slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
UNCTAD - WORLD BANK TRADE FACILITATION SEMINAR GENEVA, MAY 13th, 2004 Brazil Programmatic Loan for Sustainable and Equi PowerPoint Presentation
Download Presentation
UNCTAD - WORLD BANK TRADE FACILITATION SEMINAR GENEVA, MAY 13th, 2004 Brazil Programmatic Loan for Sustainable and Equi

Loading in 2 Seconds...

play fullscreen
1 / 25

UNCTAD - WORLD BANK TRADE FACILITATION SEMINAR GENEVA, MAY 13th, 2004 Brazil Programmatic Loan for Sustainable and Equi - PowerPoint PPT Presentation


  • 205 Views
  • Uploaded on

UNCTAD - WORLD BANK TRADE FACILITATION SEMINAR GENEVA, MAY 13th, 2004 Brazil Programmatic Loan for Sustainable and Equitable Growth. Paulo Guilherme Correa Team Leader Finance, Private Sector and Infrastructure Latin America and the Caribbean World Bank.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

UNCTAD - WORLD BANK TRADE FACILITATION SEMINAR GENEVA, MAY 13th, 2004 Brazil Programmatic Loan for Sustainable and Equi


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

UNCTAD - WORLD BANK TRADE FACILITATION SEMINARGENEVA, MAY 13th, 2004Brazil Programmatic Loan for Sustainable and Equitable Growth

Paulo Guilherme Correa

Team Leader

Finance, Private Sector and Infrastructure

Latin America and the Caribbean

World Bank

the country assistance strategy

UNCTAD/World Bank -Trade Facilitation Seminar

The Country Assistance Strategy

Provide support towards a more equitable and sustainable Brazil, built on a foundation of good governance through …

… four sets of programmaticadjustment loans supporting each of these areas.

The Programmatic Adjustment Loan:

  • No fiscal Impact
  • (Some) External Financing
  • Supports the design and implementation of a specific agenda of policy reform (technical advice & consensus building)
  • International Reptuation
  • TALs
background the fhc years 1994 2001

Source: Sima

Source: Sima

Source: Sima

Source: PPI Database -World Bank

UNCTAD/World Bank -Trade Facilitation Seminar

  • Significant progress in:
  • The Social Areas -- Education and Health – through important policy changes;
  • Structural reforms in Infrastructure Industries;
  • Macroeconomic Stabilization ...

Background: The FHC years (1994-2001)

background

UNCTAD/World Bank -Trade Facilitation Seminar

Background

... And yet a difficult heritage.

High debt to GDP ratio

High real interest rate

Source: IMF

Source: Brazilian Central Bank

Low GDP Growth

High unemployment levels

Source: Sima

Source: Loayza, Fajnzylber and Calderón (2002)

background lula election in 2002 53 million votes expressed

UNCTAD/World Bank -Trade Facilitation Seminar

Background: Lula election in 2002 (53 million votes) expressed:
  • The need to grow and generate employment (2.7 million unemployed) …
  • … within a tight fiscal situation and poor external financing conditions (high risk by external markets)…

... leading to:

  • Superavit (2002) - R$ 52.4 bi(4.06% GDP)
  • Domestic Interest Rate: 25.5% p.y.
  • Pension Reform Bill
  • Tax Reform Bill

Elections

Source: JP Morgan

growth and the fplseg the growth agenda

UNCTAD/World Bank -Trade Facilitation Seminar

Growth and the FPLSEG: The Growth Agenda

Despite structural reforms, low trade integration, poor business environment, limited financial intermediation, and insufficient technology performance.

Source: Sima, Brazil Jobs Report, Foreign Inestment Advisory Service and USPTO.

growth and the fplseg contd

UNCTAD/World Bank -Trade Facilitation Seminar

Growth and the FPLSEG (contd)

Patents

Low investment

Patents Granted in the US

Source: Sima

Source: USPTO

Low Productivity

Source: Sima

loan overview
Loan Overview
  • This adjustment loan of US$ 505 million is part of a broader program to support an specific set of microeconomic measures and institutional reforms, that will foster growth and employment generation in Brazil through increased investment and productivity.
  • This first loan will support four main objectives:
    • reducing logistics costs, encompassing multi-modal transport planning, customs, ports, and roads;
    • improving the business environment, including infrastructure regulation, competition policy, barriers to entry, and the framework for corporate insolvency and creditor rights;
    • enhancing financial system efficiency and depth (including long-term credit, insurance, and venture capital), and
    • improving Brazil’s capacity to transform knowledge into productivity gains (through the innovation system).
  • Subject to progress in the implementation of these measures, a second and loan and third loan are envisaged adding to US$ 1 billion in the next 4 years.
loan overview architecture

UNCTAD/World Bank -Trade Facilitation Seminar

Loan Overview (Architecture)
  • The reforms supported represent a coherent set of measures of sufficient breadth and depth to have a significant impact on growth, stability, and poverty reduction.
  • The package is focused on win-win reform areas to leverage the impact of the remaining political capital.
  • These form a robust subset of a longer list of growth-oriented measures on which the Government is acting, including measures to reduce tax distortions, improve contract enforcement, deepen trade integration, and strengthen labor markets.
slide11
.

