November, 2012 MANAUS FREE TRADE ZONE Business and Investments in the Amazon Business and Investments in the Amazon

November, 2012November, 2012

MANAUS FREE TRADE ZONEMANAUS FREE TRADE ZONEBusiness and Investments

in the Amazon

Business and Investments

in the Amazon

Ministério da Ciência, Tecnologia e Inovação

BRAZIL

AMAZONAS

The Manaus Industrial Park has created economic

alternative that enabled 98% of

preservation of the native vegetation

coverage. .

TOPICS

1 - CONTEXT OF NATIONAL ZFM

2 - WHAT IS SUFRAMA?

3 - THE AMAZON AND SOCIOECONOMIC MANAUS

4 - AREA OF COVERAGE MANAUS FREE TRADE ZONE

5 - KEY TAX INCENTIVES

6 - BASIC PRODUCTION PROCESS

7 - REGIONAL LOGISTICS

8 - ECONOMIC INDICATORS OF ZFM

CREATION OF THE MANAUS FREE TRADE ZONE

(Law no. 3.173/1957 amended by Article 1 of Decree-Law no. 288/1967)

“The Manaus Free Trade Zone is a free import and export trade area where special tax incentives apply, set up with the objective of creating in the interior of the Amazon Region an industrial, commercial and agricultural center under economic conditions that allow its development, given local factors and the great distance separating it from its markets”

(Law no. 3.173/1957 amended by Article 1 of Decree-Law no. 288/1967)

“The Manaus Free Trade Zone is a free import and export trade area where special tax incentives apply, set up with the objective of creating in the interior of the Amazon Region an industrial, commercial and agricultural center under economic conditions that allow its development, given local factors and the great distance separating it from its markets”

AGRICULTURAL AND CATTLE-RAISING DISTRICT

INDUSTRIAL DISTRICT

1 – CONTEXT OF ZFM IN BRAZIL

Area: 8.514.876,599 km2

GDP: 2,294 (trillions – US$)

GDP per capita: 11.769 US$

Population: 193 millions

Municipalities and their

Federative Units

Position occupied

by the 100 largest cities

Gross Domestic Product at current

prices($ 1000)

Holdings percentage (%)

relative

São Paulo/SP 1º 389.317.166,69 12,02

Rio de Janeiro/RJ 2º 175.739.349,47 5,43

Brasília/DF 3º 131.487.267,90 4,06

Curitiba/PR 4º 45.762.418,37 1,41

Belo Horizonte/MG 5º 44.595.204,91 1,38

Manaus/AM 6º 40.486.106,54 1,25

Porto Alegre/RS 7º 37.787.913,24 1,17

Salvador/BA 8º 32.824.228,58 1,01

AMAPÁMacapá-SantanaBoa Vista

RORAIMA

AMAZONAS

Manaus

ItacoatiaraTabatinga

Rio BrancoVilhena

RONDÔNIA

Guajará-Mirim

ACRE

Cruzeiro do Sul Porto Velho

BRASIL

Ji-Paraná

Bonfim

Brasiléia-Epitaciolândia

COVERAGE OF THE MANAUS FREE TRADE ZONE MODEL

Free Trade Areas (09)

Regional Offices (05)

SUFRAMA Headquarters

WESTERN AMAZON

(*)

TOPICS


2 - WHAT IS SUFRAMA?2 - WHAT IS SUFRAMA?







SUPERINTENDENCE OF THE MANAUS SUPERINTENDENCE OF THE MANAUS FREE TRADE ZONE - SUFRAMAFREE TRADE ZONE - SUFRAMA

A Federal Public Administration Body connected to the Ministry of

Development, Industry and Foreign Trade (MDIC). Its objective is to

manager and control the tax incentives granted to companies that set up in

the Manaus Free Trade Zone, as well as to promote development

strategies for the Western Amazon, assuming in this way the role of an

investment stimulation agency.

SUFRAMA

Ministry of Development, Industry and Foreign Trade

PRESIDENCY OF THE REPUBLIC

TOPICS



3 - THE AMAZON AND SOCIOECONOMIC MANAUS3 - THE AMAZON AND SOCIOECONOMIC MANAUS






2 – SOCIOECONOMIC ASPECTS:: AMAZONAS E MANAUS

AMAZONAS ( NUMBER OF MUNICIPALITIES = 62) 20091 Gross Domestic Product (R$ x 1.000) 49.614.2 GDP per capita (R$) 14.620,94

3 Industry Participation in Economic Activity in gross value added (%) 41,40

4 Gross Value Added- (GVA) (R$ x 1.000) 41.719.

Source: IBGE

CITY OF MANAUS

Manaus 2009 - (R$ x 1000 MILHÕES) GDP 40.486. GDP per capita 23.286 GROSS VALUE ADDED (GVA) 32.948. Population 1.738.641 Area – Km2 11.401

