Brazil CountryProfile

BRAZIL

Country Profile

Politics

Economy

Trade & Industries

General Profile Total area 8,514,877Km² Population 205,716,890 2007 2008 2009 2010 2011 Growth Population World (in YOY Billion) 6.6 6.7 6.8 6.9 7.0 1% Government type Federal republic Chief of state President (since 1 January 2011); Head of government President Dilma ROUSSEFF (since 1 January 2011); Capital BRASILIA Climate mostly tropical, but temperate in south Portuguese (official and most widely spoken language) note: less common languages include Spanish (border areas and Language schools), German, Italian, Japanese, English, and a large number of minor Amerindian languages Major City Sao Paulo, , , Porto Alegre,BRASILIA

Economy Profile 2009 2010 2011 World GDP Real Growth -0.8% 5% 3.6% World GDP (in Trillions) 58.1 63.3 70.2

BrazilGDP Real Growth -0.6% 7.5% 2.7% GDP $2.518 trillion GDP – Per capita $11,600 agriculture: 5.8% GDP – Composition by industry: 26.9% sector

services: 67.3% (2011 est.) Profile General Inflation 6.5%

Exchanges Rates reals (BRL) per US dollar -1.602 (2011 est.) Chapter: Chapter:

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Primary Economy Sector agricultural, mining, manufacturing, and service sectors

Unemployment Rate 17.8%

Economy Profile Economy Chapter: Chapter:

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cargo ports (tonnage): Ilha Grande (Gebig), Paranagua, Rio Grande, Santos, Sao Ports and Sebastiao, Tubarao container ports (TEUs): Santos (2,677,839), Itajai (693,580) Terminals oil terminals: DTSE/Gegua oil terminal, Guaiba Island terminal, Guamare oil terminal  Brasilia International Airport (BSB), Brazil International  Guarulhos International Airport (GRU), Brazil Airports  Rio de Janeiro International (GIG), Brazil Federal Senate - percent of vote by party - NA; seats by party - PMDB 20, PT 13, PSDB 10, DEM (formerly PFL) 7, PTdoB 6, PP 5, PDT 4, PR 4, PSB 4, PPS 1, PRB 1, Election other 3; Chamber of Deputies - percent of vote by party - NA; seats by party - PT results 87, PMDB 80, PSDB 53, DEM (formerly PFL) 43, PP 41, PR 41, PSB 34, PDT 28, PTdoB 21, PSC 17, PCdoB 15, PV 15, PPS 12, other 18 Political Office Name party Presidency Dilma Rousseff PT Vice Presidency PMDB Chief of Staff PT Ministry of Agrarian Development Afonso Florence PT Ministry of Agriculture, Livestock and Supply Mendes Ribeiro PMDB Mário Negromonte PP Ministry of Communications PT Ministry of Culture — Ministry of Defense PT Ministry of Development, Industry and Trade PT Ministry of Education PT Ministry of the Environment Izabella Teixeira — Ministry Name Ministry of Finance PT Ministry of Fishing and Aquaculture PT Ministry of External Relations — Ministry of Health PT José Eduardo Ministry of Justice Cardozo PT Ministry of Labor and Employment Paulo Roberto Pinto PDT Ministry of Mines and Energy Edson Lobão PMDB Fernando Bezerra

Ministry of National Integration Coelho PSB Ministry of Planning, Budget and Management Miriam Belchior PT Ministry of Science, Technology and Marco Antônio Innovation Raupp Ministry of Social Development and

Hunger Alleviation Tereza Campelo PT Ports and Terminals Ports and Ministry of Social Security PMDB

Ministry of Sports PCdoB Chapter: Chapter:

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Ministry of Tourism Gastão Vieira PMDB Ministry of Transportation Paulo Sérgio Passos PR Secretariats and Offices with the status of Ministry Central Bank — Inspectorate-General Jorge Hage — Army Gen. José Elito Institutional Security Cabinet Carvalho Siqueira — Luís Inácio Lucena Office of the Solicitor-General Adams — Secretariat-General of the Presidency of the Republic Gilberto Carvalho PT Secretariat of Civil Aviation Wagner Bittencourt Secretariat of Institutional Relations Ideli Salvatti PT Secretariat for Social Communication Helena Chagas — Secretariat of Strategic Affairs PMDB Special Secretariat for Human Rights Maria do Rosário PT Special Secretariat for Promotion of Racial Equality Luiza Bairros — Special Secretariat of Ports Leônidas Cristiano PSB Special Secretariat for Women's Rights PT

