRA
Page4
II. Special Export Programmes
1. Title ofthesubsidy programme ifrelevant orbrief description oridentification ofthe
subsidy.
Theprocedure forconcession offiscal incentives waslabeled BEFIEX Special Export
Programmes. Nonewprogrammes have been approved since 1990. Phasing-out tobecompleted
by1999. Thebeneficiaries, whohadagreed tocertain FOB export levels andnetforeign exchange
earnings, hadtheright toimport with fiscal incentives.
2. Period covered bythenotification.
January toDecember 1995.
3. Policy objective and/or purpose ofthesubsidy.
TheBEFIEX programmes have astheir basic objective toincrease exports ofmanufactured
products and toattain netforeign exchange earnings, yielding lower import costs through the
reduction orexemption oftaxes.
4. Background andauthority forthesubsidy (including identification ofthelegislation
under which itisgranted).
TheBEFIEX programmes were created byDecree-Law No.1,219, dated 15May 1972,
which wasrevoked byDecree-Law No.2,433, dated 19May 1988, thatestablished anewprocedure
fortheconcession offiscal incentives.
Law No.8,032, dated 12April 1990, revoked theexemptions andreductions oftheimport
duties andoftheTaxonIndustrialized Products (IPI). This revocation includes fiscal incentives
given under Decree No.2,433, which prevented theapproval ofnew BEFIEX special export
programmes. The lastprogramme approved under theabove mentioned Decree-Law isdated
29December 1989.
Nevertheless, itshould bestressed thatArticle 10ofLawNo.8,032 preserved theexemptions
andreductions thathadbeen effectively conceded.
Later,throughLawNo.8,661,dated2June1993,thelegislationontheBEFIEXprogrammes
was entirely revoked. Original procedures continue toapply toprogrammes currently being
phased-out.
Currently, theMinistry ofIndustry, Commerce and Tourism isresponsible forthe
administration oftheremaining programmes.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Decree-Law No.1,219 contemplates theconcession offiscal incentives byexemption or
reduction ofimport duties andofIPIontheimports ofmachinery, equipment andinputs, aswell
asexemption oftheAdditional Contribution ontheFreight forRenovation oftheMerchant Marine
(AFRMM). Decree-Law No.2,433 limits thescope ofthese benefits byestablishing tighter sectorial
export performance targets andbyrequiring aglobal foreign exchange balance bycompany taking
intoaccount other programmes besides theBEFIEX itself (such asdraw back).G/SCM/N/3/BRA
Page5
6. Towhom and how thesubsidy isprovided (whether toproducers, toexporters, or
others; through what mechanisms; whether afixed orfluctuating amount perunit;
ifthelatter, how determined).
Theincentives aregranted totheindustrial exporting firms. Themaximum limit thatthe
firms areauthorized toimport interms ofmachinery, equipment andinputs with exemption or
reduction oftaxes isestablished contractually. Theimport ofinputs are,nevertheless, limited to
1/3ofFOB exports, with theexception ofimports made under special customs regimes such as
draw-back.
7. Subsidy perunit, orincases where thisisnotpossible, thetotal amount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunit subsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
In1992, fiscal incentives granted under theBEFIEX special export programme amounted
toUS$297.96 million, representing anaverage incentive ofUS$593.5 thousand perprogramme.
In1993, thevalue offiscal incentives granted wasofUS$199.17 million andtheaverage incentive
perprogramme wasofUS$466.4 thousand. In1994, these figures were ofUS$218.83 million and
US$554 thousand, respectively.
8. Duration ofthesubsidy and/or anyother time limits attached toit,including date of
inception/commencement.
Theconcession ofincentives began in1972 andthelastBEFIEX programme isscheduled
toendinDecember 1999.
9. Statisticaldatapermittinganassessmentofthetradeeffectsofthesubsidy.Thespecific
andscope ofsuch statistics islefttothejudgment ofthenotifying Member. Tothe
extent possible, relevant and/or determinable, however, itisdesirable that such
information include statistics ofproduction, consumption, imports andexports ofthe
subsidized product(s) orsector(s).
