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8) Political economy of Brazil
Restart of the economic development with the creation of jobs, better distribution of rent, and institutional reforms that are necessary to guarantee a sustainable growth.
9) Incentives to attract FDI
Regional incentives seek toencourage the economic and social development of certain areas of the country. Two autonomous federal agencies administer the regional incentives traditionally offered: the Superintendence for the Development of the Northeast and the Superintendence for the Development of the Amazon Region. he north-eastern region, covering about 19 per cent of Brazil’s territory, includes the states of Alagoas, Bahia,Ceará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe, and parts of the states of Maranhão and Minas Gerais. The Amazon region, which occupies almost 60 per cent of the country, includes the northern states of Acre, Amapá, Amazonas, Pará, Rondônia, Roraima, and Tocantins; the northern portion of the state of Mato Grosso; and the western part of Maranhão.
Enterprises operating inthe northeastern region for which the SUDENE is responsible are eligible for the following incentives:
• A 37.5 per cent reduction in the income tax for enterprises established in the region, up to December 2003. This percentage is scheduled to be reduced to 25 per cent from January 2004 to December 2008, and to 12.5 per cent from January 2009 to December 2013.
• For projects approvedafter January 1998, a 75 per cent reduction of the income taxes effective up to December 31, 2003. This percentage is scheduled to be reduced to 50 percent from January 2004 to December 2008, and to 25 per cent from January 2009 to December 2013.
• Partial exemption from state and municipal taxes.
• Exemption from duties on imported equipment.
Eligibility for these benefitsdepends on SUDENE’s prior approval of a new project or the expansion of an already existing project. Any income derived from the project cannot be remitted abroad.
Approved enterprises operating in the Amazon region, for which the SUDAM is responsible, are offered similar incentives.
Numerous tax incentives and financing programmes are also available at the state level. Governors in all regionsof the country, but most notably in the states of Paraná and Rio Grande do Sul (southern states), Bahia, Ceará, and Minas Gerais, are competing fiercely to attract business investment and generate employment in their state.
A number of tax incentives are based on Brazil’s agro-industrial technology development programmes, which seek to increase industrial technologydevelopment. The incentives apply to projects previously approved by the Ministry of Science and Technology, and some of them are scheduled to be progressively reduced up to the tax year 2013. In general, they grant or allow:
• Accelerated amortization of some intangibles
• Accelerated depreciation on domestically produced equipment
• Double deduction of technology development expenses,limited to 8 percent of the basic income tax liability.
• Reduction of up to 50 per cent of withholding taxes due on remittances of royalties and technical services fees.
• Increase in the deduction of royalty and transfer of technology expenses to 10 per cent of related gross sales.
Export Incentives and free trade zones
Manaus free trade zone
A free trade zone has beenestablished in and around the port of Manaus on the Amazon River, about 1,000 km from the Atlantic Ocean. The zone has become the principal assembly point for radios, television sets, videocassette recorders, motorcycles, and other goods that depend on imported parts. The constitution guarantees the existence of the Manaus free trade zone until 2013. The following incentives, intended to encourage...