Category: Doing Business

Brazil highways’ maintenance to the private sector on 10 year contracts — MercoPress

Brazil highways’ maintenance to the private sector on 10 year contracts — MercoPress.

Following Japan, Korea disputes IPI increase at WTO

As expected more and more countries are lining up to challenge the unreasonable protective measure by the Brazilian government to increase the Tax on Industrialised Products (IPI). Last month, Brazil raised the so-called IPI by 30 percentage points for imported cars that aren’t made with at least 65% local content. Excluded are those from companies that produce locally or in Mercosul partners. Established carmakers such as Volkswagen, Fiat,General Motors Co. and Ford, which together account for about three-fourths of car sales, had complained about the influx of cars as Brazil’s currency strengthened and demand jumped.

Japan may be the first country to challenge at the World Trade Organization the Brazilian this increase in the IPI tax. In addition to Japan, South Korea also objected to the increase for imported cars decided by the Brazilian government. The two countries that are producers of automobiles, said that Brazil violates the agreement of trade-related investments as well as an article of the World Trade Organization (WTO) on national treatment of companies.

Both Korea and Japan has decided to challenge the measure of the Brazilian government in the Market Access Committee , which periodically examines new barriers raised by the countries. The report itself noted that the Japanese action could pave the way for other governments complain of Brazil, as it did. Japan will ask judges at the WTO to examine the measure. Though most Japanese car makers produce locally, exempting them from the tax, the country’s government is concerned that a similar measure could be repeated by other countries. The issue was raised with Brazil during a meeting of the WTO’s market access committee on Friday, said Atsushi Saito, Japan’s representative at the Geneva-based organization. In addition to Japan, members from South Korea, Australia, Europe and the U.S. also voiced their concerns, Saito said. When asked if Japan planned to file a formal complain with the WTO, Saito replied in an email that “If you understand that ‘formal complaint’ is part of a dispute settlement process, we don’t have any plans at this stage.”

More than 20% of cars sold this year are imported, up from just 5% in 2005, according to automakers association Anfavea. But the tax hike was challenged by car companies who are building or plan to build factories in the country and who say that because they won’t be able to meet the full local content requirements during the first few years of operations, they would cancel plans to bring production onshore.

Government willing to negotiate?

The government has since said it would negotiate with those companies to reach a compromise. This is also confirmed by China’s JAC Motors. JAC Brazil says it has finalized a deal to build a $500 million car factory in Brazil. JAC Brazil says in an emailed release the factory will be built in the northeastern state of Bahia. The plant should be ready by 2014.The automaker said in August it wanted to build a factory in Brazil. But those plans were questioned after Brazil hiked the import taxes on foreign cars, threatening the Chinese-made vehicles JAC ships to Brazil. JAC says in its Friday statement it hopes the decision to invest will convince officials to scrap that tax hike.

BMW considers building a factory in the country, but..

BMW asked Brazil’s Trade and Development Minister Fernando Pimentel to reevaluate the increase in the IPI tax as it considers building a factory in the country, O Estado de S. Paulo reported, citing Henning Dornbusch, chief executive officer of BMW’s Brazil unit. The Brazilian government’s decision to raise the tax on cars with less than 65 percent of their parts produced in Brazil may lead BMW to build its plant in China, India or Russia instead, according to the newspaper. The company will announce its decision by November, O Estado said. The Ministry of Trade and Development’s press office said Pimentel hasn’t made any commitment relating to BMW’s request because the decision must be made in conjunction with Finance Minister Guido Mantega, O Estado said.

 

Chinese Car Maker JAC to Build in Brazil – WSJ.com

Chinese Car Maker to Build in Brazil – WSJ.com.

SÃO PAULO—Anhui Jianghuai Automobile Co., the Chinese auto maker known as JAC, and its Brazilian partner said Friday that they decided to go ahead with plans to build a factory in Brazil on hopes that the government will modify a production tax.

SHC, the company that imports JAC automobiles into Brazil, said it would invest 80% of the 900 million Brazilian reals ($509 million) needed to build the factory, with JAC providing the rest. The factory will be built in the northeastern Brazilian state of Bahia, with output set to begin in 2014.