Statistical data isattached.G/SCM/N/3/BRA
Page6Year: 1994 (US$)
Taxes Relieved
Product Exports Total Imports II IPI AFRMM Total ofTaxes Balance
Metalurgical 2,174,020,459 118,183,282 18,860,139 5,307,112 77,521 24,244,772 1,547,149,243
Mechanical 384,383,160 40,838,733 3,931,494 2,243,249 206,144 6,380,887 319,770,084
Electrical 331,107,300 37,654,062 6,282,789 3,709,282 - 9,992,071 161,877,888
Household
appliances542,714,036 15,467,825 2,112,777 1,114,463 31,561 3,258,801 410,134,198
Transport 2,235,238,506 404,009,607 80,940,958 31,232,669 3,409,913 115,583,540 1,336,536,181
Chemical 296,673,056 17,873,112 3,008,767 1,102,723 137,353 4,248,843 87,787,561
Pharmaceutical 397,010 - - - - - (159,898)
Textile 716,663,758 57,735,664 7,828,798 1,349,853 405,168 9,583,819 1,143,484,209
Footwear 513,228,991 6,726,596 1,329,271 762,128 3,859 2,095,258 393,007,893
Food 536,125,307 34,591,316 6,197,222 1,283,551 359,883 7,840,657 586,272,735
Glass 18,512,492 50,189 2,716 2,282 - 4,998 (2,871,838)
Ceramic 63,348,669 5,851,820 1,138,758 4,212 120,178 1,263,148 44,618,780
Rubber 311,611,806 71,108,025 6,497,518 2,329,834 563,549 9,390,901 97,910,118
Plastic 57,712,383 684,178 54,479 47,758 14,074 116,311 33,275,542
Paper &
cardboard1,370,808,670 70,532,369 13,788,838 2,283,492 401,091 16,472,835 1,237,373,684
Wood &
furniture168,213,094 29,553,712 5,751,838 1,972,216 86,028 7,810,082 167,630,210
Various 111,516,555 2,872,123 346,477 179,207 19,232 544,916 101,776,421
Total 9,832,075,252 913,732,622 158,072,254 54,924,031 5,835,554 218,831,839 7,665,573,011
II = Import Tax
IPI = TaxonIndustrial Products
AFRMM = Addition toFreight forRenovation oftheMerchant MarineG/SCM/N/3/BRA
Page 7Year: 1993 (US$)
Taxes Relieved
Product Exports Total Imports II IPI AFRMM Total ofTaxes Balance
Metalurgical 2,124,215,643 72,845,198 11,980,790 4,768,740 68,094 16,817,624 1,699,448,936
Mechanical 397,492,015 22,401,744 2,954,148 1,040,665 75,973 4,070,786 320,644,707
Electrical 274,501,154 19,274,747 3,510,023 1,864,310 - 5,374,333 134,423,325
Household
appliances545,864,337 27,689,872 4,402,909 1,500,406 59,370 5,962,685 439,629,369
Transport 1,953,275,157 936,577,685 79,772,665 31,817,987 2,813,909 114,404,561 970,562,466
Chemical 258,735,467 23,401,144 4,190,532 762,107 276,211 5,228,850 254,736,192
Pharmaceutical 1,387,885 122,438 - - - - (400,240)
Textile 753,754,220 45,866,846 7,177,062 1,571,939 157,126 8,906,127 946,633,740
Footwear 710,278,932 12,632,860 1,701,189 546,017 9,662 2,256,868 530,694,746
Food 508,529,263 40,469,955 7,681,402 1,485,469 415,903 9,582,774 530,525,892
Glass 65,910,469 4,320,965 399,994 33,744 10,921 384,659 30,347,177
Ceramic 109,495,126 3,040,126 524,290 80,925 - 605,215 81,203,697
Rubber 217,112,693 39,055,268 4,456,678 872,434 393,405 5,722,517 51,455,008
Plastic 32,150,793 803,097 45,938 39,996 12,469 98,403 5,632,711
Paper &
cardboard1,006,031,888 68,359,802 14,047,911 3,130,325 213,423 17,391,659 1,193,668,869
Wood &
furniture175,383,415 4,686,411 1,085,948 334,645 23,053 1,443,646 174,794,867
Various 131,273,366 6,487,734 630,327 257,555 31,657 919,539 105,219,314
Total 9,265,391,832 788,035,892 144,501,806 50,107,264 4,561,176 199,170,246 7,439,220,776
II = Import Tax
IPI = TaxonIndustrial Products
AFRMM = Addition toFreight forRenovation oftheMerchant MarineG/SCM/N/3/BRA
Page 8Year: 1992 (US$)
Taxes Relieved
Product Exports Total Imports II IPI AFRMM Total of
TaxesBalance
Metalurgical 2,098,896,569 67,826,083 11,660,466 2,984,935 57,734 14,703,135 1,504,605,308
Mechanical 489,111,445 27,479,185 4,450,741 1,520,911 44,054 6,015,706 382,313,150
Electrical 263,360,643 40,409,465 8,605,460 3,372,606 11,845 11,989,911 197,787,280
Household