Ministry Name Ministry Chapter: Chapter:

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Brazilian Democratic Movement Party or PMDB [Michel TEMER]; Brazilian Labor Party or PTB [Roberto JEFFERSON]; Brazilian Renewal Labor Party or PRTB [Jose Levy FIDELIX da Cruz]; Brazilian Republican Party or PRB [Marco Antonio PEREIRA]; Brazilian Social Democracy Party or PSDB [Sergio GUERRA]; Brazilian Socialist Party or PSB [Eduardo Henrique Accioly CAMPOS]; Christian Labor Party or PTC [Daniel TOURINHO]; Communist Party of Brazil or PCdoB [Jose Renato RABELO]; Democratic Labor Party or PDT [Carlos Roberto LUPI]; the Political or DEM [Jose AGRIPINO] (formerly Liberal Front Party or PFL); Freedom and parties and Socialism Party or PSOL [Afranio BOPPRE]; Green Party or PV [Jose Luiz PENNA]; leaders Humanist Party of Solidarity or PHS [Paulo Roberto MATOS]; Labor Party of Brazil or PTdoB [Luis Henrique de Oliveira RESENDE]; National Mobilization Party or PMN [Oscar Noronha FILHO]; Party of the Republic or PR [Alfredo PEREIRA DO NASCIMENTO]; Popular Socialist Party or PPS [Roberto Joao PEREIRA FREIRE]; Progressive Party or PP []; Social Christian Party or PSC [Vitor Jorge Abdala NOSSEIS]; Social Democracy Party or PSD []; Workers' Party or PT [Rui FALCAO] Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries, and Brazil is expanding its presence in world markets. Since 2003, Brazil has steadily improved its macroeconomic stability, building up foreign reserves, and reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments. In 2008, Brazil became a net external creditor and two ratings agencies awarded investment grade status to its debt. After strong growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in 2008. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to begin a recovery. In 2010, consumer and investor confidence revived and GDP growth reached 7.5%, the highest growth rate in the past 25 years. Rising inflation led Brazil the authorities to take measures to cool the economy; these actions and the Economy deteriorating international economic situation slowed growth to 2.7% for 2011 Characteristics as a whole, though forecasts for 2012 growth are somewhat higher. Despite slower growth in 2011, Brazil overtook the United Kingdom as the world's seventh largest economy in terms of GDP. Urban unemployment is at the

historic low of 4.7% (December 2011), and Brazil's traditionally high level of income equality has declined for each of the last 12 years. Brazil's high interest rates make it an attractive destination for foreign investors. Large capital inflows over the past several years have contributed to the appreciation of the currency, hurting the competitiveness of Brazilian manufacturing and leading the government to intervene in foreign exchanges markets and raise taxes on some foreign capital inflows. President Dilma ROUSSEFF has retained the previous administration's commitment to inflation targeting by the central

bank, a floating exchange rate, and fiscal restraint. leaders and parties Political

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Considering the important coming events to be hosted by Brazil - Soccer World Cup (2014) and the Olympic Games (2016) - and the progress of exploitation of the Brazilian pre-salt oil reserves, we hereby present a brief overview of some tax incentives[1] granted by the Brazilian Federal administration.

a. World Cup

On December 20th, 2010, the Federal Government enacted Law 12.350, which, among other tax incentives, exempts the Import Tax levied on the importation of goods to be used in the World Cup such as trophies, medals, medicine, and office material, and so forth, on the condition that such goods are imported by FIFA. Such exemption does not include goods that can be used in future events.

The same law gives incentives to the construction or reform of football stadiums (RECOPA program), by granting the suspension (and posterior exemption) of federal taxes levied on the importation of machinery, equipments, construction materials and services.

b. Ex-Tarifario

The Ex-tarifario regime presents as its main objective the reduction of costs regarding the importation of capital assets, computing and telecommunication goods. It consists in the temporary reduction of the Import Tax of such goods, on the condition that no national company produces them, and that the item is indicated in the “Ex-tarifario List”, published by the federal authorities. Investment c. Repetro Policy This is a special O&G industry customs regime, which allows the import of assets to be used on the exploitation and research of natural gas and petroleum with suspension of federal taxes such as the Import Tax (II), Excise tax (IPI) and Social Contributions (PIS/COFINS).