Brazil’s market—the world’s fourth-largest by sales—has attracted heavy investment. Sales are expected to grow 5% this year, slowing from last year’s 12% expansion as the government raised interest rates earlier this year to rein in an overheated economy.

The JAC factory, with initial capacity of 100,000 vehicles, will be in the city of Camacari, an industrial area where Ford Motor Co. has a plant. JAC will assemble and paint the cars locally, with stamping and motor-production capacity set to be built later.

JAC began selling cars in Brazil in March of this year, and through September had sold 17,421 vehicles. With four models sold locally, JAC accounts for 0.9% of all cars sold this year, according to auto dealers association Fenabrave.

SHC and JAC will also build a research center to locally develop parts such as flex-fuel engines–the predominant kind in Brazil, which can run on gasoline, ethanol, or a mixture of the two–as well as a design center and a test track.

The factory plans had been announced in August by SHC president Sergio Habib, although a location had yet to be decided upon. A month later, however, Brazil said it was raising the a tax on autos by 30 percentage points—to a range of 37% to 55%, from 7% to 25%—exempting only cars that used at least 65% locally produced content.

Mr. Habib said last month that the tax would also hurt auto makers that in recent months had begun building factories in Brazil, such as South Korea’s Hyundai Motor Co. and China’s Chery Automobile Co. Mr. Habib later said he may cancel plans to build the factory because it was impossible for any company to begin production with 65% local content.

Brazil’s Trade Ministry said earlier this week that it was considering making the rules more flexible. News reports said the government may consider gradually increasing local content requirements for newly installed factories.

Also Friday, Mr. Habib said Friday that he is in talks with India’s Tata Motors to import the company’s cars. Tata officials weren’t available to comment.

Steve Jobs is not Brazilian:The Apple founder Steve Jobs, died without seeing his company operate normally in Brazil.

Steve Jobs is not Brazilian

Icon Steve Jobs

Steve Jobs died

The Apple founder Steve Jobs, died without seeing his company operate normally in Brazil. The he is rightly being hailed as a revolutionary genius who transformed the way we sell and consume culture and technology. That’s a lot. But one thing he could accomplish was to make his business occupy the space it deserves in the phenomenal Brazilian market. And that says a lot more about Brazil than Jobs.

To date, Apple products are commercialized by third parties in Brazil, as the American company was unable to develop a viable business model in the homeland of the high taxes and poor business environment.

Brazilians pay double or more than Americans for an Ipad created by Jobs and his team. The last stand for the normalization of the action here was Apple’s announcement, over hyped to say the least, the construction of an IPad factory here.

The announcement came during Rousseff’s trip to China in April. In the absence of any tangible result of the visit, it was announced with great fanfare and no substance that Foxconn, the Taiwanese company that manufactures iPads would open a new factory in Brazil to produce them here. It was what Dilma and PT needed to capture the emerging middle class in the country.

As I wrote here at that time, Apple cannot sell its products in Brazil because of its poor economic conditions, called on the Taiwanese company that manufactures and iPods, IPads in China to produce them here and so get around the precarious economic environment and still be sold as an asset of Dilma’s visit to China. There is the “spin”!

The factory as of today is still obviously a promise. First there was talk of initial production in November, then that BNDES would finance the US$ 12 billion investment, then came the talk that there was no skilled labor in the country to implement the project, then start the operation would begin with Mexican “maquiladoras” only assembling the products here.

The fact is that Steve Jobs is dead, and Brazil is still largely excluded the Apple revolution. While we continue with one of the most expensive and slowest internet connections in the world.

These are the things that explain why we are behind despite the huge advances in recent years, and our dependence on blessed commodities, which without them we would have disastrous trade deficits.

If Jobs was able to transform so much, who knows that maybe this commotion with his death will illuminates the heads of our bureaucrats and accelerate liberalization of the Brazilian market and digital technology.

Taxing technology is taxing knowledge, innovation and the future. It closed the borders to Steve Jobs.