appliances502,229,789 35,112,990 7,047,520 1,644,896 33,638 8,726,054 409,783,914
Transport 3,483,439,381 456,921,393 131,860,559 43,284,878 2,600,045 117,745,482 2,311,463,217
Chemical 228,005,265 37,556,765 8,603,474 1,653,166 272,143 10,528,783 139,225,473
Pharmaceutical 984,372 - - - - - 478,377
Textile 824,239,346 52,795,025 10,114,626 1,733,464 543,066 12,391,156 955,690,724
Footwear 642,766,121 10,650,972 2,219,415 537,209 3,972 2,760,596 465,289,767
Food 544,859,809 40,202,088 9,066,820 1,279,056 403,546 10,749,422 554,697,025
Glass 69,135,877 11,367,238 1,282,127 333,630 6,881 1,622,638 1,034,332
Ceramic 109,129,484 2,735,900 447,199 17,227 960 465,386 95,269,600
Rubber 255,730,025 30,123,274 6,047,534 837,967 253,490 7,138,991 171,377,781
Plastic 24,859,415 2,976,394 498,929 143,577 41,424 683,930 16,894,044
Paper &
cardboard1,194,309,933 81,335,428 22,864,830 4,281,045 386,555 27,532,430 1,326,669,223
Wood &
furniture164,023,459 7,643,132 2,054,407 193,617 132,955 2,380,979 170,513,658
Various 254,566,499 12,071,189 2,117,121 280,827 123,423 2,521,371 221,715,375
Total 11,149,647,432 917,206,521 228,941,228 64,099,011 4,915,731 297,955,970 8,924,808,248
II = Import Tax
IPI = TaxonIndustrial Products
AFRMM = Addition toFreight forRenovation oftheMerchant MarineG/SCM/N/3/BRA
Page9
III. Steel Industry
1. Title thesubsidy programme ifrelevant orbrief description oridentification ofthe
subsidy.
Incentive related totheTaxonIndustrialized Products (IPI)granted totheBrazilian steel
industry.
2. Period covered bythenotification.
January toDecember 1995.
3 Policy objective and/or purpose ofthesubsidy.
TheBrazilian Government considers thesteel industry akeysector, essential tothe
development andthecompetitiveness oftheBrazilian industry asawhole. Thus, theGovernment
considered itnecessary togiveincentives tothesteelindustry, refunding 95percentoftheIPI
tofirms which undertake projects of:(i)investment intheincrease ofproduction; (ii)improvement
ofproduct quality; (iii)improvement oftheenvironment; (iv)increase inproductivity; and(v)
restructuring oftheirpremises.
4. Background andauthority forthesubsidy (including identification ofthelegislation
under which itisgranted).
Theconcession oftheincentive isbased onLawNo.7,554, dated 16December 1986.
TheMinistry ofIndustry, Commerce andTourism isresponsible fortheadministration ofthis
incentive.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Refund tothebeneficiary firms of95percentoftheIPIrelating tosalesintheinternal
market.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, or
others; through what mechanisms; whether afixed orfluctuating amount perunit;
ifthelatter, howdetermined).
Thesubsidies aregranted tosteelproducing firms intheform ofrefunds of95percent
oftheIPIrelative tothebalance between debits resulting from thesalesofproducts andcredits
related torawmaterials, packaging andintermediate goods.G/SCM/N/3/BRA
Page10
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunitsubsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
Volume offunds: from1987 to1993 theaverage annual value ofgranted incentives was
approximately US$200 million. In1994, US$202 million. Theestimate for1995 is
US$180 million.
8. Duration ofthesubsidy and/or anyother timelimits attached toit,including dateof
inception/commencement.
Law7,554 willbeinforce until31December 1996, when allbenefits fromincentives will
cease.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy. Thespecific
andscope ofsuchstatistics islefttothejudgment ofthenotifying Member. Tothe
extent possible, relevant and/or determinable, however, itisdesirable thatsuch
information include statistics ofproduction, consumption, imports andexports ofthe
subsidized product(s) orsector(s).
