Findings from Study on Brazil’s Services Trade

1. Findings from Study on Brazil’s Services Trade Development Research GroupThe World Bank

2. Overview • Review of Brazil’s services trade pattern • Analysis of Brazil’s services trade policy • Brazil’s export interests in services

3. While Brazil records a negative balance on BOP services trade … Millions of US dollars 0 -1,000 -2,000 -3,000 -4,000 -5,000 -6,000 -7,000 Total Transport Travel Insurance Other services services services services services trade Source: IMF Balance of Payments Statistics

4. … “other services” have shown fast export growth … Source: IMF Balance of Payments Statistics

5. … especially miscellaneous business and professional services “Other services”, 1995 “Other services”, 2000 “Other” “Other” 27% 48% Miscellaneous Miscellaneous business and business and professional professional services services 73% 52% Source: IMF Balance of Payments Statistics

6. Brazil received large inflows of FDI in services in the late 90s … Source: Banco Central do Brasil

7. … in a variety of services sectors Total FDI inflows in services from 1996 to 2000 Electricity and Other services gas 9% 16% Other business Distribution services services 22% 5% Computer services Telecommuni- 2% cations and post Financial intermediation 27% 19% Source: Banco Central do Brasil

8. The majority of investors are European Total FDI stock by country of origin, 2000 Other US 22.8% 24.2% MERCOSUR (without Paraguay) 1.5% Europe 51.5% Source: Banco Central do Brasil

9. Brazil’s services trade policy • What are the explicit barriers? • Where are there trade preferences? • Does the regulatory framework support trade liberalization?

10. Sectoral policy regimes broadly fall into four categories • Sectors with few or no explicit barriers • Telecommunications, distribution, certain business services • Sectors that are liberal, but policy is less certain • Financial services, express mail/courier services • Partially liberalized sectors • Transport, audiovisual, construction, professional services • Sectors that remain largely closed • Postal, reinsurance services

11. Trade preferences • Formal preferential treatment • Transport services, certain professional services • Reciprocity rules, requiring foreign service providers to be treated equivalently to Brazilian suppliers abroad • Telecommunications, financial services • In most cases, reciprocity rules do not lead to actual preferential treatment

12. Regulatory framework • Regulation is necessary to remedy market failures (monopolies, information asymmetries) and attain social objectives (universal service). • Brazil’s sector specific regulatory regimes broadly track international trends. • One area of weakness is professional services: outdated regulations and absence of specific regulations for foreigners.

13. Case studies on Brazil’s services exports • Brazil has a comparative advantage in certain services sectors • Do services exporters face explicit and implicit barriers in foreign markets? • Case studies on three industries • Construction services • Audiovisual services • Software services

14. Main findings of case studies • Brazilian exporters of services face few explicit barriers, other than limitations on the movement of services personnel. • Exporting firms are affected by a variety of regulatory measures, especially in construction services. • Policy regimes in export markets are not always transparent and/or bound by a WTO commitment.