Problems relating to Trade and Investment on Brazil

26. Others
Issue	Issue details	Requests	Reference

(1) Inadequate Infrastructure for Logistics	- On top of the high labour cost, the poor overhaul of the infrastructure at ports, domestic transportation networks, and communication network at high costs, together, make it difficult for FFEs to manufacture products that are internationally competitive. - The overhauls of econo-social infrastructure for which GOB is responsible lags behind due to the resource funds being exhausted by the personnel costs of the bureaucrats. - Inadequate domestic infrastructure (particularly from Manaus) the cost of logistic has substantially climbed up. - A member firm in tax exempted Manaus free trade zone procuring some parts from Sao Paulo faces the inefficiency in the transport route for these parts. It takes many days at high transport cost with the burglary risk in the overland transport. - Port service is poor while port cost is high.	- It is requested that GOB: -- overhauls the infrastructure such as ports, domestic transportation network, and telecommunication network, and -- secures the safety in the domestic transportation route. - It is requested that GOB overhauls the infrastructure of ports, and networks for domestic transportation, telecommunication, etc. - It is requested that GOB resolves the flawed and incomplete infrastructure. - It is requested that GOB takes steps to: -- ensure safety on the transport route, and -- alleviate the burden on wage related accompanying expenses.
	(Action) - In September 2004, government announced the increased investment in modernizing the domestic port facilities, selecting 11 points to which investment is strengthened. It is aimed at increasing the port capacity to handling US$10 billion per annum of export cargoes. - On December 30, 2004, GOB promulgated the Regulation No.11079 "General Regulations on Public and Private Partnership" ("PPP"), prompting the participation in the construction, operation and maintenance of public facilities such as infrastructure services, provided however that, it is expected that it would take time before its full operation. - On January 22, 2007, GOB announced Programa de Aceleracao do Crescimento ("PAC"). GAP expects to invest in the coming 4 years along with private sectors in development of infrastructure to the tune of R$503.9 billion (US$237 billion), of which GOB, however, assumes only 14%. For execution of PAC, additional investments by private sectors must be made. The infrastructure overhaul program includes refurbishment of National Route 163 and the north-south railway construction plans. - On 31 December 2007, the Executive Branch promulgated Provisional Measure No.412 that stipulates extension of the term provided in Law No. 11033/2004 On tax incentive REPORTO for modernization of the key port facilities. - It is said that it takes 10 days to 2 weeks for the domestic cargo transport from Manaus via sea and land. - The traffic between Port of Santos and its hind areas remains obsolete, causing traffic jam on the road leading to the port entrance, while it is pointed out that the railway transport is hardly sufficient. - Due to the pressure of the labor union, at Port of Santos, more than double the numbers of port workers actually required are registered. - In Brazilian ports, which are open for 24 hours, it is said that Customs officials nevertheless work only for certain business hours determined by themselves. - In August 2012, President Dilma Vana Rousseff released Infrastructure Investment Project as a part of Accelerated Growth Programme. The Project envisages transfer of construction and management to Private Enterprises based on a Partnership Agreement between Private Enterprises and GOB. The subjects of The Projects are: Expressway, Cargo Railway, Seaport and Airport. The Project shown upon announcement in August 2012 is Expressway and Cargo Railway with the total investment of R$133 billion (or 5.32 trillion yen). Expressway of 9-sections, 7,500km in total length with the total investment of R$42 billion (1.68 trillion yen) over 25-years. Cargo Railway of 12-lines, 10,000km in total length with the total investment of R$91 billion (3.64 trillion yen) over 30-years. The common factor between Expressway and Cargo Railway is that GOB designates the investment amount for the first 5 years in both cases. GOB intends to construct, overhaul, and maintain infrastructure. Another common issue is both projects are funded by the long-term loan at preferential terms available from BNDES (Banco Nacional de Desenvolvimento Economico e Social= the Brazilian Development Bank), in which GOB owns 100% equity. BNDES serves as the major provider of the long-term R$ fund domestically in Brazil. - In December 2012, GOB announced outlines for both Seaports and Airports Projects. The Seaport Project envisages total investment of R$54.4 billion or more over the stretch of 2014 through 2017. The Airport Project with the budgeted total investment of R$11.4 billion includes investment into Galeao of Rio de Janeiro. The Tender Terms will be different from the February 2012 tender for 3-airports that included Guarulhos of Sao Paulo. More precisely, the Tender Terms, being different from those applied to three airports, including Guarulhos in Sao Paulo, in February 2012, seek entry into Brazil of Airport Operators with a higher management power by requiring the number of annual passengers processed, etc. (Japan Bank for International Cooperation (JBIC) Material.)