Table 1 - Comparison with ZFM Amazonian countriesCountries Area Km² (1) GDP (US$ million)

Bolívia 1.098.581 25.010

Colombia 1.138.910 328.420

Peru 1.285.215 173.500Venezuela 912.050 315.840

Brasil (2) 8.514.876 2.473.441Amazonas (4) 1.559.161 24.837

Manaus (4) 11.401 20.267BILLING of PIM (3) 37 41.191 (*)

Table 2 - Sizing the PIM space in the city of Manaus

AREA - MANAUS km2 Part %

Total Area 11.401, 0,73% in relation to the State ofAM

Urban Area 412,27 3,62% in relation to Manaus

Transition Area 361,96 3,17% in relation to Manaus

Rural Area 10.626, 93,21% in relation to Manaus

(1) Source: Index Mundi, IBGE e SUFRAMA

(2) GDP quarterly (4o. quarter - Source IBGE); Exchange rate 1,675 - 2011 - Source IPEA

(3) Industrial District I e II -> 3,7 hc of anthropic area

(4) GDP of 2009 e exchange rate 1,9976 - Source IPEA ESTIMATE 2011(*) BILLING US$ DOLLAR

ECONOMIC ASPECTS OF THE CITY OF MANAUS

INDUSTRIAL DISTRICT

TOPICS




4 - AREA OF COVERAGE MANAUS FREE TRADE ZONE4 - AREA OF COVERAGE MANAUS FREE TRADE ZONE





Article 2 of Decree-Law No. 288/1967:

The Executive will mark on the left bank of the Rio Negro and Amazon, a continuous area with the minimum area of ten thousand kilometers square, including the city of Manaus and its surroundings in which to install the Free Zone.

COVERAGE OF THE MANAUS FREE TRADE ZONE MODEL

WESTERN AMAZON

AMAPÁMacapá-SantanaBoa Vista

RORAIMA

AMAZONAS

Manaus

Itacoatiara

Tabatinga

Rio BrancoVilhena

RONDÔNIA

Guajará-Mirim

ACRE

Cruzeiro do Sul*

SURINAME

GUYANAVENEZUELA

COLOMBIA

ECUADOR

PERU

BOLIVIA

Porto Velho

BRAZIL

Free Trade Areas (09)

Regional Offices (05)

SUFRAMA Headquarters

Ji-Paraná

Bonfim

Brasiléia-Epitaciolândia

WESTERN AMAZON

(*)

NATIONAL GOODS CONTROL SYSTEMExemption from IPI,

PIS/COFINS reduced to zero

FOREIGN GOODS CONTROL SYSTEM

For Inputs: Suspension of II, Exemption from IPI, PIS/COFINS reduced to zero

For products: Exemption from II and IPI and PIS/COFINS reduction

SYSTEM OF INDUSTRIAL INDICATORS

88% reduction in II, Exemption from IPI, differentiated tax percentage

PIS/COFINS – 0.65% PIS and 3.0% COFINS

1º

4º 2º3º

EXPORTS(ALICEWEB)

TOTAL EXEMPTION

TOPICS





5 - KEY TAX INCENTIVES5 - KEY TAX INCENTIVES




TAX INCENTIVES OF PIM – MANAUS INDUSTRIAL SECTOR

STATE TAXES

STATE VALUE ADDED TAX (ICMS) Credit Incentives of between 55% and 100%. In all cases, the companies are obliged to contribute to funds which finance higher education, tourism, R&D, and small and micro-companies

FEDERAL TAXES

IMPORT DUTY (II) - 88% reduction for the inputs to be used in industrialization processes, or proportional to the domestic added value, when dealing with information technology goods

EXCISE TAX (IPI) – Exempt

SOCIAL INTEGRATION PROGRAM (PIS) and CONTRIBUTION FOR SOCIAL SECURITY FINANCING (COFINS) – Zero rated for incoming materials and inter-industry internal sales and 3.65% for sales of finished goods to the rest of the country.

INCOME TAX (IR) - 75% reduction in taxes on income and nonrefundable additional fees, exclusively for reinvestment. Common to all the Legal Amazon Region.

