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THE COMPETITION IN 1997
U.S. and
Competitor Expenditures on Export Promotion and
Export Subsidies for Agricultural, Forestry and Fishery Products
Brazil
Export promotion is becoming a higher priority for the Brazilian government as the value of the currency has stabilized and the market has become more open. While it is difficult to isolate expenditures on agricultural products from total expenditures, it is estimated that the portion of Brazilian export promotion budgets which applied to the agricultural sector amounted to $1.35 million in 1997.
Government/Quasi-Government Export Promotion Programs:
Export promotion activities in Brazil are the responsibility of the Department of Commercial Promotion (DPC), Ministry of Foreign Affairs (MRE). In addition to market promotion in other countries, the DPC/MRE is responsible for promoting investment opportunities in Brazil. DPC/MRE is responsible for promotion of capital or industrial goods as well as agricultural and food products. It plans and executes export promotion programs utilizing staff in 117 Sectors of Commercial Promotion (SECOMs) in more than 90 Brazilian Embassies and Consulates overseas. These programs include participation in overseas trade shows and the support of trade missions, as well as training seminars on export promotion. DPC also provides market research, sector studies and statistical data on world markets for Brazilian products. The annual budget of DPC/MRE dropped from US$10 millions in the 70's to US$3.4 million in 1996. For 1997 the Brazilian Government allocated US$11.4 million for DPC activities, but private analysts believe that less than US$6 million will be actually released due to budget restrictions. In 1998 the government plans to introduce a new National Program of Commercial Promotion. The details of this plan are still being worked out.
The Ministry of Industry, Commerce and Tourism (MICT) also plays a major role in the export promotion programs of the Brazilian Government, although its functions are more on the domestic side, such as identifying potential sectors that need export assistance, including financing, as well as preparing market studies and providing training. MICT through the Office of Foreign Trade (SECEX) provides the following services: a) export logistics; b) export financing; c) export data; d) export/import directories; e) export insurance; f) total quality program, and g) market information for Brazilian exporters. The portion of MICT budget that is directly allocated to export services and promotion is not available, but it is estimated by private analysts to reach US$5 million, not including export financing.
Export promotion programs are also becoming the focus of some quasi-government agencies, state promotion boards, and other private sector associations. The most aggressive of these marketing organizations is the National Small Business Service (SEBRAE). A non-profit organization, SEBRAE was established in 1990 and is financed by a deduction by the government of 0.3 percent of company payrolls. Delegates from the government and the private sector make up SEBRAE's National Deliberative Board. It is organized as a system, with the headquarters in Brasilia and 27 other units in each state. The agricultural sector is represented in the national board through the National Agricultural Confederation (CNA), similar to the Farm Bureau in the United States, and by the National Industry Council (CNI), which represents the Brazilian food industry. SEBRAE’s goal is to increase the number of small and medium-size companies involved in exporting to a level of 26,500 firms in the next two years. In view of this, SEBRAE is very aggressive in training, financing and subsidizing the participation of these companies in trade shows overseas, such as the ANUGA show. SEBRAE encourages companies to participate in such shows by providing a booth at low cost and subsidizing airfare. In addition to trade shows in targeted foreign markets, SEBRAE also participates with large pavilions in national foods shows. It also provides customized market research for small companies entering the export market.
Another important quasi-government agency is FRUPEX. It is linked to the Ministry of Agriculture and the main target is fruit production for exports. Recently, the Brazilian government launched a regional program for the Northeast of Brazil, which includes long-term financing of US$1.5 billion to finance the incorporation of 150,000 hectares of irrigated land in the semi-arid back lands of the Northeast to cultivate grapes, papaya, melons, mangoes, and other fruits for exports. Currently, Brazil exports about US$120 million in fruits, and the goal is to triple this value in the next two years.
Some state governments are beginning to play an increasing role in export promotion. Some of these governments maintain state export boards, which are basically financed by local governments to promote their products in selected markets overseas, and by attracting foreign investments to that state. These state export promotion boards are responsible for several annual sales missions overseas, which usually include the governor as the head of the team. The states of Sao Paulo, Rio, Parana, Bahia, Rio Grande do Sul and Goias have been particularly aggressive in this type of marketing promotion. Products from Sao Paulo are mostly manufactured goods, but agricultural and food products such as orange juice, fruits, processed meats, coffee, sugar, nuts, and consumer-oriented products also represent a major portion of marketing activities depending on the state.
