Findings from Study on Brazil’s Services Trade Development Research Group The World Bank

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

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

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

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

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

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

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

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

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

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

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.

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

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.