Brazil -Manaus Free Trade Zone

General Description

The Manaus Free Trade Zone (Manaus FTZ) is comprised of a manufacturing park, a trading centre and an agricultural and ranching district, all located in Manaus, the capital city of the Amazonas State in northern Brazil. ⁶⁴ Manaus has an estimated population of 1.6 million and it has the 4^th highest Gross Domestic Product in Brazil.⁶⁵ Currently, 400 companies are operating in the Manaus Industrial Sector, and these companies generate an average annual revenue in excess of U.S. $10 billion and employ 50,000 people in the Manaus region.⁶⁶

The Manaus FTZ was established in 1967 and is presently managed and promoted by the Manaus Free Trade Zone Superintendence (Suframa), a government agency under the Ministry for Development, Industry and Foreign Trade. Suframa is mandated to implement the tax scheme associated with corporate establishments in the Manaus FTZ, and it has the overall responsibility for economic development of the western Amazonas region. ⁶⁷

Infrastructure

Energy

Hydroelectric plants generate approximately 90 percent of the Brazilian electric power. Due to long distances between the location of electric power generation and final consumption, Brazil has a well developed transmission network.⁶⁸ Deloitte could not locate reliable public information regarding the electric power supply available to companies operating within the Manaus FTZ. However, in the urban area of the northern Amazonas region electricity is available to 96.8 percent of inhabitants at 110 volts.⁶⁹

Telecommunications

The Manaus FTZ has an established telecommunications network due to large investments by the Government of Brazil.⁷⁰

Transportation

Road Transport
The Manaus FTZ is located close to Highway BR 174, which connects Manaus to Boa Vista in the north. This highway provides paved road transportation access to Venezuela and neighbouring countries.⁷¹ Highway BR 319 connects Manaus with Porto Velho in the south.

Sea Transport
The Manaus FTZ in located in close proximity to the Port of Manaus on the Rio Negro, which connects Manaus to many domestic locations via an extensive network of navigable waterways. The Port of Manaus also provides access to the Pacific Ocean and the Atlantic Ocean.⁷²

Rail Transport
There is no rail transport available in Manaus, or within close proximity to the city.⁷³

Air Transport
The Eduardo Gomes International Airport is located in Manaus and is Brazil's 3rd largest airport measured by freight movement. The airport has 2 passenger terminals and 3 cargo terminals, and offers regular scheduled flights via multiple airlines.⁷⁴

Financial Sector

Brazil's national financial sector is comprised of the National Monetary Council (CMN), the Central Bank of Brazil, Banco do Brasil S.A. and Banco Nacional do Desenvolvimento Econômico e Social, as well as other private and public institutions. The CMN is responsible for monetary and credit policies and regulation of the general operations of Brazil's financial institutions.⁷⁵ Deloitte did not, however, obtain reliable public information regarding the specific financial sectors available to corporations that operate within the Manaus FTZ.

Business Sectors

The commercial sector, primarily involving imported goods, was the first business sector to be established in the Manaus FTZ at its inception in 1970, which increased tourism and associated service offerings. In 1975 the industrial sector was established as the leading business sector in the Manaus FTZ. Currently, the Manaus FTZ also has an agriculture and ranching district that caters to agriculture and ranching, colonization, ecotourism, mining projects and environmental protection and research.⁷⁶ Table 3 below shows the predominant industrial sectors of the Manaus FTZ and the main products produced by the companies within the Manaus FTZ.

Table 3 Manaus Free Trade Zone Industrial Sectors and Products⁷⁷

Industrial Sector	Product
Electric and electronic equipment	Color TV's
Two-wheel vehicles	Cell phones
Watches	3-in-1 Stereo equipment
Optics	Video monitors
One-way appliances and goods	Tape deck radio recorders
Toys	Air conditioners
Thermoplastic and metallurgic products	VCR's
	CD's
	Bicycles
	Pocket watches

Incentives

The incentives associated with corporate establishment in the Manaus FTZ are noted below.

Federal Government Incentives

• Corporate tax reduction - Eligible corporations may receive a 75 percent corporate tax reduction on "exploration profits" until 2013.⁷⁸
• Import Tax reduction and exemption - Eligible corporations established in the Manaus FTZ may receive Import Tax reduction and/or exemption granted by the Federal Government of Brazil as follows:
  • Foreign goods entering the Manaus FTZ that are destined for internal consumption and re-exportation are exempt from Import Tax;
  • Certain eligible foreign goods destined for the western Amazons region are exempt from Import Tax;
  • Import Tax reductions may be applied to eligible "raw materials, intermediate goods, secondary materials and packaging materials" from foreign destinations if these good are used in the manufacturing process of companies established in the Manaus FTZ and the finished goods is destined to another area in Brazil. Such reductions are pending pre-approval from Suframa and certain other statutory and formulary restrictions;
  • Excise Tax exemption applies to eligible foreign goods traded within the Manaus FTZ, as well as to foreign goods utilized within the zone subject to certain restrictions. The Excise Tax exemption is also applicable to goods produced within the Manaus FTZ and to domestic goods entering the zone; and
  • Export Tax exemption for goods produced within the Manaus FTZ.⁷⁹

State Government Incentives

• Value Added Tax exemption - The State of Amazonas provides an exemption for VAT to eligible goods for consumption or industrialization or re-exportation by other Brazilian States to the Manaus FTZ;⁸⁰
• Value Added Tax credit - The State of Amazonas grants VAT credit equal to the amount payable at the point of origin for goods manufactured in other Brazilian States as these goods enter the Manaus FTZ;⁸¹ and
• Value Added Tax refund - VAT on eligible goods is refunded subject to certain conditions.⁸²

Municipal Government Incentives

• Tax exemptions - Corporations established in the Manaus FTZ are exempt from paying applicable municipal Housing, Territorial and Urban Real Estate Tax, as well as from paying tax for waste disposal and conservation, for a period of 10 years;⁸³ and
• Other Incentives - The Manaus FTZ offers an exemption from paying a corporate license fee for a period of 10 years, subject to certain conditions.⁸⁴

Business Inputs

Raw Materials

Manaus has access to abundant mineral resources including, but not limited to, oil and gas, limestone, silvinite, kolin, claystone, niobium and tin.⁸⁵

Labour

Corporations established in the Manaus FTZ have access to a qualified and fairly productive workforce. In addition, employees within all business segments have the opportunity to receive continuing labour training.⁸⁶

Investors

Deloitte was not able to obtain reliable information on the geographical origin of foreign investors that have established a presence in the Manaus FTZ.

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