The Free Trade Zone of Manaus: purposely and unwittingly results
Mauro Thury de Vieira Sá, Prof.
Department of Economics & Analysis
Faculty of Social Studies
Federal University of Amazonas (UFAM)
Paris, jun. 3rd 2015
Manaus Free Trade Zone - Origins
1953: Legal Amazon established as a planning region
1957: Manaus Free Trade Zone creation
as a measure to deal with the ilegal exit of Brazilian Amazon’s resources;
Manaus was viewed as a forward Panamazonian trade center (CAPES, 1959);
but ineffective until 1967
1966: Amazon Operation: the set of government measures that concerns about geopoliticalAmazon subjsects, including human occupation, the economic growth and apprehensionabout the Brazilian Amazon’s internationalization
Sudam – the Legal Amazon development organization (which manages the income taxincentive) and Bank of Amazon (BASA) started
Manaus Free Trade Zone – De facto in motion: Phase 1
1967: Manaus Free Trade Zone (ZFM) changed to be de facto operational as one of thegovernment initiatives (not “the” government initiative) as part of the Amazon Operation;
Suframa was founded to manage the ZFM’s tax incentives
. Federal exemptions/ reductions: import tariffs, federal VAT (IPI in portuguese)
. State exemptions/ reductions: state VAT (ICMS in portuguese)
The Western Amazon was established, including the presente States of Rondônia, Acre,Amazonas, Roraima, with specific tax incentives from Suframa
1970: National Integration Program (PIN)
1971: North and Northeast Regions’ Redistribution Land and Agroindustry Promotion Program(PROTERRA)
1971: First National Development Plan (I PND) was launched
1972: Manaus Industrial District was set in motion
Legal Amazon, Western Amazon and Manaus Free Trade Zone
Western Amazon: 2,2 millions km²(Amazon State: 1,6 millions km², 4x German area)
MFTZ: 10 mil km²A big territory to a FTZ,
A small one to the Amazon
Legal Amazon, almost 60% of BrazilSource: Elaborated with maps from IBGE and Suframa
Manaus Free Trade Zone – Phase 2
A little bit before – 1974: The Program of Agromineral and Agroindustrial Poles ofAmazon (Polamazônia) was launched
1975: II PND started
1975/ 76: ZFM included under the import substitution industrialization policy in the IIPND (Second National Development Plan) with deep changes
- Import quotas
- Nationalization index requirements
Late 1970s: ZFM’s industrial pole began to take form
Suframa had made efforts in improve industrialization
Regional Development Programs and Projects in Militar Federal Governments
Polamazônia
Coelho, 1978.
Manaus Free Trade Zone – Phase 2
1980: III PND, not effective
1980’s: The Amazon megaprojects came alive: Grande Carajás, Polonoroeste, bothas extensions of selected areas of Polamazônia
While the country entered in the”lost decade”
the Amazon’s States still maintened their growth
Electronics manufacturing appeared as a driving industry in Manaus IndustrialPole (PIM in portuguese)
1988: The ZFM’s time-length was extended by the new Federal Constitution
The constitutional regional funds was established
Manaus Free Trade Zone – Phase 3 and maybe a 4th
1990-1992: The Brazil’s trade opening,
Brazilian recession (1991-1992),
ZFM was adapted to the opening process and the Basic Productive Processphase (PPB in portuguese) begun
Middle of 1990’s: since then, Suframa has intended to contribute more to WesternAmazon in spite off being a regional development organization based in specialactions – the use of the Suframa Administration Tax
The Real Plan
2003: The second increase of the time length of ZFM, to 2023
The state government incentives was improved
Finally, Science & Technology gained emphasis in the State level
2014: Another 50 years from 2013 to ZFM
ZFM: Purposed resultsAgregated Product
1,09
1,02
0,72
0,65
0,85
0,73
0,69 0,74
1,11
1,52
1,82
1,35 1,40 1,
51 1,55
1,41
1,09
1,02
0,72
0,65
0,85
0,73
0,95
0,97
1,54
2,20
2,56
2,16 2,
28
2,52 2,
61
2,52
0,0
0,5
1,0
1,5
2,0
2,5
3,019
39
1947
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2012
Western Amazon and State of Amazonas - Agreggated Product (% of Brazil)
Amazonas Western AmazonNotes: 1. Agreggated product concepts:
until 1960's, Net Domestic Product at factor costs;until 1980, Gross Domestic Product at factor prices;1985-1994: Gross Value-Added at basic costs (reference year: 1985);1995-1912: Gross Value-Added at basic costs (reference year: 2002).
2. Until 1960's, the State of Amazonas' data for agreggated product included the other parts of the Western Amazon.
ZFM: Purposed resultsAgregated Product
5.0
99
,5
6.9
03,3
8.3
80,4
5.9
84
,3
4.5
42
,7
6.6
35,8
8.8
18
,8 11.7
67,0
13.2
66,1
11.7
30,7
9.9
38,7
7.2
16,8
10.3
95
,1
9.1
15,1
9.1
12
,9
10
.622,4
14.1
90
,9
18.9
01
,6 2
2.7
48,0
25.6
69
,9
30.1
00
,4
25.9
53,6
35.1
05
,1
41.094,1
37.5
44,6
38
.539,6
36.8
67,6
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Manaus Industrial Pole - Shipments (US$ millions)
Rest of the Brazil Regional Market Other Countries Total
ZFM: Purposed results
Quocient Location (variable: agreggated product; reference area: Brazil)
If QL > 1, the State of Amazonas is specialized on that activity vis-à-vis Brazil
1939 1950 1960 1970 1980 1990 2000 2010 2012Agriculture, forestry and fishing 1,43 1,19 1,20 1,90 0,84 0,88 0,63 1,35 1,45Industry 0,89 0,48 0,88 0,50 1,30 1,47 1,49 1,80 1,48
Manufacturing ... ... ... ... ... 3,57 1,90 2,40 2,00Services 0,81 0,79 0,94 1,07 0,78 0,66 0,89 0,86 0,85
Wholesale and retail trade 1,10 1,25 1,48 1,44 0,98 0,86 0,93 0,90 0,89
Source: Elaborate with regional accounts data – for concepts of agreggated product by year, see next slide.