Steel Products (in1,000 tons)
Year 1993 1994 1995(*)
Production 23,014 23,541 22,609
Sales inthedomestic market 10,437 11,934 11,830
Exports 12,237 11,078 9,471
Imports 195 203 300
Apparent consumption
(sales internal market +imports)10,632 12,095 12,120
(*)preliminary dataG/SCM/N/3/BRA
Page11
IV. Regional Incentives (administered bySUDAM/SUDENE)
(green subsidies)
1. Title thesubsidy programme ifrelevant orbrief description oridentification ofthe
subsidy.
FiscalincentivesforthedevelopmentoftheLegalAmazonandtheNortheastRegionsinclude:
(i) exemption fromincome tax:granted foraperiod of10years starting fromtheyearfollowing
theoneinwhich theenterprise started tooperate. Industrial oragricultural firms which
areclassified asbeing ofinterest forregional development andwhich establish their
operations, modernize themselves, andincrease ordiversify theiractivities intheLegal
Amazon orNortheast Regions arebeneficiaries;
(ii) reduction oftheincome tax:granted toanenterprise which meets onlythebasic conditions
ofinterest toregional development; andreinvestments oftheincome tax:theactivity must
beofinterest forregional development; and
(iii) interested firms willhavetodeposit 40percentoftheincome taxdue,plus50percent
oftheirownresources, inBanco daAmazônia (BASA) orinBanco doNordeste doBrasil
(BNB). These funds mustbeapplied intheLegal Amazon orNortheast Regions inactivities
linked tomodernization orexpansion ofinstalled capacity.
2. Period covered bythenotification.
January toDecember 1995.
3. Policy objective and/or purpose ofthesubsidy.
Given differences inthelevel ofeconomic development across regions, theBrazilian
Government created inthe1960s, compensatory mechanisms forthedevelopment oftheNorth,
Northeast andMidwest Regions.
These mechanisms involve: (i)thetransfer totheconcerned region ofpartoftheincome
taxofjuridical persons from outside thatregion; and(ii)theexemption orreduction ofincome
taxforenterprises operating within thatregion.
Inthiscontext, withaviewtosupporting thedevelopment oftheNorth Region, theSuperintendency
fortheDevelopment oftheAmazon Region -SUDAM (byLawNo.5,174, dated 27October 1966)
andtheSuperintendency fortheDevelopment oftheNortheast -SUDENE (byLaw3,692, dated
15December 1959) werecreated. Their objective, among others, istoevaluate andapprove projects
ofinterest tothedevelopment oftheregion andtogrant fiscal benefits orfinancial cooperation
accordingly.
Theareaofaction oftheSUDAM, denominated Legal Amazon, encompasses presently thefederal
states ofAcre, Amapá, Amazonas, Mato Grosso, Pará, Rondônia, Roraima, Tocantins andpart
ofMaranh ão.TheLegal Amazon isacontinental space of5,217,423 square kilometersG/SCM/N/3/BRA
Page12
(approximately 61percentofthenational territory), withapopulation ofaround 19million, highly
concentrated inurban areas anddispersed intherural area.
Theareaofaction ofSUDENE encompasses thefederal states ofMaranh ão,Piauí, Ceará, Rio
Grande doNorte, Paraíba, Pernambuco, Alagoas, Sergipe andBahia, inaddition toanareaofthe
federal stateofMinas Gerais included intheso-called “polígono dassecas”(draught polygon).
Thebenefits aregranted toanyenterprise located intheLegal Amazon orNortheast Regions
which cangenerate jobsandincome fortheregion. They are,therefore, ofgeneral application.
4. Background andauthority forthesubsidy (including identification ofthelegislation
under which itisgranted).
Thefiscal incentives, designed toinduce economic activity intheLegal Amazon and
Northeast Regions, areadministered bySUDAM andSUDENE, which areautonomous federal
entities linked totheMinistry ofPlanning andBudget (seecitedlegislation).
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Fiscal incentive.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, or
others; through what mechanisms; whether afixed orfluctuating amount perunit;
ifthelatter, howdetermined).
Thefiscal benefits aregranted toindustrial oragricultural firms which areclassified as
beingofinteresttoregionaldevelopmentandwhichestablishtheiroperations,modernizethemselves,
andincrease ordiversify theiractivities intheLegal Amazon orNortheast Regions.
