GENERAL AGREEMENT ON TARIFFS AND TRADE

Transcription

1 GENERAL AGREEMENT ON TARIFFS AND TRADE Committee II - Expansion of Trade RESTRICTED COM.11/73 18 May 196 Limited Distribution Original: English TRADE IN AGRICULTURAL PRODUCTS BRAZIL Synopsis of Non-Tariff Measures for the Protection of Agriculture or in Support of Incomes of Agricultural Producers furnished by the Government of Brazil General Objectives The growing population of the country and the constant efforts toward quicker economic development have brought an increased demand for food in the domestic market and a constant pressure upon the imports of foreign goods. One of the essential objectives of the agricultural policy in Brazil is therefore to increase the output in order to meet the demands of the domestic market and the possibilities offered by foreign consumer markets. It is also necessary to obtain a higher diversification of agricultural production in the country. With the fast growing urban centres, the habits of the population are changing quickly, demanding'new products for which agricultural production has to adapt in order to supply. It is also expected with this diversification to enlarge the role of the exportable products and thus to avoid the position in which the country is at the moment dependent on one crop for 60 per cent of its foreign currenoy revenue. To improve the techniques of production is also an important objective of the Brazilian agricultural policy, and efforts have been directed in the sense of attaining a more satisfactory index of labour productivity in agriculture. II. MEASURES OF PROMOTION (A) General Measures In order to attain these objectives, measures taken by the Government are the following: 1, Technical assistance, through research, training and extension work. The Ministry of Agriculture and some State Departments of Agriculture maintain experimental stations and staffs of technicians to study the problems of plant and'animal production. They also maintain a regular extension service among producers.

2 CCM.ii/73 Page 2 2. Credit facilities. The Bank of Brazil offers regular short- and medium term credit for the expcnsos of farm operation at more favourable rates of interest than usual in commercial business. It constitutes an important incentive for producers. L few other financial instituions, such as the Bank of the State of Sao Paulo and the National Bank for Cooperative Credit also operate mainly in short term credits, (B) Special Measures Among th&so it is worth mentioning the following: 1. Minimum price for food products. In accordance with Federal Law No, 1506 the Commission for Production Financing (Comissao de Financiamento da Produçao - CF.P.) must make public, three months before the planting season, the prices which will be guaranteed for rice, beans, maize, soya bean, peanuts, wheat, sunflower seeds, manioc products, yerba-mate and & few others. Other products, such as cotton, coffee and sizal, may or may not bo included, depending on the special situation of their respective markets. The guarantee system works through the purchase of products or by financing 80 per cent of the price. The influence of these measures on markot prices has been only indirect, due mostly to the presence of the Commission on the market, sinco the minimum prices are usually set at a level much lower than the current prices. In past years small purchases, of local interest, were made of beans, corn, sizal, jute, rice and carnaubawax in the most distant regions. With the exception of coffee, major intervention was made in the cotton crops of 1952 when the Commission became the only purchaser in the market. With foodstuffs the largest operation was still modest as comparod with cotton. Another Governmental Agency, the "Federal Commission on Food Supply and Prices" (Comissao Federal de Abasteclmento e Preços COFAP) has among its aims the establishment of fired prices for certain articles. In principle, this agency should cover a wider field since it has the responsibility of dealing with all the problems of adequate supply of food and raw materials to the population and, in order to achieve that, the agency is avithorlzed to accumulate stocks, import or seize privately owned stocks. However, its function has been limited to establishing prices for products which, due to specific conditions of marketing or production, are easily controlled, for example milk, meat, cotton, seed oil, vrtieat, by-products and imported foodstuffs. Even for those products the price control has been limited to special occasions, when it was considered that the forces of the market were not able to operate freely. With milk the GOFAP has a pormanent scheme for the regions that supply the large urban centres. The agency does not purchase the product but has a discretionary power for establishing a minimum price to producers and a maximum price to consumers.