(2) Inadequate Communication Infrastructure	- The overhaul of infrastructure is a mandatory requirement, i.e., poor telephone line connections, sudden blackouts by thunder, etc.	- It is requested that GOB overhauls the infrastructure on port facilities, domestic transport network, telecommunications, etc.
	(Action) - In Manaus FTZ, the problems continue of the frequent blackouts and the unstable power supply. - The complaints received by the Sao Paulo Consumers Protection Center ("Procon-SP") are broken down into 32% on telephones, water/sewerage, and electric power, 22% on financial sector, 21% on manufacture, 18% on public service, and 15% on health/insurance.

(3) Inadequate Electricity Supply Infrastructure	- Abrupt blackout occurs by thunder. - Power outage frequently occurs.	- It is requested that GOB expedites electric power infrastructure.
	(Action) - In December 2004, Minister of Ministry of Mines and Energy (Ministerio de Minas e Energia) stated: 1) there would be power shortage by 2009 and thereafter, going by the current construction of the power plants; 2) the construction of 45 hydro generation plants now in dormant conditions would be resumed. - On December 30, 2004, GOB promulgated the Regulation No.11079 "General Regulations on Public and Private Partnership" ("PPP"), prompting the participation in the construction, operation and maintenance of public facilities such as infrastructure services, provided however that, it is expected that it would take time before its full operation.

(4) Aggravated Public Security	- In Sao Paulo where FFEs entering Brazil cluster, it is imperative to select carefully the location for offices and warehouses, in regard to employees' safety, and preservation of cargoes. However, such places are extremely limited and expensive. - There is a risk of robbery in the land transportation of the components from Sao Paulo to Manaus. - Valuable goods cannot be transported by air to metropolitan areas other than Sao Paulo for security reasons. - The public security has been aggravating recently, not only in Sao Paulo and Rio de Janeiro but also throughout the country. Many cases of murder, robbery, and kidnap have arisen. Public security in the Manaus region has been aggravated (by burglaries bearing heavy armaments). - The aggravated public security due to the shortage of employment opportunities and inequality in income distribution, etc. impacted the investment environment as well. - Public security measures for persons on business trip. - Quite an amount of expenditure is necessary for securing expatriates security.	- It is requested that GOB maintains the security and deregulates the regulations. - It is requested that GOB tightens its public security measures. - It is requested that GOB takes steps to beef up public security.
	(Action) - Under the Cardoso Administration, "Arborada Plan" and "Active Community Program" were implemented as a means to combat poverty. - The current Lula Administration enforces "Zero Famine Program (Programa Fome Zero)" for 4-years from now, under supervision of the newly established Ministry of Food Security and Combating Poverty (Ministerio do Desenvolvimento Social e Combate a Fome). - The security remains serious, with no sign of improvement in the urban areas of Sao Paulo. Japanese as well as Brazilians are victimized. Kidnapping is increasing and risk is high for Japanese to be kidnapped. "Short-hours-kidnapping" flourishes. According to certain report, 12 cases of kidnapping occurred in a single day in average. - On 21 August 2007, the Executive Branch promulgated in the Official Gazette launching the Provisional Measure No.384 on the National Public Security and Citizenship Program (Programa Nacional de Seguranca Publica com Cidadania=PRONASCI). - As of May 2016, according to Ministry of Foreign Affairs Safety home page "(Danger Information) Warning Level 1 (Utmost Attention)" continually lists the following areas as to Brazil: Brazilian Federative Units, Paulo, Great Sao Paulo and Campinas City; Rio de Janeiro Great Rio Zone; Amazonas Great Manaus Zone; Para Greater Belem Zone; Pernambuco Greater Recife Zone; Bahia Greater Salvador Zone; Estado do Espirito Santo Greater Voctoria Metropolitan Area; Parana Estado, Greater Curitiba Area; Rio Grande do Sul, Porto Alegre. "In Brazil, murder, burglary, etc. frequently occur due to gaps in income, poverty, nacortic drugs, etc. Crime rate is quite high in Brazil in the international perspective, in which the cases of Japanese victims have been quite frequent." Guns are used frequently so that showing resistance could prompt the gun use, leading to murder. Atrocious crimes are not exclusive to big cities. They take place equally in non-urban areas as well. Don't be lulled into a false sense of security.

(5) Prevalence of Prices in USD

- The general pricing system in Brazil such as the legal counsel fees, and subsidiary are charged in the US dollars, not in Real (BRL).

(6) High Cost of Commodity

- House rent, etc. are being interlocked with the Brazilian PPI inflation index (IGPM), which has the effect of causing the inflation. Indirectly, the cost of living, such as, energy (electricity and gas) and gasoline prices are linked to the U.S. dollars, despite the fact that they are domestically produced in Brazil.
- House rent, foods, etc. are quite expensive in Brazil.

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