… even though tariffs have not being particularly high (un-weighted tariff rates in percentage terms)

logistics cost in brazil

Logistics Costs as a share of GDP

Source: Sima

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics Cost in Brazil

Logistics costs in Brazil are estimated at about 20 percent of GDP, almost twice the level in OECD countries…

….affecting trade integration and regional development within Brazil.

logistics cost in brazil13

Source: Sima

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics Cost in Brazil
  • Inventory and Warehousing costs are the main individual cause for the high logistics costs ...
  • ... accounting for almost 40 percent in the region.
  • Inventory costs are proportional to interests rates, which have remained high in the region, particularly in Brazil. But inventory levels in Brazil and many other developing countries are typically twice as high for final products and three times as high for raw material as in the United States.
logistics cost in brazil14

Table 2Modal Shares in Total Output and Expenditures in 1999

Output

billion tku

%

Expenses

$million

%

Rate $/000’ tku

Air

2.2

0.1

292

0.8

130

Costal shipping

100.0

6.5

753

2.2

8

Pipes

33.1

2.1

102

0.3

3

Rail

140.8

9.1

1,111

3.2

8

Truck

1,271.2

82.1

32,766

93.6

26

Total

1,547.4

100.0

35,025

100.0

19

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics Cost in Brazil
  • Transport and transshipment costs represent about a third of logistics costs in Latin America.
  • Brazil’s domestic freight transport market has in recent decades been dominated by the trucking industry ...
  • ...which accounts for almost 80 percent of the demand for transport and is essencially unregulated.

Source: de Castro, N., (2001) “Freight Transportation and Logistics in Brazil: An Overview.”

  • Following privatization, railways have been increasing their share of traditional markets (particularly the grain market) but still unable to compete with trucks.
logistics costs in brazil

Brazil

China

India

Malaysia

Imports:

Average

13.8

7.5

10.4

3.4

Longest

32.4

12.2

21.6

7.4

Exports:

Average

8.4

5.5

5.1

2.6

Longest

16.9

8.1

9.3

5.1

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics Costs in Brazil

Table 1Port transit times compared (days)

  • The ongoing reform of the ports system has led to significant reductions in the port cots and tariffs…. But labor costs in many Brazilian ports remain high…

Source: World Bank, Investment Climate Assessments

… as well as transit times.

logistics in brazil

Source: Os Problemas da Empresa Exportadora Brasileira - CNI

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics in Brazil
  • Customs and related administration costs represents more than 10 percent of operating costs average.
  • Including losses and insurance, customs and administration account for 30 percent of the firms’ logistics costs in the region.
  • Brazil’s customs procedures and practices are reported as the single most important obstacle for the expansion of Brazilian exports, according to the business community .
logistics in brazil17

Days to clear customs-- Imports

Brazil

China

India

Bangladesh

Average

14.0

7.9

7.1

11.7

Longest

32.0

12.5

12.8

23.2

Days to clear customs --Exports

Average

8.7

5.4

5.4

8.8

Longest

16.8

8.0

8.0

14.0

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics in Brazil
  • Customs

(Based on a diagnostic prepared for the project - full report in Project Files)

    • Outdated Customs procedures (further simplification needed, as for example consolidating export declaration and export register).
    • Insufficient equipment (software and hardware), despite recent progress with Siscomex and Radar (further automation still needed)
    • Excessive number of inspections, despite some recent progress (rationalization through risk management needed).
    • Poor training of inspectors.
    • Excessive emphasis on tax collection to the detriment of trade facilitation.
logistics in brazil18