3 COM. n/73 Page 3 The prices of milk industrialized products are not subject to permanent' control. Only in adverse situations does the COF.iP interfere in the prices. The export of foodstuffs and certain raw materials also depends on authorization from COP.ÛP. Authorization is granted when supplies in the domestic market are considered satisfactory. Due to that control the domestic price of these goods may for some time be lower than world prices. Price fixing is adopted for rice and meat in the State of Rio Grande do Sul; this operates through specialized Institutes, and has only an indirect effect on the prices of the products in the other regions of the country. 2. Exchange Control has been an instrument for implementing agricultural policy. With a system of multiple and variable exchange rates it is possible' to exercise some influence both on volume and direction of imports and exports. On the export side there are different categories receiving different values of premiums above the official rate of exchange (Cr$l8.36). The classification of an export product into the'different categories depended mainly on the capacity of the product to support it. However, the influence of this system has been more of a fiscal character since tho rate of exchange has always been lower than the free market rate. Only in October 1958 were agricultural products first moved to the free market (SUMOC Instruction No. 167). At present all products are in the free market except coffee and cocoa whose exchange rates are still fixed at 76 cruzeiros per dollar and castor beans which are at 100 cruzeiros. On the import side the goods are classified in two categories, Goneral and Special, according to a criterion of essentiality. In the general category are included raw materials, industrial machinery, other production goods as well as popular consumer goods for which domestic supplies aro inadequate. The special category includes articles which are not commonly used by the majority of consumers and articles which are in sufficient supply in the domestic market. The classification and the allocation of various foreign currencies to each category are determined by the Council of SUMOC, taking account of the traditional pattern of imports, commitments under bilateral or multilateral agreements and the requirements of the Brazilian economies. A small proportion of exchange is at present allocated for imports in the "special" category. Particular currencies are sometimes offered at auctions without limitation of of amount.. Special auctions of foreign exchange are held for certain imports used exclusively in agriculture, such as specified fertilizers, insecticides, fungicides and fumigants, for imports of parts of cars or cars having certain specifications and occasionally for imports of particular commodities (e.g. Christmas decorations) from specified countries, "Premia" obtaining in such auctions have been considerably lower and close to the set minimum (82/83 cruzeiros per United States dollar).

4 COM.II/73 Pago 4 Exchange control, with the system of "premium" paid by the importer and "bourses" received by the exporter, gives a surplus which is registered into a special account (conta dos Agios). This fund is used for different purposes. Part of the support of coffee prices is done with the help of this fund. The agricultural credit given by the Bank of Brazil gets support from it. A' part of the fund is also used in the rehabilitation programme of coffee farms. 3. Institutes. Certain products have special Institutes for promoting production and controlling prices. For example, the Sugar and Alcohol Institute (Instituto do Açucar e do Alcool) establishes'yeai'ly production quotas for the si\gar mills, according to the expected demand. The operation of a new sugar factory or the enlargement of an old one depends upon authorization from the Institute. The sugar price is fixed by the Institute. Howover, the Institute does not buy or hold stocks. If the market is not firm it only extends credits to the mills against guarantee of the sugar produced. Recently the producers in the State of Sà'o Paulo organized themselves into a cooperative (Cooperativa dos Produtores de ACiacar de Sào Paulo) for the marketing of the product. Jt is expected that the cooperative will be effective in maintaining the fixed price. Recently the fixed price was made Uniform for all the mills in the country. A tax was charged on the product (Cr&24-00 per bag) in order to raise a Fund (Fundo de Compensaçao de Preços) for paying the freight and the transportation expenses to the consumer centres. There is another tax of Cr#3.10 per bag (Taxa de Defesa de Preço) which is used to protect the price, and still another tax that is used for covering the difference in price of the sugar exported. This tax is collected in a special Fund (Fundo Complementer de Safra). However, since the product was moved to the free market and since tho rate of exchange in this market underwent new devaluation, no compensatory payment is now necessary. Due to these measures adopted in tho past, the sugar industry has reached a very satisfactory level. The crop yields are good and the sugar extraction reasonably high. The total sugar production has increased from a yearly average of 21.1 million bags is. the period of 1945/50 to 52.5 million in the year 1958/59. And now in 1959/60 it is expected, taking into account the sugar cane planted, that production should reach 62.5 million bogs. However, the control was tightened and tho quota established by the Institute was reduced to 50,9 million. The Wheat Development Service (Serviço de Sxpansao do Trigo - S..E.T.) was created in 1945 for the purpose of coordinating and promoting the cxiltivation and distribution of the country's wheat crop. It establishes for every mill quotas of national and imported wheat according to domestic production, the quantity of wheat imported, the milling capacity of the various mills and the calculated consumption in the regions served by them. The import of foreign wheat is also controlled by the Government who determines the quantity to be imported. Import transactions are carried out by the Bank of Brazil which sells the product to private mills according to the quotas established by the S.E.T.

