Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Thursday, November 23, 2017

WTO defends the free trade of the great powers, while Brazil accommodates itself

The agency opened a case against the country for complaints by the European Community and Japan against programs to encourage local industry, among which are some related to ICT. Although the WTO already resolved to request changes and eliminations, the Brazilian government appealed and the process can be extended until October 2018. After that date, Brazil will have 90 days to proceed with the modifications.

The World Trade Organization (WTO) has asked Brazil to withdraw subsidies for the national production of content, to eliminate the Law on Computing and other programs such as InovarAuto -incentive for technological innovation in the automotive manufacturing chain-, or Support for the Technological Development of the Semiconductor and Displays Industry (Padis, for its Portuguese acronym). The argument for this type of process - which was initiated by the European Union and Japan - is that establishing differentiated tax regimes for products produced in Brazil is a way of subsidizing them, affecting those imported and exercising anti-competitive practices.

There were also processes against the programs of Support for Technological Development of the Equipment Industry for Digital TV and the digital inclusion program, which were written off. However, faced with this new complaint from the WTO, the Brazilian government filed an appeal and must submit its report at the beginning of 2018, that will most likely not have modifications to comply with international trade rules.

Computer Law

Although the government does not want to advance on the changes that are studied for the Computer Law arguing that in previous statements they were used against the country in a dispute, ensure that they aim to maintain the benefits achieved by public policy.

Speaking to the Brazilian press, the Secretary of Information Technology Policy of the Ministry of Science, Technology, Innovation and Communications (MCTIC), Thiago Camargo, said that through the Computer Law, the country invests more than US$ 460 million annually in research and development (R&D), of which 70% corresponds to the software area. In addition, the policy guarantees 135,000 direct jobs, and allows a tax collection of US$ 1.38 billion.

The head of Sepin said that the amendments to the Computer Law - which has been in force for 25 years - would be necessary even without the requirement of the WTO, but they depend on the National Congress. "The moment is positive to bring companies from outside and the MCTIC is not going to renounce to that," said Camargo.

 

Provisional Measure

At the beginning of November, the Executive had a Provisional Measure ready to de-bureaucratize and modernize the Computer Law. Among the planned provisions is the simplification of accountability processes for smaller companies that seek the benefits of the standard. Also the possibility of applying incentive resources in start-ups developers of ICTs through investment funds or government programs, something that was not allowed until then.

Likewise, it is expected that the rendering of accounts of the money granted for R&D will be accompanied by an audit (accredited in the Securities Commission), in order to simplify and speed up MCTIC's audit work. This measure aims to avoid liabilities created after many years of a brake in project verification, which in the end caused the government to declare about U$$ 3 billion, which generated a great accounting problem for companies. After corrections, the value that will return to the public coffers will be US$ 307 million and must be applied to R&D in a kind of Conduct Adjustment Term (TAC) called reinvestment plan.

Strength and challenges

In the midst of the country's appeal to the WTO, the National Confederation of Information and Communication Technology (Contic, for its Portuguese acronym) was created, gathering more than 75,000 companies, representing 8% of the national GDP and employing more than 2 million people. If we only take into account the telecommunications sector, it pays more than US$ 18.4 billion a year and has more than 330 million customers.

The entity was formed from the union between the Brazilian Telecommunications Federation (Febratel, for its Portuguese acronym), the National Federation of Information Technology Companies (Fenainfo, for its Portuguese acronym) and the National Federation for Installation and Maintenance of Telecommunications Infrastructure and Computer Networks (Feninfra, for its Portuguese acronym). In a statement, Febratel said that the creation of the Contic occurs at a time when "the country is facing great challenges."

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