SÃO PAULO, BRAZIL — In another step to curb Brazil's trade deficit, the government has placed a 17 percent import tax on some plastics machinery that previously had been tariff-free.
Local machinery firms applauded the measure, but some processors and machinery importers criticized the move. Previously, processors could import machinery tariff-free if no firms made a similar model locally.
Processors like José Eduardo Leal Passos, director for Sinimplast Indústria e Comércio Ltda., in Diadema, São Paulo, said they may be forced to pay the tariff.
``Some types of machines made in Brazil produce the same item that an imported machine produces, yet production speed is much inferior and quality is infinitely worse,'' he said. ``In some cases the best solution is to pay the 17 percent tax, which will result in higher costs for finished products.''
The new measure went into effect July 28. Brazil's trade deficit totaled $4.7 billion in the first half of 1997. Imports of capital goods amounted to $7.49 billion during the period between January and June.
The tax exemption was renewed on an annual basis by the government, and for several years was a looming issue for major machinery associations, including Associacão Brasileira da Indústria de Maquinas e Equipamentos/Sindicato Nacional da Indústria de Maquinas (Abimaq/Sindimaq).
``Most of the time, the internal revenue department was not able to thoroughly analyze the authenticity of all requests received, and ended up granting tax exemption for importing equipment that did possess similar models produced in Brazil. In turn, the local industry suffered considerably,'' said Hiroyuki Sato, industrial policy director for Abimaq/Sindimaq.
He said Brazilian equipment imports totaled $6.6 billion in 1996. Abimaq/Sindimaq did not possess specific figures for the plastics sector.
``We estimate that approximately 60 percent of this amount entered the country through the tax exemption system and, of this specific proportion, at least half benefited from it unduly.''
Daniel Ebel supports elimination of the tax exemption. He is a partner at auxiliary equipment supplier Plast-Equip Indústria de Maquinas e AcessÃ³rios Ltda. and at Rax Representacoes Ltda, which represents domestic and imported brands of plastics machines.
Ebel said the measure is ``an incentive for the local industry to develop new products and bring state-of-the-art technology to Brazil through international agreements.''
His opinion is shared by Fernando Moraes, the sales manager at Bekum do Brasil Indústria e Comércio Ltda, which manufactures blow molding machines in SÃo Paulo and imports some models from other subsidiaries of the German-based corporation.
Moraes does not believe the measure will significantly affect blow molders, since all local manufacturers already use multinational technology.
But criticism is more prevalent among firms that make machines that have no similar models manufactured domestically — such as injection molding machines with more than 1,800 tons of clamping force, and PET preform molding presses.
``One of the solutions for reducing Brazil's trade deficit is to offer exportable competitive products. By having to pay more for machines it becomes a lot harder to achieve such a goal,'' said Humberto Savoia Jr., regional manager at SÃo Paulo-based Husky do Brasil Sistemas de Injecão Ltda.
Because of the lack of local competition, Savoia does not foresee any changes in the sales situation at Husky Injection Molding Systems Ltd.'s Brazilian subsidiary, which imports products from the Bolton, Ontario, parent firm.
The 17 percent import tax is set for the Mercosul trade region for 1997. That percentage gradually will fall and settle at 14 percent in 2001.