5 COL.11/73 Page 5 Wheat is imported at a favourable rate of exchange which is now CrvlOC.QO per dollar whereas the rate in the free market is CrOlSO.OO, but the Bank sells it to the mills for a higher price. The difference obtained in the transaction is ascribed to a Fund (Fundo de CompensaçaO de Trigo) which is used for paying a "bonification" to domestic producers (Cr025O,OO per bag) which is not received as cash by the farmers but retained in the Bank for paying for the machines, fortilizor and other production goods that arc to be acquired by them. The mills buy the domestic wheat from the farmers at the price (Crv per 60k bags) established by the S.E.T, The Bank of Brazil makes the transaction. The prices at which the mills sell the wheat flour and its by-products to the consumers are established by the Government and reflect the weighted average of the prices paid for the imported and domestic wheat plus the operating expenses of the mills. The increase in wheat production in Brazil has been remarkable. From a production'of less than 90,000 tons in 1940 it reached more than 1 million tons in In the last three years, duo to unfavourable weather conditions, the quantity harvested fell to 400,000 tons. HI» SUBSIDIES (ALL FORMS OF IKC0ÎJE AND PRICE SUPPORTS) (a.) Price Support The different forms of price fixing in Brazil do not represent a subsidy from the Government or from the consumer. The minimum price of the Commission for Production Financing, as shown in Chapter II, has always been established at very low levels and does not havo the objective of raising the price, but only the avoidance of a drastic fall in years of good harvesting. In fact very seldom does the Commission have to buy or to receive the product. The fixed price adopted by C0FAP is intended mainly to protect the consumer, since the price is not allowed to rise above'a level which is considered necessary to prevent a discouragement of consumption. With some articles, such as milk and vegetable oil, prices are also fixed to protect the producersbut the objective has been only to assure that they receive what is considered to be a fair share of what the consumers pay. With sugar, in previous years, prices were fixed at such a level as was considered to be an incentive to increased production. The domestic consumer was prying it. Howevor, at the present time, tho value of the cruzeiro in tho free market suffered deeper depreciation, no more internal subsidy exists. The domestic price is on a level with the foreign price. In the past both production and consumption of wheat were subsidized. The operation of a multiple exchange rate allowed the maintenance of a very low price for foreign wheat and a higher price for tho domestic product, and through a special mixing policy the consumers had the wheat flour at a price which stood in the middle of both. The burden of the subsidy has fallen mainly upon the exporters of agricultural products. At the moment the samo process is still in practice but no more subsidy exists due to changes that have occurred in the prices of the products and in the rate of exchange.