Unwittingly resultsGrowth and Forest
0
50
100
150
200
250
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Amazonas and Pará - gross deforestation km² p.a. and GDP volume index(base year 1995 = 100)
AM - Desflorestamento PA - Desflorestamento AM - PIB - Índice de volume PA - PIB - Índice de volume
Source: Elaborated with: GDP: IBGE, except 2011 – 2013: BCB’s acitivity index as GDP’s proxy; Deforestation: INPE.
Unwittingly resultsGrowth and Forest
Source: INPE.
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Amazonas and Pará - Gross Deforestation p. a. (km²)
Amazonas Pará
Mixed results: trade balance
-15.000.000
-12.500.000
-10.000.000
-7.500.000
-5.000.000
-2.500.000
0
2.500.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Amazonas (AM) & Manaus Industrial Pole (PIM) - Trade Balance wiht other Countries(US$ thousands fob)
PIM - Exp AM - Exp PIM - Imp AM - Imp PIM - Trade Bal. AM - Trade Bal.
Source: Elaborate with data from Secex/MDIC and Suframa.
Mixed results: trade balance
-15.000.000
-12.500.000
-10.000.000
-7.500.000
-5.000.000
-2.500.000
0
2.500.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Amazonas (AM) & Manaus Industrial Pole (PIM) - Trade Balance wiht other Countries(US$ thousands fob)
PIM - Exp AM - Exp PIM - Imp AM - Imp PIM - Trade Bal. AM - Trade Bal.
Source: Elaborate with data from Secex/MDIC and Suframa.
Mixed results: trade balance
Source: Elaborate with data from Suframa.
-21.000.000
-14.000.000
-7.000.000
0
7.000.000
14.000.000
21.000.000
28.000.000
35.000.000
42.000.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Manaus Industrial Pole - Trade Balance with Other Countries and the Rest of Brazil(US$ thousands fob)
Other Countries - Exp. Other Countries - Imp. Other Countries - Trad Bal.
Rest of Brazil - Exp. Rest of Brazil - Imp. Rest of Brazil - Trade Bal.
Total - Exp. Total - Imp. Total - Trade Bal.
Mixed results: Fiscal Particularities
ZFM generates a great ammount of tax waiver: 2011: R$ 18,96 billions
But Suframa has a tax – administrative service tax, which in 2013 generatesR$ 485 millions; this tax serves to promote initiatives in the Western Amazon.Because of the Fiscal Responsability Law, the tax is usually retained by FederalGovernment
In State level, as counterparts of the VAT reductions (ICMS), there are contributionswhich maintain three funds:- Fund for micro and small firms- Fund for tourism and hinterland development- Fund for State University of Amazonas (UEA)
AMAZONAS – ICMS revenues and Counterparts as Contributions (R$ thousands)
Mixed results: Fiscal Particularities
Some Notes
As ZFM had been suceed in comparison to most of others government’sdevelopment initiatives in Western Amazon
It generated a big push – in the Rosenstein-Rodan’s meaning – at municipal,microregional scale
In state scale or Amazon scale, ZFM almost turned in growth pole, with some limits
As the other measures launched by the federal government didn´t suceed, it becamemore difficult for the ZFM to spread its benefits to other Amazon areas
But these unsuccessful programs permited the manteinance of the Amazon forest inthe State of Amazonas in contrast with other Amazon’s parts while ZFM (mostlyManaus Industrial Pole) has been propitiate the growth of Amazonas’ GDP in theabsence of or little economics of agglomeration, specially economics ofregionalization
In 1995-2010, the Amazonas’ GDP grows more than any other Northern state, 5.4%a.a., while Brazil grows 3.1% a.a. (before the recent improvement in nationalaccounts).
The Amazonas position in Brazil’s economy haven´t forged ahead because the pricesof the PIM’s goods didn´t increase as important commodities’ prices did.
Some Notes
Maybe the ZFM’s industrial pole hasn´t made yet regional and sectoral linkages asmuch as the policy makers desire: the unbalanced development a la Hirschmanhasn`t let the State and the Western Amazon take-off (1958)
But Manaus Industrial Pole (PIM) promoted positive fiscal effects in the Hirschman’sgeneralized approach sense (1976 article) and these results don´t appear in a input-output matrix: fiscal resourses is generated and have the potential to promoteinitiatives in State of Amazonas and Western Amazon
And in spite off some efforts, specially since 2003, Manaus Industrial Pole hasn´t gotyet a “regional or local innovation system status” – the R&D and C,T&I efforts took along time to be done: 1967 vs. 2003.
There is a long way to until these initiatives bring Strong results and innovation is thecore of Perroux’s idea of growth poles and unbalanced development
