Policy Changes to Modernize Economy : Brazil Eases Limits on Imports, Free Enterprise

RIO DE JANEIRO — President Jose Sarney announced an ambitious plan Thursday to overhaul Brazil’s ailing economy by giving private enterprise increased freedom and opening the door to more imported goods.

Sarney signed decrees to lower import taxes, reduce official red tape for exporters and new companies, and encourage the development of advanced technology. He said the measures reflect major policy changes aimed at “the modernization of the Brazilian economy.”

Since World War II, Brazilian governments have followed a policy of “import substitution,” using customs, taxes and other restrictions to protect local industries from foreign competition. Sarney said this policy served its purpose but “is exhausted today and is compromising our development.”

Under the new policy, many import taxes, some as high as 105%, will be reduced and others eliminated. Preference will be given to imports such as industrial parts and components that help to increase the quality, and lower the final cost, of Brazilian manufactured goods.

‘Untying Economy’

Goods to be exempted from import taxes include food staples, fertilizers and pesticides, news print and aircraft replacement parts.

With a population of more than 140 million, Brazil has the world’s eighth-largest market economy. The Brazilian trade surplus is expected to reach more than $12 billion this year, despite severe economic problems that include an industrial recession and inflation of nearly 20% a month.

Sarney expressed confidence that his new policy will turn the economy around.

“We intend to untie our economy so that it may enjoy the winds of freedom that are already benefiting other sectors of our country,” he said in a televised speech. “I have just signed four decrees that will, without doubt, change the course of the Brazilian economy. . . . We are the eighth economy of the world and we have the capacity to jump to the vanguard of the world economy.”

One decree will eliminate the need for permits and other advance paper work to export about 3,000 products. Sarney said that “debureaucratization” is an important part of the new policy.

“The multiplicity of agencies and papers that interfere in the daily activities of the businessman make production difficult and expensive,” he said. “We are now simplifying and making bureaucratic procedures more agile.”

He announced the elimination of requirements for government authorization before a business can be started. Another decree provides new incentives, such as tax breaks and credits, for companies that invest in new industrial technology.

“For the first time,” he said, “specific incentives are being created to make research possible at the level of private enterprise.”

Jose Castelo Branco, Sarney’s minister of industry and commerce, called the policy a “new model of development.” He said it includes plans to put many government-owned industries under private ownership.