Normally, a relevant reduction of the value-added tax on sales and services (ICMS) levied on the importation is also granted, depending on the state tax legislation, and the type of asset to be imported.

d. Drawback

Under the Drawback regime, suspension and exemption can be acquired for the Import Tax (II), Excise tax (IPI), Social Contributions (PIS/COFINS), and value- added tax on sales and services (ICMS) for imported goods to be used in the manufacturing process of products destined for exportation.

e. Regional Incentives

The Federal Government presents many tax benefits, such as reduction on the general taxes, such as corporate income tax (IRPJ), excise tax (IPI) and import Tax (II), as well as exemption of the transactions tax (IOF). Normally, the objective is to encourage investments and to promote development in certain

strategic regions of the Brazil. Policy Investment

Examples of the mentioned incentives are (i) tax reductions in the Free Trade Chapter: Chapter:

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Zone of Manaus, and (ii) tax incentives in the SUDAM (Amazon region) and SUDENE (Northeastern region) areas.

It is important to remember that most of the Brazilian tax incentives require previous analysis of the company’s situation and verification of fulfillment of legal obligations by the Federal Revenue Service, in order to confirm if the incentives can be granted to these determined investors.

Investment Policy Investment Chapter: Chapter:

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President Rousseff has made economic growth and poverty alleviation top priorities. Export promotion is a main component of plans to generate growth and reduce what is seen as a vulnerability to international financial market fluctuations. To increase exports, the government is seeking access to foreign markets through trade negotiations and increased export promotion, including tax breaks for exporters.

Brazil has been a leading player in the World Trade Organization’s Doha Round negotiations and continues to seek to bring that effort to successful conclusion. To further increase its international profile (both economically and politically), Trade Policy the Rousseff administration is also seeking expanded trade ties with developing countries, as well as a strengthening of the Mercosul ( in Spanish) customs union with Uruguay, Paraguay, and Argentina. In 2008, Mercosul concluded a free trade arrangement with Israel, followed by another arrangement with in 2010. Mercosul is pursuing free trade negotiations with Mexico and Canada and resumed trade negotiations with the EU. This trade bloc also plans to launch trilateral free trade negotiations with India and South Africa, building on partial trade liberalization agreements concluded with these countries in 2004. China has significantly increased its purchases of Brazilian soy, iron ore, and steel in recent years, becoming Brazil's principal export market and an important source of investment. AfDB (nonregional member), BIS, BRICS, CAN (associate), CELAC, CPLP, FAO, FATF, G-15, G-20, G-24, G-77, IADB, IAEA, IBRD, ICAO, ICC, ICRM, IDA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC, International LAES, LAIA, LAS (observer), Mercosur, MIGA, MINURSO, MINUSTAH, NAM organization (observer), NSG, OAS, OECD (Enhanced Engagement, OPANAL, OPCW, Paris Club participation (associate), PCA, SICA (observer), UN, UNASUR, UNCTAD, UNESCO, UNFICYP, UNHCR, UNIDO, Union Latina, UNISFA, UNITAR, UNMIL, UNMISS, UNMIT, UNOCI, UNWTO, UPU, WCO, WFTU, WHO, WIPO, WMO, WTO Trade machinery, electrical and transport equipment, chemical products, oil, Opportunities automotive parts, electronics textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor Main Industry vehicles and parts, other machinery and equipment Industry Type Name Of Company Aerospace & Defence Embraer Diversified Metal & mining Vale Eletrobras Electric Utilities Cemig CPFL Energia

Biggest BRF-Brasil foods Company Food Processing JBS

Cosan

Personal Care Natura Cosmeticos BM&F Bovespa Investment Services Bradespar

Companhia Siderurgica Policy Trade Iron And Steel

Metalurgica Gerdau Chapter: Chapter:

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Usiminas

Paper & Paper Products Suzano Papel e Celulose Telecommunications services Tele Norte Leste

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