6 COM. H/73 Pago 6 The froo market rate standing at about 180 cruzoiros per 1 dollar, and being about.74 dollars per ton, the price of the imported wheat would be Cr$ per bag which roughly compares with the Cr paid to the domestic producer at the producing centres. The consumption of chemical fertilizers benefit from special aids. The product is imported with a preferential rate of exchance (official rate of exchange of Cr&lS.92 plus surcharge of Cr$8l.08). And the domestic producers of chemical fertilizers receive a subsidy equivalent to the difference betwoen the price of similar articles imported at the preferential rate of exchange and that which would result if the imports were effected at the cost of the general category exchange plus the amount of tax, (B) Export Aids In fact there are no export aids. The exchange rate control, as was said in Chapter II, has not been used for this aim. The "bonuses" paid to the exporter should not be by any means considered as an aid. Due to certain characteristics of the Brazilian exchange policy, the official rate of exchange has been held at 0^18.36 cruzeiros per dollar even at present when the rate in the free market is higher than 180 cruzeiros. Thus, the payment of a bonification might be considered as a form of minimizing the penalty imposed on the product exported and not as an export aid. Tho Government maintain in the Bank of Brazil (Cartoira de Comércio Exterior do Banco do Brasil - CAC2X) a control on the price of the products exported. For some articles such as coffee, cotton and others, minimum prices in cruzeiros are temporarily established. The objective, however, is not to protect the price, since the minimum adopted is always equal to the current prices in the domestic market. The objective is mainly fiscal since the exporter has to turn in to the Bank of Brazil the actual foreign currency received in the selling. Otherwise, the exporter would retain part of it abroad in order to bring it in.at the free market rate thus receiving more cruzeiros in the transaction. The same control is exercised on the import trade in order to avoid the practice of under-invoicing of the goods bought. Without this control the importers could buy the goods and pay part of the price with dollars bought in the free market at a lower rate. IV. MIXING REGULATIONS As indicated in the previous chapter, foreign and domestic wheat are mixed inproportion regulated by the Wheat Development Service (SET), This agency also establishes the proportion of manioc flour which is to be mixed with wheat flour. At present the mixture is limited to 5 per cent, but pure wheat flour is also sold to consumers. ' In the State of Rio Grande do Sul soya bean flour is also allowed to be mixed. The alcohol produced by the sugar cane factories is also used for mixture with gasoline.

7 CO!,r.ïî/73 Page 7 V. STATE TRADING OPJIRATIOI.S There is no State-trading in Brazil. The example closest to it is found in the wheat trade. The only Import of wheat is by a Government agency. However, it does not have warehouses, mills and other facilitios to handle the product. The wheat is received directly by privately owned mills. With the sole aim of assistance, the Government maintains agencies (COFAP and Si'JPS) in charge of buying articles from the producers and distributing them to the consumers. The volume of goods handled by these agencies are negligible. VI. HiPORT RESTRICTION No effective import restriction exists in the form of quotas, import licensing, etc. Before the new Tariff Law (No of ) all imports paid for in foreign exchange bought at the auction were subject to a licensing system. With the enactment of the new law only the products classified in the special category need licences. However, the jsovernment has not used the law to limit or to impede imports. In the banana export trade there is one Board organized by the exporters which has the objective of rogulating the quantity of bananas shipped to the importing country (Grupo Controlador de Embarque de Bananas para Argentina). The Board works on a basis of "gentlomen 1 s agreements" and has only one objective which is to provide for an orderly marketing of bananas for that country. VII. ML&SDRES WHICH TEND TO KJDUCE OR REMOVE THE BEEP FOR IiOK-TARIPF MEASURSS OP PROTECTION OR SUPPORT A less developed country, in a programme for economic development, often runs into difficulties in its balance of payments. The pressure on the import side tends to grow with the increased needs for more capital goods, fuel and foreign "knowhow" which are essential for this development and have to be imported from well developed countries. International agencies, operating in long-term conditions, could minimize the needs felt by these countries to defend their trade balance with non-tariff measures. Another cause for non-tariff measures of protection among the less developed countries is found in the instabilitjr of world market prices for agricultural products, which are the principal products exported by such countries. When the prices fall or the terms of trade become favourable, these covintries cannot improve the situation by exporting larger quantities since the elasticity of the demand for these products is very low. The adoption of international schemes for stabilizing the prices of those prodùots Isessential if these countries are to maintain a permanently liberal policy.