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics in Brazil
  • Customs-Selectivity System for Custom Release (Siscomex)
    • On line system for custom release (import and export). Customs releases are processed in Siscomex and results communicated to the trader. The system offers 4 modalities of customs release --immediate, document review and/or physical inspection and fraud.
    • The selection process takes place during specific periods of time depending on the customs port, varying from every two hours to four times a day (not 24 hours). The built-in time frame gives the customs officers time to perform their own analysis independent of the system’s results, increasing arbitrary decisions.
    • There is no link yet to the Radar System -- that collects importer/exporter profile data and inspection results -- nor to the Merchant Marine System (to capture vessel transportation data), making it more difficult to develop modern risk management systems.
    • In 2002 (first quarter), at least 27% of imports were physically inspected and only 51% of exports were automatically released.
logistics in brazil19

Roads, paved

(% of total roads)

1994

1999

var

Brazil

8.1

9.6

19%

Chile

13.8

18.9

37%

Latin America & Caribbean

23.8

24.3

2%

Indonesia

53.8

46.3

-14%

Korea, Rep.

77.8

74.5

-4%

Philippines

16.6

20.0

20%

Thailand

94.7

97.5

3%

OECD -- High income

86.0

88.0

2%

UNCTAD/World Bank -Trade Facilitation Seminar

Logistics in Brazil
  • Road network is relatively poor …
  • … and in bad conditions:
    • 3.4% of the production of non-exporting and 1.6% of exporting firms’ are lost annually due to transport failures ,
    • while 1% of sales of non-exporting and 1.2 % of sales of exporting firms are annually lost in breakage.

(Brazil- ICA, 2004)

the first programmatic loan for sustainable and equitable growth flseg reform program 1of 4

Area/Policy

Prior Actions

Key Next Steps

Medium-Term Actions

Expected Outcome Indicators

Macroeconomic Management and Overall Growth Program Definition

-

Adequate macro-economic framework

-

Satisfactory Growth Program and Publication of White Paper

Reduce Logistics Costs

1.

Improve Customs

-

-

-

-

Customs Reform Strategy

Selectivity level cut from 40% to

Clearance systems and

Average gross release time

Effectiveness

approved

30%

procedures streamlined and

decreased from 5 to 3 days

adapted to expanded Customs’

(imports) and from 2.0 days to 1.0

mission and selectivity cut to 20%

day (exports)

-

Average net release time cut by

20%

2.

Reduce Port Costs

-

-

-

Productivity improvement plan

Port authorities restructured and

Average cargo transit time

and Delays

approved

productivity plan implemented

through port cut from 13.8 to 10 days

for imports and 8.4 to 5 days for

exports; average container handling

cost cut by 10%

3.

Reduce Transport

-

-

-

-

Law reorganizing Federal

Output based

Road network classification law

50% of road network in good

Costs on Federal Road

Transport Administration approved

maintenance/rehab contracts on

approved

condition (as evaluated by the

Network

and implemented

30% of federal road network

International Roughness Index),

-

-

-

-

9% of non-trunk roads on

Further 12% of non-trunk roads

In addition to road concessions

Average road transport costs

remaining federal network

on remaining federal network

existing in 2003, further 5% of the

decreased 5%

transferred to state management

transferred to state management

remaining federal network under

concession

-

Total of 25% of non-trunk roads

on remaining federal network

transferred to state management

4.

Foster Multi-modal

-

-

Geographical restructuring of

10% increase in non-road

Transport

railway concessions underway

transportation share

UNCTAD/World Bank -Trade Facilitation Seminar

The First Programmatic Loan for Sustainable and Equitable Growth (FLSEG) – Reform Program (1of 4)
the flseg reform program 2 of 4

Area/Policy

Prior Actions

Key Next Steps

Medium-Term Actions

Expected Outcome Indicators

Improve the Business Environment

·

·

·

·

1.

Strengthen Infrastructure

Creation of land and water transport

PPP Law approved by Congress

Law on Career Development Plan

5 Public-Private Partnerships

Regulation

regulatory agencies (ANTT and

for Regulators approved by Congress

projects approved

ANTAQ)

·

·

PPP Law submitted to Congress

Draft law on Career Development

Plan for Regulators submitted to

Congress

·

·

·

2.

Enhance the Competitive

Amendments to Antitrust Law

Amendments to Antitrust Law

Increase in number of “hard-core”

Environment

reviewed by inter-ministerial committee

approved by Congress

cartel cases with national impact

successfully prosecuted

·

Pre-merger notification made

mandatory

·

·

·

3.

Simplify Entry and Business

Constitutional amendment approved

Law regulating the unification

Time needed to register a firm

Operation

to, inter alia, unify tax collection at

of tax collection approved by

decreased to 76 days in pilot cities

federal, state and municipal levels for

Congress

micro and small companies

·

Simplified procedures for

companies’ registration adopted in some

cities

·

Export norms simplified by MDIC

·

·

·

·

4.

