When it was born, in 1967, the idea of a Free Zone (ZFM) and free trade in the Amazon region was a convergence of interests. Not all were economical. It was a strategy by then-president Arthur da Costa e Silva, the second after the 1964 coup, to try to keep regions populated that could be occupied by communist nations or American invested. There was also the economic pressure of the end of the Rubber Cycle, as factories of the synthetic product appeared in the great centers. Finally, there was a diplomatic interest in consolidating the narrative that the Brazilian military government wanted to be active in global trade and that the Amazon region would be a good logistical center. And so it’s been 55 years. The space is still there, continues to receive maintenance incentives and remains active and operational, even though none of the premises used in its foundation are needed anymore. So why does it still exist?
The question of whether or not to have the Industrial Pole of Manaus (PIM) permeated ministerial discussions in all governments since the country’s redemocratization, but none of them dared to effectively move in space. Now, the topic has returned to the table. But the approach was not straightforward. A few weeks ago, President Jair Bolsonaro had been talking about a measure to unburden businessmen. Paulo Guedes, Minister of Economy, in at least three public meetings spoke about tax benefits and distortions that unbalance Brazilian industry. With this bed in place, came, on Friday (25), the decree that reduced by up to 25% the collection of the Tax on Industrialized Products (IPI) to stimulate the economy. With a tax waiver of R$ 19.5 billion this year, the plan is to reverse this figure with revenue from consumption, employment and increase GDP.
The problem is that this measure weakens companies located throughout the PIM region, which currently employs 106,000 people and earned R$158.2 billion in 2021. With the reduced IPI, the price of the product that leaves this region and goes to the rest of Brazil is either exported and is no longer competitive. And those who work there didn’t like it at all. In his defense, the president told Rádio Jovem Pan that the measure would be a re-industrialization of Brazil, and said he did not see how the reduction “would harm the industrialists who work there”.
In Congress, the decree was criticized. Senator Omar Aziz (PSD-AM) said that, unlike other attempts by past governments, “this attack is not punctual, against one segment, but against all,” he said. According to him, this will have a devastating economic effect on the region. “It will not be overnight that Manaus will develop a new economic alternative.” When announcing the decree, Guedes complained about the tax benefits granted to the Free Zone. According to him, were it not for the exemptions given there, the cut in the IPI could be up to 50%.
The mayor of Manaus, David Almeida (Avante), spent the Carnival meeting with advisors, technicians and representatives of the PIM to think about a strategy. The first of these is an open letter, addressed to the federal government. According to the mayor, at this point, the objective is to dialogue. One suggestion would be that companies that already go through the Basic Production Process (PPB), which is a kind of selection process to obtain ZFM tax incentives, have their product category removed from the IPI reduction list. In 2021, the sector with the best performance within the Free Zone was the IT Goods sector, with revenues of R$ 44.4 billion and an increase of 40.65% compared to 2020.
“The attack on the Manaus Free Trade Zone is not punctual and the state of Amazonas will suffer the consequences of the decree” Omar Aziz Senator (PSD-AM).
DISONANT VOICES If there is this movement to maintain the benefits, economists are also evaluating whether it is time to review the Free Trade Zone. Luis Carlos Longo, professor of macroeconomics and doctor in public development policies, is one of them. According to the academic, the PMI was not developed as a reference in research and scientific thinking, it did not take advantage of the characteristics of the region and is reduced to a factory floor that could be replaced in any other region. “For many years there was, on the part of businessmen, a speech that the existence of the pole stopped deforestation. It fell to the ground.”
In 2006, a survey commissioned by the Superintendence of the Manaus Free Trade Zone (Suframa), an autarchy of the Ministry of Economy, revealed that a good part of the companies installed in the region did not dispose of adequate toxic waste, with contamination of soil and landfills. There were also no plans for water treatment or specific sewage care. Janaína Senna, professor of green economy and researcher in the Amazon region, summed it up: “Putting 300 random industries into such a rich region is not transforming the place. It is to deform”. For her, the transformation of the Amazon region should attract another type of industry. “The future of medicine and human survival passes through environmental science. The Amazon region could be the center of this research.” For this to happen, it is not necessary to see what the region needs, but to see where its strengths are.
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