The Manaus Free Trade Zone was established in 1967 with the aim of creating a commercial and industrial hub to develop the region and integrate it with the rest of Brazil. To encourage companies to move to this remote area in the middle of the vast Amazon jungle region, a Free Trade Zone was established in the city of Manaus with offshoots in towns such as Porto Velho, Rio Branco and Boa Vista. Companies operating within the Zone enjoy tax benefits from the federal, state and municipal governments which can be up to 40% more advantageous than other states. Flavia Grosso, director of SUFRAMA, the body which manages the Zone, says that companies operating within the hub had record revenues in 2006 of between US$21 billion and US$22 billion and were responsible for the creation of 105,000 direct and 400,000 indirect jobs. Many of these companies are involved in high technology, such as digital TVs, and biotechnology. The Zone contains a Biotechnology Center which aims to add value to regional products without damaging the environment. In this interview, Brazil´s Development, Industry and Foreign Trade minister, Luiz Fernando Furlan, talks about the importance of the Zone for Brazil´s exports and how Brazil aims to boost GDP growth in the coming years.

Luiz Fernando Furlan: The Manaus industrial hub plays a leading role in the industrial, technological and foreign trade policy by establishing mechanisms which are essential to strategic areas, such as biotechnology, micro-technology and software. The importance of the industrial hub in terms of job creation in the Amazon region is unquestionable. It is not by chance that industrial production in the Amazon surpassed that of other states fourfold in 2005. Besides being responsible for building a regional development model which uses the natural resources in a sustainable way, SUFRAMA and the industrial hub have strategic importance for Brazilian sovereignty in the North region. We should also not forget the contribution the Amazon region has made to Brazil´s trade balance which will come to more than US$ 135 billion in 2006. Mobile phones, produced in Manaus, are among the leading export products.

Furlan: Brazilian exports have been growing at a strong rate in recent years, rising from US$60.4 billion in 2002 to around US$ 135 billion in 2006. This is an average annual growth rate of 22.3%. There are lots of reasons for this optimism. For example, the IMF is projecting growth of 4.9% for the Brazilian economy and 9.4% for the world economy. Some of Brazil´s Latin America trading partners, such as Argentina and Venezuela, are growing at a fast rate – 8% in the case of Argentina and 7.5% for Venezuela. It should also be noted that large investments have been scheduled for important exporting sectors in Brazil, such as steel, paper, alcohol and sugar. Fuel alcohol, an area where Brazil has lots of technological know-how acquired over the years, is also gaining much importance on the international front.

Furlan: In 2005, Brazil jumped from 15th to 11th position in the ranking of the largest economies in the world. Macroeconomic stability is assured and a number of microeconomic initiatives are creating a favorable environment for growth in 2007. In recent years, the government has lifted the tax burden on the productive sector and investment, expanded credit, reduced interest rates and examined how to resolve the failing of the economic infrastructure. A number of measures have been taken including those covering exempting tax on capital goods, the civil construction package, the new exchange rate law, making credit more widely available, reducing long-term interest rates, the biodiesel and ports programs and new credit lines from the BNDES national development bank. Increasing GDP growth is a priority for the government and a commitment which President Luiz Inacio Lula da Silva assumed during the election campaign.

Furlan: Trade within the Mercosul came to around US$ 20 million in 2005. This was mainly due to Argentina which has started to recover economically over the last four years. The trade flow has tended to diversify as the exporters and importers within the bloc get to know each other. Investments have also grown as companies become more active internationally. In terms of the Manaus Free Trade Zone, the definition of the digital television model for the Brazilian system could open markets in the expanded Mercosul which now has Venezuela as a full member and Chile and Bolivia as associate members. 

Furlan: Brazil´s foreign trade negotiations are made through the Mercosul and are directed at getting access to markets for its goods, agricultural products and services. The Mercosul has reached agreements with SACU, an organization which brings together countries from the southern cone of Africa, as well as India and the Gulf Cooperation Council. In November 2006, talks were re-established with the European Union which should cover a package of measures involving industrial and agricultural products, financial services, insurance and transport. Finally, we also negotiated the continuation of the Automobile Agreement between the Mercosul and Mexico in November. All these agreements represent new opportunities for the Manaus industrial hub which has the competitiveness and technological ability to dispute markets with the best companies in the world. These are world-class companies and many of them use Brazil as a platform for exporting products to the United States and other international markets.

Furlan: Without doubt the Manaus-Boa Vista highway (BR-174) to Venezuela must be maintained in a good condition, considering the fact that Venezuela has just joined the Mercosul. This will boost trade between the two countries, particularly in goods produced in the region, such as electro-electronic appliances and wheels, which are currently exported to Venezuela via Mexico. The upgrading of the Manaus-Porto Velho highway (BR-139) is of fundamental importance since it represents another connection between the Amazon region and the Brazilian Midwest. For its part, the exit to the Pacific Ocean is being undertaken through various initiatives with Peru and will lead to greater trade with the Andean countries.

© John Fitzpatrick 2007