Attributions:

BR ECON: Steve Jobs | Expat Living in Goiânia, Brazil. /

Article by Sérgio Malbergier, Folha de São Paulo, published on Expatbrazil

Sergio Malbergier is a journalist. He was editor of the special money section of Folha (Dinheiro – 2004-2010) and Mundo (2000-2004), correspondent in London (1994) and Special Envoy for Folha in Iraq, Israel and Venezuela, among others. He has directed two short films, A Árvore (The Tree -1986) and Carô no Inferno (Dear Hell – 1987). He write for Folha.com on Thursdays.

Brazilian government taking a big chunck from a $100.000 salary

Effective tax rates

KPMG Study Effective tax rates

KPMG Study Effective tax rates

Brazilian government takes 40%  from a $100,000 salary?

BRAZIL has a income tax of 27.5% for a person earning $100,000, according to a survey of effective tax rates in 93 countries published on September 29th by KPMG, an accounting firm. But employee social-security contributions in Brazil are 12%, and once such contributions are taken into account, high earners in Brazil will take home 62% of their salary. Brazilian high earners will still take home more than several countries, including Belgium, Greece, Germany and France. Belgium’s government grabs the highest share from earnings of $100,000, at almost 48%.

Incomes in Brazil

Brazilian income tax rate bracket of 27,5% starts at salaries above R$ 3911,63. With inflation at almost 7% one can expect salaries will increase next year, pushing more tax payers in the higher bracket. The unions are propping up for higher salaries. At the moment the government owned banks are striking, in several states teachers and police are striking for better working conditions and higher salaries. A significant shortage of qualified and skilled labour force and high demand as a result of the relative strong economy and implemented government (protectionism) programs will push salaries further.

Just a few years ago salaries of R$ were very exceptional, but a recent survey of DataFolha shows that more and more categories have moved in to this salary scale over the last couple of years.

The good news is that more taxes income is available for the government to implement the much need infrastructure, social and education programs. The challenge is the execution power of the various governmental powers to implement the plans in budget and on time. The real bad news is that higher salaries are pushing inflation. Not only will the cost of production increase, but also consumer demand will increase. In the overheated economy (some already signaling a bubble) producers will be able to raise prices of their products. In a few critical branches of the economy this is further supported by the government to frustrate foreign direct investment. The clearest example is the recent increase by 30% of the import taxes on cars not produced in Brazil. With the major economies in the world suffering, one might ask himself whether Brazil will escape a financial crises.

 

 

 

 

Protectionism: R$ 600.000 investment threshold for investment Visas in Brazil

Brazilian government shooting in their own foot

Brazilian government shooting in their own foot

Protectionism all over the place: Brazil is closing its doors

In another attempt protecting the labour market, Brazil has raised the minimum capital requirements for granting permanent Director’s Visas in Brazil. In the past it was possible to obtain a permanent visa for intra-company transferees to work as managers, directors, or executives with a minimum investment of US$200.000. From now on, companies have to invest at least R$ 600.000 in order to obtain a visa for its foreign directors who are coming to live in Brazil. Each additional director will require another R$600.000.

On this blog I have already given other examples of protectionism by the Brazilian government. Just a few days ago I wrote an article about the massive tax increase (+30%) on imported cars. Also the wind-energy industry is experiencing the measurements to protect the local (monopolist) steel industry.

Although the increased capital requirements and the additional option to get visa for foreign managers will provide additional revenue for Brazil government and facilitate the creation of jobs in the country, they could add further stress on the already tight labour market particularly for qualified labour and possibly discourage long term productive foreign direct investments  in Brazil vis-a-vis other similar foreign direct investment destinations with a more favourable legislation on foreign labour.

Again, this looks like another time the Brazilian government is shooting in its own foot.

So, as the Economist already mentioned in their April 2007 issue:

The Brazilian formula is to crowd out enterprise or drive it underground with excessive spending and taxation, then to harass it further with capricious, nonsensical regulation.

Source:  RESOLUÇÃO NORMATIVA Nº 95, DE 10 DE AGOSTO DE 2011

Wind industry is caught in a Brazilian steel-price trap

In Depth: Wind industry is caught in a Brazilian steel-price trap

High domestic steel prices are one of the main barriers to making future wind projects profitable in Brazil.

