Brazil steps up fight against imports

Brazil has stepped up its fight against cheap imports from Asia, strengthening border controls and increasing antidumping measures, as well as offering $16bn in tax breaks to revive the country’s own flagging manufacturers.

Despite enjoying one of the highest growth rates in the world, Brazil has seen its industry shrivel over recent months as a result of the surging local currency, which has made exports less competitive and encouraged cheap imports, mainly from China.

Only a week after introducing harsh new rules to rein in the Brazilian real, Brazil’s government turned its attention to imports on Tuesday, arguing that it was necessary to take further action to protect the country’s industry in the face of an ever weaker dollar.

“We must protect our economy, our manufacturing efforts, and our jobs,” said President Dilma Rousseff, speaking at the presidential palace in Brasília. “Brazil has the means to deal with this drawn-out crisis [abroad] … we have the means to keep resisting in a systematic way.”

As part of a wide-ranging industrial plan labelled “Bigger Brazil”, the government promised to quadruple the number of trade investigators in the country to 120.

In an effort to stop foreign manufacturers avoiding trade restrictions by rerouting their products via other South American countries, the government also said it would cancel import licences if products were not labelled with the correct country of origin.

As well as pledging to strengthen border controls and take tougher action on violations of intellectual property, the government also offered a package of tax exemptions totalling R$25bn ($16bn) to help the hard-hit textile, footwear, furniture and software industries.

“Some of these measures make sense: in certain sectors there is a problem with the ‘triangulation’ of exports where, for example, Chinese companies set up depots in Paraguay so they can import into Brazil,” said Tony Volpon, head of emerging markets research for the Americas at Nomura.

However, analysts were largely sceptical that the latest series of measures would be enough to solve Brazil’s perennial problem of controlling its vast borders, often deep in the Amazon jungle, as well as resuscitating the country’s manufacturers.

The “Bigger Brazil” plan was announced hours after new industrial data showed the country’s output fell 1.6 per cent in June – the second worst decline in production since 2008, according to the national statistics industry.

Many manufacturers blame the strength of the real, which has appreciated more than 6 per cent against the dollar this year and is currently trading at about a 12-year high in spite of recent government efforts to curb the currency by imposing higher trading taxes.

Analysts also pointed to the fact that cheap imports actually help Brazil to control inflation, which is currently running above the upper limit of the central bank’s annual target of 6.5 per cent.

“Imports aren’t really the problem,” Mr Volpon said. “In fact, they are saving Brazil from the problem of inflation.”