Producer/Industry Market Promotion Organizations:
Approximately 250 large Brazilian companies account for 85 percent of Brazil's total exports, including some large Brazilian food companies. Although the branded promotion programs remain as the primary focus of international market development activities of these companies, they are increasingly reorienting their policies to strengthen their trade organizations to become more involved in market promotion and are pouring more resources into these activities. Traditionally, these organizations were charged with lobbying the federal and state government. Today, they are more concerned with market access for their products, providing technical and financial support to Brazilian trade negotiators to fight unfair competition and non-tariff barriers.
The most active Brazilian export market development trade organizations are: the Association of Brazilian Oilseed Crushers (ABIOVE), the Association of Brazilian poultry Exporters (ABEF), the Association of Brazilian Pork Exporters (ABECS), the Brazilian Association of Beef Exporters (ABIEC), the Association of Brazilian citrus Processors (ABECITRUS), the Brazilian Association of Food Industries (ABIA), the Brazilian Association of Plywood Industry (ABIMCI) and the Brazilian Association of Supermarkets (ABRAS). The Brazilian Wine Industry Association (UVIBRA), and the Brazilian Coffee Exporters (ABEC).
In the past, the Brazilian government has funded the participation of Brazilian commodity groups in trade shows, mostly in the European market. However, because of budget constraints, these organizations have taken up more marketing responsibilities, such as organizing trade missions to target foreign markets, such as the European Union, China, and Japan. Reverse trade missions have also become the focus of these organizations, by which the Brazilian companies try to influence foreign government officials to change regulatory requirements affecting market access for their products. For example, one group recently hosted a visit to Brazil of Russian officials which contributed to open the Russian market to Brazilian pork. These organizations are also organizing trade missions to major export markets. Recently, the beef exporters association planned and subsidized the trip of major exporters and government officials to China to participate in the World Meat Congress, and to travel to other countries in Asia to develop export markets for Brazilian beef.
It is virtually impossible to obtain reliable financial data on these trade organizations' export market development expenditures. The best estimate available for 1997 spending in export marketing activities by industry association organizations is US$1.9 million.
Export Financing Programs:
The Brazilian government offers a variety of tax and tariff incentives to encourage export production (such as tropical fruits in the Northeast region of Brazil) and to encourage the use of Brazilian inputs in exported products. In addition, the exemption of state value added tax (ICMS) on exports was finally extended to primary products, such as soybeans, and other agricultural products on January 1, 1997. The semi-processed and processed food products already benefited from the exemption of ICMS tax.
An export credit program, known as PROEX, established in 1991 gained new financial strength since 1996. Under the program, the Brazilian government provides interest rate guarantees to commercial banks which finance export sales, thus ensuring Brazilian exporters access to financing at rates equivalent to those available internationally. Most products eligible for financing under the PROEX program are capital goods, but some semi-processed agricultural and food products can also be eligible. BNDES, the government national development bank, is the primary Brazilian source for longer-term credit. Since 1996, BNDES is becoming more aggressive in providing export financing for Brazilian firms. In 1996, BNDES released US$390 million for financing export operations in general. It is estimated that only 20 percent were for agricultural and food products. During Jan-Aug 1997, BNDES already financed US$612 million in exports. Finally, the Bank of Brazil, a quasi-government bank is the principal arm of the federal government involved in commercial export financing. It is estimated that nearly $550 million in loans for agricultural exports were made using government funds in 1997.
Competitor Activities:
Brazil and other MERCOSUL countries are increasingly targeted for export promotion by competitor countries, particularly EU member states such as France, Germany, Great Britain, the Netherlands, Spain and Italy. These countries primarily use trade shows to promote their products. Many have held solo shows to promote both their manufactured and food products. Foreign participation in established Brazilian trade shows is also increasing. A major focus of European countries has been the use of diplomatic trade missions to increase interest in trading and investing in Brazil. These have included visits by government leaders such as French President Chirac in March 1997 and German Chancellor Kohl in September 1997, accompanied by huge contingents of business executives. Such activities are complemented by the EU’s initiative to negotiate free trade negotiations with MERCOSUL beginning in 1999. In the last two years European countries have made significant inroads into the Brazilian market.
Foreign countries, particularly Canada, also use reverse marketing trips, inviting Brazilian officials to visit the host country. This strategy is especially useful to familiarize Brazilian regulatory officials with host country practices and conditions to encourage acceptance for such products in Brazil. Branded promotions in Brazil are most common for Italian pasta, French frozen vegetables and German wine. It is estimated that more than $1 million is spent for such promotions by these companies.
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