2.1 Legislation on trade and investment

There is not a comprehensive trade law in Brazil. Its main import measures have been included in the Import Regulations while export measures in the Export Regulations. The main investment-related legislation is Brazil's Constitution, the Foreign Investment Law and Labor Law.

2.2 Trade administration

2.2.1 Tariff system

Brazil is a member of MERCOSUR, a customs union comprising Argentina, Brazil, Paraguay, and Uruguay. Full Common External Tariff (CET) product coverage is scheduled for implementation in 2006. CETs range from zero percent to 35 percent ad valorem, with a limited number of country-specific exceptions.

In February 2005, the Brazilian Foreign Trade Commission passed Decisions No. 5 and No. 6. By Decision No. 5, import tariffs were brought from 4 percent to 2 percent on the capital goods, information and communications products that originally had fallen in the category of CET exceptions and that had been proved beyond Brazil's domestic manufacturing capacity. According to MERCOSUR CET tariff schedule, the import duties on the above-mentioned products generally stay at 14 percent Meanwhile, Decision No. 6 grants free duty on over-3000 horsepower diesel engines that are not produced in MERCOSUR countries.

In December 2005, the President of Brazil signed a decree that exempts some products of capital goods and all software products from manufactures tariffs as of 1 January 2006. Among the exempted products are: (1) 14 kinds of capital goods including farming tractors, steam boiler spares, steam turbine spares, pump spares, non-electrothermal furnaces used at works or laboratories, machines for manufacturing leather products and machinery use in metallurgy, coking and foundry, whose current average tax rate is 5 percent; (2) software CD or DVD of original copy for information-processing machines (with VA produc ts and other software excluded), whose current average tax rate remains 15 percent: (3) invoice-making machines whose current average tax rate stays at 15 percent.

2.2.2 Import administration

The Brazilian government requires that all imports be subject to import licensing, which includes automatic and non-automatic import licensing. The automatic licensing is administered upon those non-trade-restrictive imports. The submission of license application and the customs declaration can be made at the same time. The license, if approved, will be issued automatically. Non-automatic licensing is administered upon those commodities or imports that are under the control of the Government. The application form shall generally be submitted before shipment, or before customs declaration in some cases. Its approval procedures are complicated, for documents and certificates shall be provided for counter-signature of relevant authorities.

The Secretariat of Foreign Trade (DECEX) under the Ministry of Development, Industry and Foreign Trade is responsible for examination of the application for non-automatic import licenses. Generally the validity of non-automatic import licenses is 60 days.

2.3 Investment administration

The Brazilian government encourages foreign investment and grants foreign companies national treatment. Constitutional amendments passed in 1995 eliminated the distinction between foreign and national capital and the Constitutional Law now mandates the same legal treatment for national capital and foreign capital invested in the country under the same circumstances, and prohibits all forms of discrimination not explicitly foreseen in the Law.

Brazilian National Treasury under the Ministry of Finance declared in a communiqué released in December 2005 that Brazil had been seeking for further improvement since the National Monetary Commission implemented a policy in 2000 designed to encourage foreign investment in Brazil's capital market. The incentives mainly include:

(1) Granting rights to invest in Brazil's capital market to foreign investors abroad instead of to institutional investors only, as previously specified.

(2) Streamlining registration procedures by combining the registrations that had to be conducted respectively with the Securities Regulatory Commission for investment and the Federal Taxation Administration for legal entity into a single on- line registration with the Securities Regulatory Commission only. As a result, the time needed has been shortened from 30 days to no more than 24 hours. The on- line registration was initiated in the second half of December, and Brazilian public bonds can be purchased on-line ever since.

(3) Allowing free conversion between fixed income securities and non-fixed income securities, which is now not regarded as outward remittance of profits.

2.4 Competent authorities

Foreign Trade Commission is the top foreign trade policy-making body in Brazil. Brazilian Export Credit and Credit Security Committee under the Foreign Trade Commission serves to speed up the release of loans and promote foreign trade. Ministry of Foreign Affairs and Ministry of Development, Industry and Foreign Trade are main administrative authorities governing the sector of foreign trade. The Ministry of Agriculture, Ministry of Finance, and Ministry of Health are partly involved in the administration of foreign trade. Subordinate to the Ministry of Finance, the Federal Taxation Administration is responsible for Brazil's customs affairs, including making and implementing customs policies, imposing duties, and conducting customs supervision.

On 25 January 2005, the Brazilian Government declared the establishment of the National Commission for Industrial Development and Industrial Development Administration, new government bodies in charge of affairs of its national industry. The said Commission is entrusted with policy-making for industry, science and technology, and foreign trade, formulation of measures concerning industrial development, infrastructural construction, and enhancement of manufacturers' competitiveness and policies affecting project credits. Directly responsible to the President, the Commission comprises 13 ministers, the President of National Bank for Economic and Social Development, and other 14 members representing private sectors and laboring people.

The Industrial Development Administration serves as a promoter of the implementation of the policies encouraging industrial development, especially the job-creating industrial policies by coordinating policies for foreign trade and science and technology. Under the direction of the Ministry of Development, Industry and Foreign Trade, it is made up of a review commission, a supervision commission and an executive body.