Bring the Brains Back

    Bring the Brains Back

    The strength of the real, and lower tariffs among other
    things, are making Brazil a world-class importer. And Brazilians are enjoying
    their new role. With more American ports offering service to Brazil, rates
    should continue to fall, offering greater opportunities for U.S. exporters.
    On the other side, distribution continues to be a big problem.
    By Juliet Kong

    It has never been easier to import in Brazil. Better shipping schedules
    and rates, availability of financing, automated Customs releases through
    a new computerized system called Siscomex, infrastructure developments
    have all helped to improve the way imports flow into the country, and the
    tendency is for things to get even better.

    Brazil is importing like never before as a result of generally lower
    tariffs and reduced non-tariff barriers, as well as the strength of the
    Brazilian currency relative to the dollar. In 1996, the country imported
    over $53 billion in products, a huge increase over the $15.9 billion imported
    in 1990, when then President Fernando Collor de Mello first started the
    process of trade liberalization.

    With business booming, the Brazilian waters are crowded with steamship
    lines chasing a slice of the trade pie. Major ocean carriers like Cho Yang,
    Hanjin Lines and Maersk Lines have entered the market lately. Others, like
    Companhia Marítima Nacional and Columbus Line have greatly enhanced
    their services between the U.S. and South America. As sailing schedules
    become even more frequent, and more American ports begin offering services
    to Brazil, rates should continue to fall, offering greater opportunities
    for U.S. exporters sending cargo to Brazil.

    For air cargo, the scenario is the same. While Varig and VASP continue
    to serve a wide range of points between the U.S. and Brazil, other cargo
    carriers like Polar Air, Tower Air and American International are proposing
    a massive increase in capacity on the already well served São Paulo
    market, as well as Manaus, the capital of Amazonas state.

    Obtaining financing for imports has become easier for Brazilian traders.
    Bradesco, the biggest private bank in the country, financed 248% more in
    1996 than in the previous year. According to Antônio Bórnia,
    executive vice-president of Bradesco, "This reflects the growth of
    imports. Just look at the trade deficit ($5.539 billion in 1996) and you
    will understand." Financing international trade was a major investment
    for the Brazilian banks in 1996 and will continue to be so in 1997.

    To implement the import operations, starting on January 1, 1997, the
    Secretariat of Foreign Trade’s computerized trade documentation system
    — Siscomex (Sistema Integrado de Comércio Exterior — International
    Trade Integrated System) — was set up in Brazil.

    This computerized system was first started in 1993 to control the exportation
    flow, and has greatly reduced the paperwork that slowed the process of
    releasing cargo leaving the country. Siscomex now attempts to bring uniformity
    to the import procedures, to improve Customs, administrative and exchange
    controls, to reduce the costs related to the import operations as well
    as to speed the release of cargo by automatically filing, registering and
    processing all import licenses, besides linking all this to the Central
    Bank databank for exchange and collection purposes.

    "Nowadays, the import process is much faster, mainly after the
    initial problems were overcome, " says Samuel Nebenzahl, executive
    secretary for the ABTI (Brazilian Association of International Carriers).
    He admits that in the first weeks after Siscomex was established, the biggest
    problems were caused by the lack of preparation of importers, exporters
    and customs brokers who did not believe that this sophisticated computerized
    system was really going to start operating overnight. In time, he expects
    that the reduction in wait for the release of imported goods will be 50%.

    Of course the import process in Brazil is not without its share of difficulties.
    Due to box-handling capabilities at many ports, distribution in Brazil
    is still a problem. At the Port of Santos, for example, in addition to
    limited berthing space, there is a lack of equipment to make efficient
    transfers from ship to rail or truck. Adding to the problem, the government
    strictly requires that Customs physically inspect all loads, congesting
    the ports even more. Also, the costs to move containers at most Brazilian
    ports is very high. For example, at the port of Rio de Janeiro, it costs
    $550 to move a container, whereas in Jacksonville, USA, the average is
    $200.

    However, the Law of Port Modernization, which passed in February 1993,
    mandating that the ports decentralize its administration, incorporate users
    in port councils and permit the formation of labor pools to diminish restrictive
    work practices, is already making progress in improving port conditions.
    "We can say, for sure, that the privately owned terminals have a cost
    reduction of 50%," says Sérgio Barroso, vice-president of Cargill,
    a private-owned terminal in Santos. The savings are so significant that
    Barroso has already announced the construction of a terminal for sugar
    that will involve investments in the order of $35 million. This terminal
    will be ready by the end of 1997 and will move one million tons of sugar.

    The costs to move goods by land are equally high, and the conditions
    of the roads are precarious at many places. The distance between São
    Paulo and Santos is 45 miles through the mountain range of Serra do Mar.
    For one container to get from one city to the other, the cost is between
    $500 and $750. It’s the same price charged for the 450-mile trip between
    Hamburg and Frankfurt in Germany. To change that, the Brazilian government
    passed the Federal Concession Law in February 1995. It requires all services
    provided by the public sector to be open to concession. If the law is followed,
    foreign firms will eventually be able to bid on all projects of transportation.

