Brazilian Manaus Free Trade Zone is not very efficient, says World Bank

By Paulo Silva Pinto

The World Bank published on Tuesday evening (9) the study “Delicate Balance for the Brazilian Legal Amazon”, with proposals to increase the region’s economy and reduce the pressures that lead to deforestation.

The study says it is necessary to increase the region’s productivity to reduce the pressure for deforestation.

The Manaus Free Trade Zone, which maintains industry in the region through tax incentives, is cited as an example of inefficient action to boost the region’s economy.

“Tax incentives to industrial activities in the Legal Amazon have not helped stimulate productivity growth and should be reassessed,” says the report’s executive summary.

The text cites the Manaus Free Trade Zone, with tax incentives equivalent to 0.4% of the country’s GDP (Gross Domestic Product).

“Despite the high tax cost, the state of Amazonas has been losing competitiveness and finds it increasingly difficult to attract new companies.”

“The number of jobs in the industry has also been decreasing, with a concomitant increase in capital intensity.”

GAINS WITH TRANSPORTATION

According to the World Bank report, reducing transportation costs would increase productivity in the Amazon.

One of the ways the study points out is to increase competition in the shipping that connects most cities. A potential reduction of 12.5% in transportation costs is estimated.

This would specifically increase the GDP of the state of Amazonas by 38%.

“This is more than the annual value of current tax incentives for the Manaus Free Trade Zone,” the text says.

The study also lists distorted rural credit rules, inefficient taxes, and poorly targeted subsidies as factors encouraging an unproductive economy in the region.

You can read the study here.

With information from Poder360

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