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunitsubsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
SUDENE/SUDAM
Fiscal Benefits (Budget)
inUS$million
1995
SUDENE 59,76
SUDAM 69.20
8. Duration ofthesubsidy and/or anyother timelimits attached toit,including dateof
inception/commencement.
IndeterminateG/SCM/N/3/BRA
Page13
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy. Thespecific
andscope ofsuchstatistics islefttothejudgment ofthenotifying Member. Tothe
extent possible, relevant and/or determinable, however, itisdesirable thatsuch
information include statistics ofproduction, consumption, imports andexports ofthe
subsidized product(s) orsector(s).
DatanotavailableG/SCM/N/3/BRA
Page14
V. FINAM/FINOR (green subsidy)
1. Title thesubsidy programme ifrelevant orbrief description oridentification of
thesubsidy.
Financial support forthedevelopment oftheLegal Amazon andNortheast Regions.
Financial support: FINAM, FINOR: financing granted bytheBanco daAmazônia (BASA)
ortheBanco doNordeste doBrasil (BNB) withresources ofFINAM -Investment Fund ofthe
Amazon-- orFINOR -Investment Fund oftheNortheast-, respectively, withinterest rates, plus
anannual taxof4percent(itis,therefore, aloanandnotagrant). Theloans aremade inthe
form ofunderwriting ofdebentures, convertible ornotinshares, issued bythebeneficiary
enterprises, theconversion onlyoccurring (i)aftertheproject hasinitiated itsoperating phase,
inconformity withrulesandprocedures setbytherelevant regional development superintendency;
and(b)intopreferential shares without voting rights, inaccordance withtheBrazilian Corporation
Law.
Origin oftheresources: thejuridical person hastherighttodeduct 24percentoftheincome
taxdue,withtheobjective ofinvesting intheLegal Amazon orintheNortheast Regions, with
theoption ofdirecting resources through FINAM orFINOR toinvestment projects already approved
bySUDAM orSUDENE, ortotheirownpreviously approved projects.
2. Period covered bythenotification.
January toDecember 1995.
3. Policy objective and/or purpose ofthesubsidy.
Thebenefits aregranted toanyenterprise located intheLegal Amazon orNortheast Regions
which cangenerate jobsandincome fortheregion. They are,therefore, ofgeneral application.
4. Background andauthority forthesubsidy (including identification ofthelegislation
under which itisgranted).
Thefinancial support, designed toinduce economic activity intheLegal Amazon and
NortheastRegions,isadministeredbySUDAMandSUDENE,whichareautonomousfederalentities
linked totheMinistry ofPlanning andBudget.
BASA andBNB, financial agents which channel revenues destined toFINAM andFINOR,
alsoparticipate intheimplementation oftheincentive policy. Theresources remain indeposits
inthesebanksawaitingauthorizationforreleasefromSUDAMandSUDENE.TheFederalRevenue
Bureau isthesection oftheMinistry ofFinance responsible fortheadministration oftheFINAM
andFINOR mechanisms inthespecific aspects oftaxation, collection oftaxes andintermediation
ofresources.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Financing, bymeans ofunderwriting ofconvertible andnonconvertible debentures.G/SCM/N/3/BRA
Page15
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, or
others; through what mechanisms; whether afixed orfluctuating amount perunit;
ifthelatter, howdetermined).
Thebeneficiary isthecorporation whotakes theinitiative toelaborate, toestablish and
tooperate aninvestment project within therelevant region.
Theproject tobeestablished withthefinancial assistance fromFINAM andFINOR must
bedirected towards aneconomic activity ofinterest toregional development. Private sector projects
directed towards agriculture and cattle breeding, agro-industry, tourism, fishing,
forestation/reforestation, energy, transportation andcommunications areconsidered apriority. The
following arecomponents ofprojects which canbefinanced byFINAM orFINOR: preliminary
andcomplementary construction, civilconstruction, infrastructure equipment (including itssetup),
infrastructure, machinery, equipment anddevices (including theirsetup), vehicles andvessels,
acquisitionofknow-how,furnitureandutensils,preparationofareaandsoilforplantation,acquisition
ofseeds andseedlings fortransplant, installation ofnurseries andclone gardens, plantation,
agricultural andcattle installations andacquisition ofanimals (including semen).