Developers are facing razor-thin margins after the two power tenders in August saw some projects awarded power-purchase contracts at less than R$100 ($58.30) per MWh.

Wind energy

High domestic steel prices are one of the main barriers to making future wind projects profitable in Brazil.

The price of steel is 50-70% higher in Brazil than on the international market. Belo Horizonte-based Usiminas — a former state-owned company privatised in the 1990s — enjoys a near monopoly on domestic steel plate supply, and the government allows it to set different prices for domestic sales and exports. At the same time, Brazil’s national development bank, BNDES, will not give developers full access to its funding unless at least 60% of a project’s equipment is produced in Brazil. That percentage is determined by weight, and towers can constitute 80% of a wind farm’s mass. Nearly all Brazilian developers depend on the bank’s cheap financing to make their projects viable, and BNDES does not consider foreign steel rolled in Brazil as local content, meaning that companies are generally unable to import from abroad.

Last year, BNDES was considering an exception to its rules for imported steel, but the proposal was shelved in August. Brazil’s steel industry is facing strong competition from imports, putting pressure on margins, so producers fiercely oppose any relaxation of local-content rules. “Clearly, if you want to play in Brazil, you have to get access to BNDES financing, and that exposes you to these steel prices,” says Brian Gaylord, an analyst with MAKE Consulting in Chicago, who specialises in the Brazilian market.

He says the high cost of steel plate makes towers disproportionately expensive in Brazil. Gaylord says some companies experimented with importing Asian steel for about a third of their requirements, but the strategy needs high volumes to create any real price advantage.

Wind turbine manufacturers, developers and industry representatives are highly critical of government policy, and are increasingly looking to concrete towers as an alternative.

“Obviously they [Brazil] want to build a steel industry and they are doing it by artificially raising prices,” Steve Sawyer, secretary-general of the Global Wind Energy Council, tells Recharge. “It’s good for the steel industry, but bad for everyone else.”

“It’s the prerogative of a sovereign state,” says Alstom’s vice-president for wind, Alfonso Faubel. “Steel is used in development, so if you want development to take place you are always going to have certain conditions of local content.”

But Edgard Corrochano, Mercosur director at Gamesa, which was one of the most aggressive bidders in the recent tenders, says he hopes the situation will change, with Usiminas becoming more competitive. “Either [Usiminas] gets with the programme and they have international prices in Brazil, or we are going to see a tendency to go to concrete towers. And as soon as that happens, it’ll be very difficult for it to come back to steel.”

Other manufacturers point out that steel towers, as well as being expensive, are difficult and costly to transport.

Suzlon Brazil chief executive Arthur Lavieri says: “Almost everybody is talking about concrete, and it’s not only because steel prices in Brazil are completely insane, but also because bringing steel tubes of 100-120 metres 3,000km from the biggest factories is simply not possible.”

However, concrete towers need to be made on site, which can be expensive.

“To take advantage of price advantages you need a big project size,” says Gaylord.

Leading local turbine manufacturer Wobben Windpower is experimenting with using mobile concrete plants to build the towers, while Vestas sales director Marcelo Hutschinski says his company can offer concrete towers for wind farms larger than 100MW.

Officials at some turbine manufacturers admit there are drawbacks to concrete, and say they have few alternatives to buying expensive steel.

Source: RECHARGE; Ben Backwell, Rio de Janeiro; Published: Thursday, September 15 2011

Brazil will raise taxes on imported cars to protect domestic production

The government will more than doubled the IPI (Tax on Industrialized Products) for domestic and imported vehicles that do not meet requirements such as investments in technology and a percentage of 65% domestic produced materials.

Because of a common automotive regime between Brazil and Argentina, automakers operating in the neighboring country and sold to the Brazilian market will also be affected. The announcement was made Thursday by the Ministers Guido Mantega (Finance), Fernando Pimentel (Development) and Mercadante (Science and Technology).

According to Mantega, the measure can leave cars 25% to 28% more expensive than today. The government says the measure will impact on car prices by up to two months.

