Another Brazil Essay Research Paper Brazil National — страница 4

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system collection and distribution of tax revenues-empowerment of the federal redistribution of public responsibilities between the federal and the states reduction of foreign debt ending the job-for-life security of public servants replace poorly run state pension program with private project privatize and monitor estado(state) banks, stop the chaotic and unsupervised lending to the states open joint ventures or private investment in the remaining state-run enterprises remove restriction on foreign ownership General Trade Pattern Natural resources and agriculture have been the traditional mainstay of the Brazilian economy, backed up by abundant human resources. This is mainly a result of the colonial monarchy for which the infrastructure was built to provide resources for the

mother country’s industries. Since the 1960s, however, emphasis has been shifted to industrial development financed mainly by international loans. As a result, exports today reflect a much more balanced mix of commodities and manufactured goods.(See Table 6) Following the debt crisis of 1982, the servicing of Brazil’s foreign debt required the creation of large trade surpluses. This was achieved by import contraction. Between 1982 and 1990 the value of imports fell from 7% to 4% of GDP.(See Table 4) With the lowering of trade barriers, the profile is changing. A free trade zone was also set up in Manaus in the North to attract business to the Amazon. Leading trading partners are the European Communities, the United States, Japan, and Argentina. During the past decade, the

direction of exports has shifted towards the United States and developing countries, particularly in East Asia. The share of Latin American countries has declined from 18% to around 12%, reflecting unstable economic conditions in those markets.(See Table 7) Imports are also mainly from the United States and Europe. Within Latin America, MERCOSUL countries and Chile are the main suppliers.(See Table 8) Brazil is a member of the Latin American Integration Association(LAIA), and a founding member of the General Agreement on Tariffs and Trade(GATT). Special tariff preferences are granted to imports from members of the LAIA and the Global System of Trade Preferences among developing countries(GSTP). It is also a member of the Southern Common Market(MERCOSUL), an agreement among

Brazil, Argentina, Paraguay, and Uruguay aiming to gradually eliminate all tariffs in 1995. There is also a Brazil-Argentina bilateral agreement that would increase trade between the two nations. The success of these regional agreements may increase the chance of a future common external tariff. Foreign Investment The Constitution establishes that foreign investments should be in the national interest, and it is welcome to the extent that it represents a long-term commitment to the economic development. Areas particularly favored by the local include development of agriculture, technology, labour-intensive industries, and manufacture of products that are currently imported and those that will increase exports. Foreign investors may also participate in the National Privatization

Program by converting Brazilian foreign debt securities, or by subscribing to the privatization funds. Although there are no federal tax incentives to attract foreign capital, many states and local government offer tax concessions especially in the poorer Northeast and Amazon regions. Except for the above tax incentives, all corporations are subject to 26% corporation income tax. There is a strong control over foreign currency transaction which is monitored by the National Monetary Council. All foreign currency loans have to be approved by the Central Bank. When Brazil is short of foreign exchange, the Central Bank centralizes all foreign currency repatriation and remittance requests, and releases foreign currency when it becomes available. Therefore delays occur, though the Bank

pay interest compensations. Foreign ownership is restricted in certain industries viewed as strategically important. These include communications, aviation, defense, classified government contracts, coastal and freshwater shipping, financial institutions, and privatized companies. Other than these, foreign firms are generally allowed to have 100% ownership. Under the Constitution, national capital companies may also receive temporary market protection or benefits in activities considered to be important or national development. There is limitation on rural land but no restriction on ownership of urban land and buildings. Security markets are available with the principal stock exchanges in Sao Paulo and Rio de Janeiro. All public issues of securities have to be registered with the