SUFRAMASUFRAMA

SUDAMSUDAM

SEFAZ/AMSEFAZ/AM

TOPICS






6 - BASIC PRODUCTION PROCESS6 - BASIC PRODUCTION PROCESS



BASIC PRODUCTION PROCESS - BPPsDecree No. 783, of March 25, 1993

PROJECT APPROVAL

REGISTRATION AT SUFRAMA

ISSUANCE OF LO (Operation Report)

ISSUANCE OF LP (Production Report)

MACHINERY IMPORTS/

ACQUISITION

INPUT IMPORTS/ACQUISITION

DELIVERY OF LTAI

(Technical Report of Independent Auditing Firm)

ISO 9000

PRODUCTION

Yearly30 months

INDUSTRIAL INDICATORS

Immediate

R&DEXPORTS

Where applicable

PROJECT PRESENTATION

PROJECT ANALYSIS

COUNTERPARTS REQUIRED OF THECOMPANIES FOR INCENTIVES GRANTED

• Compliance with the Basic Production Process (BPP);

• Creating Jobs in the Region;

• Granting social benefits to the workforce;

• Incorporating state-of-the art product and production process technologies;

• Increasing productivity and competitiveness levels;

• Reinvesting profits in the region;

• Investing in the training and qualification of human resources for scientific and technological development; and

• Approval of the industrial project within the annual inputs importation limits;

TOPICS







7 - REGIONAL LOGISTICS7 - REGIONAL LOGISTICS


ATLANTIC OCEAN

PANAMACANAL

Miami

Los Angeles

OCEANOPACÍFICO

LOCATION IN RELATION TO MARKETS

POPULATION OF LATIN AMERICA AND THE

CARIBBEAN:

574 million inhabitants

NORTH AMERICA

ASIA

CENTRAL AMERICA AFRICA

EUROPE

Manaus

Porto Velho

São Paulo

Belém

Tokyo

Taipei

Taiwan

Hong Kong

Caracas

Capital

Sea route

Air route

Road routeAir and sea route

River route

EDUARDO GOMES

INTERNATIONAL AIRPORT

PORT OF CHIBATÃO

AURORA EADI

PORT AND AIRPORT INFRASTRUCTURE

• PUBLICLY OWNED PORT:

- PORT OF MANAUS

Largest floating port in the world

Total area: 94,923 m²

• PRIVATELY OWNED PORTS:

- SUPERTERMINALS

Storage Area: 8,000 m²

- CHIBATÃO


- AURORA EADI


• EDUARDO GOMES INTERNATIONAL AIRPORT:

- CARGO TERMINAL


Third largest airport in Brazil in terms of cargo

• PUBLICLY OWNED PORT:

- PORT OF MANAUS

Largest floating port in the world


• PRIVATELY OWNED PORTS:

- SUPERTERMINALS


- CHIBATÃO


- AURORA EADI


• EDUARDO GOMES INTERNATIONAL AIRPORT:

- CARGO TERMINAL


Third largest airport in Brazil in terms of cargo

PORT OF MANAUS

SUPERTERMINALS

BUEMVD

RIG

SSA

SUA

FOR

PEC

PORTO VELHO

AP

PAAM

RO

BELÉM

BRAZIL

Rout highway and rives

highway

OCEANOATLÂNTICO

Porto Alegre

SSZ

SEP

Belo Horizonte

Rio de Janeiro

São Paulo

MAO

DISTRIBUTION FROM PIM SOUTH DIRECTION

PORTS

-MANAUS- FORTALEZA-SUAPE -SALVADOR-SEPETIBA-SANTOS-RIO GRANDE-MONTEVIDEO-BUENOS AIRES

NORTH DIRECTION

PORTS

-BUENOS AIRES-MONTEVIDEO-SANTOS-SEPETIBA-SALVADOR-SUAPE-CEARÁ-MANAUS

SOUTH DIRECTION

NORTH DIRECTION

Transport Mode by highway and rivers most utilized

Routes to the Southeast and South of Brazil: •Manaus – Porto Velho – Cuiabá – Campo Grande – São Paulo: average of 7 - 10 days (highway and rivers)

•Manaus – Belém – Goiânia – Porto Alegre: average of 10 - 12 days (highway and rivers)

•Manaus – Belém: 4-5 days (via the Amazon River)

•Manaus – Porto Velho: 3 days (via the Madeira River )

•Manaus – Boa Vista: 12-14 hours (highway) or 1 hour (air)

TOPICS








8 - ECONOMIC INDICATORS OF ZFM8 - ECONOMIC INDICATORS OF ZFM

Indicators 2003 2011

Billing (USD billion) 10,62 41,1

Jobs (monthly average) at the PIM 64.971 119.198

Total Investments Made (USD billion) 2,76 10,7

Nationalization Index 47,04% 44,51%

Regionalization Index 27,75% 25,66%

Federal Taxes Collected (BRL billion) 3,72 12,35

Total Taxes Collected (BRL billion) 6,28 21,10

MACROECONOMIC INDICATORS

Source: Indicator systems October of 2012

Indicators 2003 2011 2012

Billing (USD billion) 10,62 41,1 27,7

Jobs (monthly average) at the PIM 64.971 119.198

118.905

Total Investments Made (USD billion) 2,76 10,7 10,019

Nationalization Index 47,04% 44,51% 40,17%

Regionalization Index 27,75% 25,66% 24,67%

Federal Taxes Collected *(BRL billion) 3,72 12,35 10.377

Total Taxes Collected *(BRL billion) 6,28 21,10 18.264

MACROECONOMIC INDICATORS OF PIM

Source: Indicators System September of 2012 – partial data* Data to October of 2012