Maserati

This Maserati will be around 30% more expensive after the new implementation of the higher taxes on imports

Currently, the tax rates of the cars produced in Brazil range from 7% to 25% depending on the model and power the car. The new rate will increase by 30 percentage points, from 37% to 55% depending on engine capacity. For cars up to 1,000 cc, the IPI will rise from 7% to 37%. For vehicles from 1000 to 2000 cc, the rate, currently between 11% and 13%, will rise to 41% to 43%. In addition to passenger cars, the measure will include the manufacture of tractors, buses, trucks and light commercial vehicles.

NATIONAL PRODUCTION

To maintain the current rate and avoid the increase, automakers must prove they aare manufacturing cars with a least 65% domestic produced materials and that they have centers of technological development in Brazil. In 60 days, the Ministry of Development, Industry and Foreign Trade will check the qualifications of companies that meet the requirements and will not have tax increase. In addition, companies will have 15 months to maintain or expand their investments in technology.

The measurement will be in effect until December 2012 and is part of the plan to stimulate the industry ‘Brasil Maior’, announced last month by President Rousseff.

COMPETITIVENESS

The objective of the measure is to foster competitiveness in Brazil, and make the vehicles manufactured in the country have more local content. The government hopes thereby to stimulate production in the country one of the ways to generate more employment in the country. “It’s a complementary program of  “Brazil Maior” to compete more solid with the import cars by means of stimuli for the Brazilian industry, one that produces vehicles in Brazil and Argentina,” said Mantega.

“It has happened that the market is depleted, the crisis has reduced consumption. There is excess capacity and a greater competition for markets. Brazil has maintained high sales, re-established after the 2008 crisis of production and consumption. But there is an appropriation that by international manufacturers, “he said.

The minister said the goal is to prevent the export of manufacturing jobs. “We run the risk of being exporting jobs to other countries. We were concerned with the increase of vehicles in stock. Industry is innovation, creates jobs and the market should be enjoyed by the domestic industry,” said Mantega.

Brazilians paid 998 Billion of taxes to date…..

Tax-o-meter reaches $ 1 trillion today

Tax payment reaches the level a month earlier in 2011

You know how much you’ve paid in taxes, levies and contributions to the three branches of government – federal, state and local – in this year?

September 13, 2011

"Leao Imposto"

Today, September 13th 2011, the Brazilian tax agency collected a total of R$ 1 trillion

The total volume will reach $ 1 trillion at about 11am on Tuesday(13), according to the ACSP tax-o-meter ((Associação Comercial de São Paulo). In 2010, the mark was reached 35 days later, on Oct. 18.

With that money, you could build almost 48 million housing units of 40 square meters, about 82 millionclassrooms, one thousand kilometers of paved roads, almost 4.8 billion purchase of staple foods, building nearly 4 million licensed seats health or acquire around 400 000 flat screen televisions.

The Tax-o-meter was implemented in April 2005 as a result of the partnership with the Commercial Association of IBPT (Instituto Brasileiro de Planejamento Tributário). Anyone can follow the government’s tax revenues. Simply access the site.

LinkedIn looking for Brazil chief executive | Reuters

LinkedIn looking for Brazil chief executive | Reuters.

Fri Sep 9, 2011 3:03pm EDT

* Professional social network looks to open Braziloffice

* Brazil users top 4 million, key growth market

(Reuters) – Professional social network LinkedIn (LNKD.N) said on Friday it was seeking a chief executive in Brazil for its Portugese-language service launched last year.

LinkedIn

LinkedIn opening Brazilian office

“When we find a chief executive for Brazil, he will help us open an office,” said Danielle Restivo, LinkedIn’s communications director for Canada and Brazil, in a telephone interview with Reuters.

Restivo said the move by major Brazilian companies Petrobras (PETR4.SA), Vivo VIVO4.SA and Itau Unibanco (ITUB4.SA) to open pages on the site helped it gain 4 million Brazilian users since April 2010 to reach a total 120 million users globally.

Brazil and Mexico are among LinkedIn’s fastest growing countries, LinkedIn Chief Executive Jeff Weiner wrote in a blog post in March, when the company was growing at a rate of about 1 million new members every week with more than half of its users outside the United States.

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