Strengthen Corporate Insolvency

New Bankruptcy Law and Tax Code

Bankruptcy Law enacted

Bankruptcy law becomes effective

Increased speed of recuperation /

Framework

Amendment passed by Lower House

resolution and higher recovery value of

insolvent enterprises

·

·

Amendment to Tax Code enacted

Reduced spreads in financial

intermediation

·

Preparation program initiated for

judiciary and courts for new law

UNCTAD/World Bank -Trade Facilitation Seminar

The FLSEG – Reform Program (2 of 4)
the reform program 3 of 4

Area/Policy

Prior Actions

Key Next Steps

Medium-Term Actions

Expected Outcome

Indicators

Enhance the Efficiency and Depth of the Financial System

·

·

·

1.

Increase Financial

Draft Complementary Law,

Effectiveness of Banking

Examination of market

Competition

extending application of

Competition Law

conduct issues in banking sector

Antitrust to Banking, submitted

by competition authority

to Congress

initiated

·

Reduced bank administrative

costs components in bank

spreads

·

·

·

·

2.

Sound Fundamental

Constitutional Amendment

Key legal initiatives for

Key legal reforms in financial

Legal framework and

Legislation and Systemic

(Article 192) approved

financial reform presented to

system voted by Congress

physical infrastructure for

Risk Control

Congress

financial system modernized;

risks reduced and access to

·

·

·

New large value payments

Evaluation of residual risk in

Second phase (retail)

financial services expanded.

system installed and operating

the payments system completed

payments system reform

successfully

launched.

·

Blueprint prepared for second

phase payments reform (retail

payments)

·

·

·

3.

Mobilize Long-Term

Regulations strengthened on

Extend permission for

Accelerated expansion of

Resources in Insurance

asset allocation, eligibility,

provision of reinsurance to new

insurance industry assets on

Sector

registration, custody and audit

entrants

sound basis

requirements enhanced

·

Enhanced service providers

in reinsurance

·

·

·

·

4.

Improve Efficient

Provisional law and

Evaluate impact of new

Passage through Congress of

Bank accounts

Financial Access for the

Resolutions passed to expand

microfinance measures in terms

new factoring law.

(sight+savings) expanded from

Poor and for SMEs

financial access at banks

of cost, outreach and impact.

95 (end 01’) to 103 million by

2006.

·

·

·

Introduce small claims courts

Enhanced use of positive

Increased credit availability

for small credits

information for credit reporting

on sound footing to small

borrowers

·

·

Establish interlinkage of

Reduction of tax write offs

credit registries

for uncollected small claims

UNCTAD/World Bank -Trade Facilitation Seminar

The Reform Program (3 of 4)
the proposed loan 4 of 4

Area/Policy

Prior Actions

Key Next Steps

Medium-Term Actions

Expected Outcome

Indicators

Increase Innovation Capacity to Transform Knowledge into Productivity Gains

·

·

·

1.

Increase Public R&D

Innovation Law sent to

Innovation Law approved by

Number of technology

Effectiveness

Congress

Congress

transfer contracts between public

universities/research centers and

the private sector increased by

20%

·

·

·

2.

Foster Private Innovation

Regulation of

Fundo Verde-

Evaluation completed of

10 percentage point increase

Amarelo

and other mechanisms

operations and management

in privately funded R&D share

to support private R&D

procedures of Sector Funds and

in total R&D expenditures

introduced

FINEP

·

·

·

3.

Create Innovation in

Kyoto protocol ratified, ICCC

ICCC approval and

US$100 million in sales of

Environmental Markets

operational, and CDM project

monitoring systems financially

carbon credits

approval mechanism published

self-sustaining

UNCTAD/World Bank -Trade Facilitation Seminar

The Proposed Loan (4 of 4)
implementation arrangements
Implementation Arrangements
  • A US$ 12 million “Programmatic” TAL started to be negotiated this morning in Brazil, evolving three main counter-parts: Ministry of Finance; Ministry of Transport and Ministry of Science and Technology.
  • Creation/ revitalization of three inter-ministerial commissions/ working groups:
    • Economic Policy;
    • Infrastructure;
    • Science and Technology
  • Increased dialogue with the Private Sector through the National Council of Social and Economic Development (created in Lula’s Administration) and traditional business associations such as CNI. Possible creation of an informal steering committee.
slide25

Final Remarks:Documents that could be shared: Loan Document (with an annex on logistics). A Detailed Diagnostic of Brazilian Customs. EMAIL: PCORREA@WORLDBANK.ORGThank you.