SOME OF THE MORE THAN 600 COMPANIES IN THE MANAUS INDUSTRIAL SECTOR – PIM

Foreign Companies

SOME OF THE MORE THAN 600 COMPANIES IN THE MANAUS INDUSTRIAL SECTOR – PIM

Domestic Companies

Source: Indicator systems September of 2012

CONSUMER ELECTRONICS34.46%

OTHERS3.9%

WATCH-MAKING1.52%

DISPOSABLE 2.17%THERMOPLASTICS4.70%

INFORMATION TECHNOLOGY

GOODS11.51%

CHEMICALS 13.7%

TWO WHEELS19.76%

MECHANICALGOODS3.61%

METALLURGY4.67%

TURNOVER BY MARKET SEGMENT

MAIN SEGMENTS IN 2012*

MAIN PRODUCTS FROM THE AMAZON

Source: SUFRAMA – MDIC/ ALICE SYSTEM

October 2012

1º OTHER PREPARATIONS FOR THE PREPARATION OF BEVERAGES

2º MOTORCYCLES WITH PISTON ENGINES ALTERNAT.125CM3 <CYL <= 250CM3

3º PORTABLE MOBILE PHONE TERMINALS

4º RAZORS, NON-ELECTRIC

5º CONSUMPTION OF FUELS AND LUBRICANTS ON BOARD AIRCRAFT

6º OTHER RAZOR BLADES COMUM METALS

7ºMOTORCYCLES WITH PISTON ENGINES ALTERNAT.50CM3 <CYL <= 125CM3

8º OTHER GOLD COMPOUNDS, ONLY AURANOFIN

9º OTHER WORKS OF TANTALLUM

10º OUTHER PAPERS PHOTO / COLORS,SENSIBIL.N/IMPR

EXPORTED IMPORTED

1º OTHER PARTS FOR RADIO/TELEVISION RECEIVING DEVICES, ETC.

2º DIESEL OIL

3º "OTHER PARTS AND ACCESS. FOR MOTORCYCLES INCL. MOPEDS

4º HEAD-DISC SETS FOR HARD DRIVE UNITS, ASSEMBLED

5º OTHER PARTS FOR D./TELEPHONE/TELEGRAPH DEVICES

6º MICROPROCESSORS ASS. FOR SURFACE. (SMD)

7º OTHER MONOLITHIC INTEGRATED CIRCUITS

8º OTHER PARTS FOR RADIO/TELEVISION RECEIVING DEVICES, ETC.

9º PALLADIUM IN SOLID AND POWDERED FORM

10º M.RAM <=25NS,EPROM,EEPROM,PROM,ROM,FLASH

MAIN DESTINATIONS AND ORIGINS OF THE PRODUCTS FROM THE AMAZON

1º CHINA 36,13%

2º SOUTH KOREA 15,28%

3º UNITED STATES 11,36%

4º JAPAN 9,99%

5º TAIWAN (FORMOSA) 4,84%

6º TAYLAND 3,38%

7º MALAYSIA 3,20%

8º GERMANY 1,83%

9º HONG KONG 1,36%

10º MEXICO 1,12%

1º ARGENTINA 24,65%

2º COLOMBIA 13,77%

3º VENEZUELA 13,10%

4º UNITED STATES 5,52%

5º CHILE 5,27%

6º GERMANY 4,97%

7º MEXICO 4,02%

8º PERU 3,25%

9º ECUADOR 2,67%

10º PARAGUAY 1,81%

Source: SUFRAMA - MDIC/ALICE SYSTEM

Data until October of 2012

EXPORTS IMPORTS

http://www.suframa.gov.br/zfm_principal.cfm

http://www.suframa.gov.br/noticias/indexNoticias.cfm

THANK YOU.THANK YOU.

THOMAZ AFONSO QUEIROZ NOGUEIRA

Superintendente da SUFRAMA

[email protected]

+55 (92) 3321-7002 / 3321-7032

THOMAZ AFONSO QUEIROZ NOGUEIRA

Superintendente da SUFRAMA

[email protected]

+55 (92) 3321-7002 / 3321-7032

Documents

November, 2012 MANAUS FREE TRADE ZONE Business and Investments in the Amazon Business and Investments in the Amazon