    Already, a number of transport projects are underway to improve distribution
    in Brazil. The Tietê-Paraná Waterway project, for example,
    involves 465 miles of primary waterways and 340 miles of secondary stretches
    that will allow the multimodal transport of goods in large scale between
    the agricultural land in the southeast and center-west with transportation
    links in São Paulo and Santos.

    The "Mercosul Waterway " will improve the flow of cargo through
    the Brazilian borders by providing good navigation conditions for 1250
    miles between Itaipu and Buenos Aires. Many railroad projects are also
    under development, like the Center-East Railroad at Unaí-Pirapora,
    and the Bauru-Corumbá Railroad between the Bolivian border and the
    Brazilian Center West.

    In the short term, importing in Brazil will continue to increase. The
    growing need for raw materials, infrastructure and consumer goods that
    the country cannot produce internally guarantees a steady increase in imports
    over at least the next five years. In addition, the high cost of manufacturing
    in Brazil continues to make importing a less expensive alternative. For
    all these reasons, imports should continue to outstrip exports in Brazil’s
    near future, making this a boom time for American and other foreign firms
    exporting to Brazil.

    Bring the Brains Back

    César Vasconcelos

    People have been asking: "How is the Mercosul doing?" The
    reply is, "Splendid, thanks." Free trade and democracy are no
    longer just buzzwords. Nowadays it has become a common place rather than
    the exception in Latin America. We are living in a historical moment indeed.
    With the exception of communist Cuba, we never had it so good. Throughout
    Latin America, economic stability and prosperity are no longer a farfetched
    dream. The result of these historical times can be accurately measured
    and quantified. Regional differences have been put aside, and mutual cooperation
    has now become a tangible reality.

    The main objective of Mercosul is the free movement of people, goods,
    and services. In addition to these trade liberalization measures, the Mercosul
    treaty entails the lifting of tariffs and duties between the Mercosul members.
    In order to qualify for the 0% tariff rule, the products traded by the
    Mercosul members must have a nationalization content of 60%. Another important
    rule of the Mercosul treaty is the educational integration, with school
    diplomas being valid in all member states. A dentist who has graduated
    from the University of Argentina, for example, can now practice his trade
    in Brazil under the Mercosul integration approach.

    Visas and passports are a thing of the past. They are no longer necessary
    and people are free to find work in whatever place he/she sees fit. Additionally,
    Portuguese has become a mandatory foreign language in Argentina, Paraguay
    and Uruguay. Conversely, Brazilian students are now supposed to learn Spanish
    in the classroom. All of this has set the stage for a true integration
    in the region similar to the European Common Market.

    Comprising Argentina, Paraguay, Uruguay and Brazil, the Southern Common
    Market, known as Mercosul in Brazil and Mercosur in the other countries,
    represents a population of 190 million people and covers an area of 12
    million square kilometers. The total combined Gross Domestic Product (GDP)
    of these nations is approximately $715 billion. Brazil is the dominant
    economic force of the region. With an estimated GDP for 1994 of $500 billion
    and a population of 155 million inhabitants, Brazil’s economy is by far
    the largest.

    Argentina comes in second with a GDP of $255 billion and a population
    of 33 million people. Argentina’s economy has been posting an impressive
    8% annual growth rate. Paraguay has 4.6 million inhabitants and a GDP of
    $6.8 billion. Uruguay has only 3.1 million inhabitants, and a GDP of $11.4
    billion. What Uruguay lacks in geographical size, it more than makes up
    for in other significant areas. The country has a bustling economy making
    it an important international financial center . With a highly dynamic
    economy, and its strategic location, Uruguay is a perfect gateway for products
    flowing between Brazil and Argentina and or Paraguay.

    The Free Trade Zones created before 1994 can fortunately operate normally
    under the Mercosul. Nevertheless, new Free Trade Zones are no longer allowed
    amongst the member nations. The total economic integration of Latin American
    in a free trade block will have far reaching implications for years to
    come. This wave of trade liberalization will no doubt require specialized
    labor. Jobs, a worldwide rarity, are expected to be created in vast numbers.
    Fortunately for the region, they have realized that the only way they can
    catch up and prosper in these competitive global economic times is by joining
    forces.

    There are many well-qualified people who have left Latin America during
    the troubled 80s — they call it the Lost Decade in Brazil. This brain exodus
    was a terrible loss to Latin America. The good news is that these exiles
    are anxiously waiting for the right opportunity to return. The time has
    arrived for Latin America to bring all this talent back home. These now
    seasoned Latin Americans will bring with them knowledge and precious professional
    experience acquired abroad. They can help their countries become a formidable
    competitor in the global economy. For the sake of the region, let’s hope
    that Latin America will seize the moment.

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