São Paulo – The economic stimulus package announced this Wednesday (27th) by the federal government does not guarantee benefits to the national industry, according to the Brazilian Machinery and Equipment Industry Association (Abimaq). “The government’s good intentions are great, but there needs to be a commitment to produce locally on the part of the industries which will benefit,” said the Abimaq president Luiz Aubert Neto. The government announced that it will purchase 8.4 billion reals worth of equipment.
Neto spoke while announcing the May and year-to-date results in São Paulo. Regarding the measures, Neto complains that parts and components used in the manufacturing of consumer goods are not required to be domestic-made. “In 2007, 98% of electric engines for washing machines were made in Brazil. By 2009, after the lowering of the IPI (Portuguese for Tax on Industrialized Goods), the figure dropped to 61%,”he said. At the time, the government cut the tax to encourage production and consumption.
“Whenever it implements these measures, the government has an obligation to encourage local production,” Neto told journalists. “The domestic market is being supplied by imported products. Our industry is being auctioned. Right now, of every 100 machines consumed in Brazil, 70 are imported,” he said. “All of these government measures are welcome, but we cannot assure that it will lead (the scenario) to improve,” he said.
To the executive, the measures announced by the president Dilma Rousseff will be ineffective if a “commitment is not made to protect the production chain.” According to the executive, Brazil is suffering process of “denationalization.”
“Brazil is the only BRIC country (a bloc comprising Brazil, Russia, India and China) which does not have its own automobile industry [with national brands]. We are losing our services companies too. Brazil is losing its decision power. We are in a commercial war. The major international groups are coming over to gain market share,” he said, stressing that important national companies in education, supply and aerospace, for instance, are already in the hands of foreign groups.
Neto did not give a very positive assessment of the lowering of the Long-Term Interest Rate (TJLP) from 6% to 5.5% a year, as part of the government package. “Interest rates have improved, but are still far from ideal,” he said. Regarding the tax burden, the executive called for a reduction in the Tax on the Circulation of Goods and Services (ICMS). “So much is said of the federal government, but one must look at the state governments. The ICMS is the heaviest tax, and the states are not letting go of anything,” he said.
Balance of trade
Brazilian machinery and equipment exports reached US$ 4.972 billion from January to May 2012, up 12.3% compared with the same period of last year. The positive foreign sales scenario drove up the sector’s total revenues during the period, which reached 32.762 billion reals (up 1.5% as against the same period of 2011), and 7.141 billion reals in May (up 11.2% as against April 2012 and down 1% as against May 2011).
The sectors which drove foreign sales up were logistics and civil construction machinery (+22.1) and infrastructure, with a combined 40% of the total market.
Imports were up 10.6% from January to May 2012, at a total of US$ 12.8 billion. In May alone, imports reached US$ 3.067 billion. The growth in imports was driven by machinery for the processing industry, infrastructure, and base industries.
Latin America was the leading target for Brazilian exports, at US$ 2.103 billion from January to May 2012. The United States ranked second (US$ 1.01 billion) and Europe ranked third (US$ 858 million).
As for Arab countries, Saudi Arabia (US$ 33 million) and the Emirates (US$ 28 million) were the leading buying markets of Brazilian machinery and equipment.
*Translated by Gabriel Pomerancblum