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunitsubsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
ResolutionsNo.7077/91and7763/93stipulatethelevelsofparticipationofFINAMresources
inthecomposition ofthefunding fortheprojects (from 40to50percent), calculated inreference
tothetotalinvestments, forapplication infixedinvestments, withdeduction ofthefinancing granted
totheproject byother sources ofcredit.
FINOR/FINAM
Fiscal Benefits (Budget)
inUS$million
1995
FINOR 326.30
FINAM 225.00
8. Duration ofthesubsidy and/or anyother timelimits attached toit,including date
ofinception/commencement.
Thefinancial benefits werecreated byDecree No.1376, dated 12December 1974. The
benefit hasbeengranted since 1975.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy. Thespecific
andscope ofsuchstatistics islefttothejudgment ofthenotifying Member. Tothe
extent possible, relevant and/or determinable, however, itisdesirable thatsuch
information include statistics ofproduction, consumption, imports andexports ofthe
subsidized product(s) orsector(s).
DatanotavailableG/SCM/N/3/BRA
Page16
VI. FNE/FNO/FCO
Constitutional Funds fortheFinancing oftheNortheast, theNorth andtheMidwest
Regions
1. Title thesubsidy programme ifrelevant orbrief description oridentification of
thesubsidy.
Constitutional Funds forthefinancing ofproductive sectors intheNorth, Northeast and
Midwest Regions.
2. Period covered bythenotification.
January toDecember 1995.
3. Policy objective and/or purpose ofthesubsidy.
Tocontribute tothesocial andeconomic development oftheNorth, Northeast andMidwest
Regions, through federal financial institutions ofregional character, bymeans oftheimplementation
ofprogrammes forfinancing productive sectors inconformity with therespective regional
development plans.
4. Background andauthority forthesubsidy (including identification ofthelegislation
under which itisgranted).
LawNo.7,827, dated 27September 1989, which regulates Article 159,paragraph I,letter
“c”,oftheFederal Constitution, creates theFNO, FNE andFCO. Theadministration ofeach
oneoftheConstitutional Funds forfinancing theNorth, Northeast andMidwest isdifferent and
autonomous, andisoftheresponsibility ofthefollowing entities:
(i) theDeliberative Council oftheSuperintendencies forDevelopment oftheNorth, Northeast
andMidwest Regions, which hastheauthority toapprove thefinancing programmes and
guarantee compatibility oftheapplications withthose ofother regional development
institutions, andtoevaluate theresults oftheprogramme;
(ii) regional financial institutions (Banco daAmazônia -BASA, inthecaseoftheNorth Region;
Banco doNordeste doBrasil -BNB, inthecaseoftheNortheast; andBanco doBrasil,
inthecaseoftheMidwest Region), which havetheauthority toapprove andtomanage
theresources, todefine norms andoperational procedures, tomake theproposals compatible
withtheprogramme conditions, toformalize thecontracts forthetransfer ofresources,
toaccount fortheresults obtained andfortheapplication ofresources.
5. Form ofthesubsidy (i.e.grant, loan, taxconcession).
Loans withlongterminterest rates(TJLP) plusannual charges of6percent.
6. Towhom andhowthesubsidy isprovided (whether toproducers, toexporters, or
others; through what mechanisms; whether afixed orfluctuating amount perunit;
ifthelatter, howdetermined).
Thefunds allow theconcession offinancing toproductive sectors ofbeneficiary regions.G/SCM/N/3/BRA
Page17
7. Subsidy perunit,orincases where thisisnotpossible, thetotalamount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year). Where provision ofperunitsubsidy information (fortheyear
covered bythenotification, fortheprevious year, orboth) isnotpossible, afull
explanation.
FNO/FCO/FNE
Budget inUS$million
1995
FNO 162.23
FCO 162.23
FNE 486.70
Theabove figures refertototalbudget andnottoactual subsidy outlays.
8. Duration ofthesubsidy and/or anyother timelimits attached toit,including date
ofinception/commencement.
Theapplication ofthebenefit hasoccurred since September 1989.
9. Statistical datapermitting anassessment ofthetrade effects ofthesubsidy. Thespecific
andscope ofsuchstatistics islefttothejudgment ofthenotifying Member. Tothe
extent possible, relevant and/or determinable, however, itisdesirable thatsuch
information include statistics ofproduction, consumption, imports andexports ofthe
subsidized product(s) orsector(s).
Datanotavailable