PRODUCTION INCENTIVES
The rise in the economy’s investment rate—associated with the trend toward longer-term planning by business executives facilitated by the economic stabilization—is contributing to the sustainability of the growth in the real GDP.
In the 1994-98 period, there were salary increases without inflationary pressures. This is partly explained by the increase of almost 10% in average industrial productivity during this period, and is associated with the technological modernization of industrial infrastructure, as well as with the introduction of new business management techniques.
AGRICULTURAL INCENTIVES
The priority given by the Government to agriculture after the Real Plan’s implementation can be assessed by evaluating a series of measures, among which the following are noteworthy:
a) Promotion of improvements in rural areas, by means of:
(i) securitization and extension of the payment periods for farmers’ debts, which benefited about 350 thousand farmers; and
(ii) the Revitalization Program for Agricultural Cooperatives in Farming (RECOOP), aimed at refinancing the debts of cooperatives, as well as at financing working capital and investments, with funds in the range of R$ 3 billion.
b) Reduction of the "Brazil Cost", especially through:
(i) the ex-ante determination of financial obligations for rural credit, in lieu of the "reference rate"; and
(ii) the exemption of the Tax on the Circulation of Goods and Services (ICMS) from exports of products produced in rural areas, making Brazilian products more competitive.
c) Prioritizing small farms and agrarian reform, generating income and employment in the rural areas, particularly by means of:
(i) expansion of the agrarian reform program, which in the 1995-98 period promoted the settlement of about 287,000 families, a number greater than what had been accomplished over the preceding 30 years;
(ii) creation of the Program to Strengthen Family Farming (PRONAF), which benefited about 1.5 million families over the 1995-98 period; and
(iii) creation of the Lands and Agrarian Reform Fund (Land Bank), aimed at restructuring land reform policies, which acts by granting financing for the acquisition of rural properties and investments in basic infrastructure. About R$ 123 million has been allocated for the 1999 fiscal year.
By restoring adequate levels of capitalization for the rural sector, these government initiatives have had a decisive effect in fostering consistent increases in agricultural production, despite the high volatility of international prices.
NEW INDUSTRIAL POLICY
The main industrial policy measures adopted under the Real Plan have been the following:
Adoption of long-term interest rates ( Taxa de Juros de Longo Prazo - TJLP) that reduce the costs of loans from the National Bank for Economic and Social Development (BNDES) toward levels closer to those found in international markets, drastically reducing the cost of investment in Brazil.
Support for the restructuring of the sectors most affected by trade liberalization, such as textiles, footwear and auto parts.
Establishment of the Program to Support Exports of Manufactured Products (BNDES/EXIM), which works with almost all export sectors by means of offering internationally competitive lines of financing.
Adoption of the New Export Centers Program (PNPE) in 14 States, to promote the export business in areas aside from the traditional export centers.
Establishment of the Export Financing Program (PROEX), which supports the exports of Brazilian goods and services with funds from the federal government through two mechanisms:
a) direct financing of exporters (PROEX-financing); and
b) payments to equalize interest rates (PROEX-equalization).
Support for small and medium-sized companies. This program was created with the purpose of facilitating access to medium and long-term credit by small and very small companies (through the Special Agency for Industrial Loans - Agência Especial de Financiamento Industrial - FINAME).
Endorsement Fund (dedicated to small and medium-sized companies). Also aimed at promoting access to credit, especially for exporting companies.
The increase in the capital goods share of Brazil’s total imports is an indicator of the modernization of the production system and of the growth of productivity.
The significant increase in foreign sales of manufactured products in 1997 and at the beginning 1998 demonstrated that the restructuring of production had begun to generate its the first benefits, especially at the beginning of 1997.
The Export Financing Program (PROEX) seeks to offer Brazilian exporters the same financing conditions obtained by our competitors, by means of direct financing to exporters and payments to equalize interest rates.
The BNDES - EXIM Program constitutes yet another example of government initiatives to reduce financing costs for production and exports.
The funds allocated for this Program to Support Exports of Capital Goods have grown significantly. The average of the funding levels for 1997 and 1998 represent 4.6 times the average funding levels for 1994 to 1996. Furthermore, the spending projected for 1999 exceeds the 1998 level of disbursements by 45%.