In the face of massive opposition from Brazil's leading business associations, the Brazilian government Jan. 29 suspended a controversial measure adopted just four days previously to require prior licensing for 70 percent of the nation's imports.

On Jan. 26, Brazil's foreign trade department (Decex) surprised the business sector by announcing an unexpected return to import controls, stating that it would require prior import licenses for a wide range of products. Until then, these imports had been approved automatically in a simple online procedure. Importing firms were only required to prepare an import declaration primarily for statistical reasons (16 ITD, 1/28/09).

It was widely speculated that the unexpected change in policy was sparked by January's trade figures, which are pointing toward Brazil's first monthly deficit since March 2001.

Businesses Attack Policy.
Business sectors that depend on imports, however, responded immediately, attacking the new policy and warning that it would threaten the capacity of domestic industry to maintain production levels and could also reduce the country's exports.

Trade analysts also warned that the measure was protectionist and would undoubtedly be challenged by Brazil's leading trading partners.

The principal concern was that the foreign trade secretariat, responsible for granting import licenses, would be unable to keep up with the overwhelming volume of Brazil's imports, causing delays that would impact on the production capacity of companies.

Under the now-suspended policy, each import request would have been examined separately by Brazil's foreign trade secretariat (Secex), which had 60 days to approve or disapprove the operation.
Already on Jan. 27, the second day of the new policy, the Brazilian subsidiary of Nokia was forced to shut down one of its factories because of a lack of imported parts.


Monitoring Imports.
Finally, under the constant bombardment of business associations and the press, Finance Minister Guido Mantega announced that the policy of prior licensing would be suspended on Jan. 29.
Mantega said that the measure was adopted by the Ministry of Development, Trade and Industry in order to better monitor Brazil's imports.

“This measure was misunderstood and caused a lot of noise. Because of this we have agreed to suspend it,” Mantega said. He added that the import controls were adopted due to January's trade balance, which as of Jan. 25 showed a deficit of $645 million.

“The international crisis has provoked a reduction of demand for commodities and as a result a reduction in Brazil's exports. This has raised concern about the performance of the trade balance,” Mantega stated.
The decision to suspend the controls was well received by traders. According to JosAugusto de Castro, vice president of Brazil's foreign trade association, “This was a demonstration of good sense by the government.”

By Ed Taylor

Source: BNA – International Trade Daily (www.bna.com)