Technical Trade Barriers Brazil: The case of organic imports

National regulation for organic production in Brazil was implemented on January 1st of 2011, demanding all imported organics to be certified according to the specifics of Brazilian norms. This new regulatory framework brought a particular condition of technical barriers to trade in the country, as it makes it unfeasible for foreign brands to locally certify their organic manufacturing processes due to the complex demand of tracking all raw material used in production, extending it to the need of multiple certification packages far down the supply chain.

For US brands, for example, the inability to conform to such measures becomes particularly proven by the fact that the largest and most recognized certifying agency in Brazil (IBD) has only two certified US producers in their database – both in the very primary base of agricultural production.

This article is an attempt to initiate a debate on possible alternatives to stimulate market transformation and perhaps openness to organic imports. In this sense, we propose the following four potential strategies for local market development:

Strategy 1: Conform to certification norms

Though in itself the national regulation structure is one of extremely difficult comformity, the program is setting the bar at a high quality assurance standard for organic farming and industrialization practices – not at all prejudicial to a conscious consumer demand. Files containing the regulatory framework for organic certification in Brazil are available for download in this link.

Strategy 2: Adopt a market driven approach

Adaptation is a premise of international markets, so if no other option seems to be feasible, then foreign companies must adapt the product to local market features.

Brazil is a potential market with roughly 200 million consumers, which makes it unquestionable that the cost-benefit relation of investing in marketing and package redesign is no higher then either certifying or interfering in regulation. Plus, in order to be commercialized in accordance to current regulations, organic products must show the BR certification logo on the package, so some level of adaptation would occur either way. In fact, one strong argument behind the defense of current regulatory practices is on policy reciprocity, being that brazilian brands very frequently must conform to foreign market conditions.

Based on Decrete 6323, Chapter II, Section III – Of the Technical Regulation of Production. Art. 9o. Paragraph 2o. The norms for products from sustainable organic extrativism will be applied only to those which have as its objective the identification as an organic product.

The suggestion here is finding a substitution for the branding term organic, yet making sure it doesn’t fall into the specifics of organic regulation. This will most likely drive the consumer to rethink the concept. Some adapted branding examples are: Sustainable Production, Sustainable Culture, etc. In short, developing a local marketing strategy that compensates for the lack of organic certification.

We do however, have to observe the following Decrete 6323, Chapter IV, Section III. Of Publicity and Advertising. Art. 23. It is forbidden, in the publicity and advertising of products that are not produced within organic systems of production, the use of expressions, titles, marks, images or any other mode of information capable of inducing the consumer to error in regards to the organic quality of products.

But we should also notice that there is room for interpretation in the text, and specially when crossing this passage with the one previously mentioned – of not objectively identifying (i.e. cathegorizing) the product as organic or even as a product sourced from an organic system of production (i.e. if you don’t meet the specifications in the law, then you’re not producing from such a system). This strategy implies the creation of a new market concept for toxin free production.

For some particular cases, what is present today in Brazil is a market opportunity to focus on the consumer who is lactose intolerant, and/or in the phases of substituting animal products for a plant based diet. And lastly, a peculiarity of the brazilian market is that imported brands are often placed as premium products, and brands from developed markets are often a reference to high quality standards, and therefore pricing is not a limitation when companies still have room for similar profit margins expected from organics per se.

Strategy 3: Diplomatic articulation for regulation revision

Though a time intensive, unsure and expensive process, participation in regulation revision if foreseen in the following passages:

Law 10831, Art. 11, Paragraph 1. The regulation will contemplate the participation of representatives of the agricultural sector and civil society with recognized participation in any stage of the organic production chain; and

Law 10831, Art. 11, Paragraph 2. The regulation of this Law will be revised and updated when necessary and, in the maximum, every four years.

These revisions are executed through a specific mechanism, as per Decrete 6323, Chapter III, Section II – Of the Commissions. Art. 34. Responsibilities of CNPOrg (National Comission). II. Propose regulations that have as objectives the improvement of the organic production chain at the national and international levels, considering proposals sent by CPOrg-UFs (Comissions from each state).

These are the comissions to which proposed formulations must be addressed. An interesting suggestion is to provide an international mechanism  under the structure of an Economic Complementation Agreement for thorough transfer of technology and technical capacitation of local producers, allowing significant improvements in national quality and productivity, specially targeting the country’s national family farming programs.

Needless to mention, Brazil is a developing economy that is greatly damaged by a lack of good public governance practices, and local producers, broadly capillarized into a network of small traditional farming communities, would significantly suffer the social impacts of fierce corporate competition.

Strategy 4: Mobilize a dispute or agreement under the WTO TBT

Claiming that the brazilian government is violating the World Trade Organization’s Technical Barriers to Trade Agreement is an option. In this link you will find a copy of the agreement with key highlights in consideration to this particular case. However, the text can be interpreted in such a broad and subjective manner, that under the agreement you will find arguments for both in favor and against current regulatory practices in Brazil, as likely as in many cases of TBT disputes in the WTO system. So, ultimately, this option is more reliable if an inclusive counterproposal for standardized practices is put in place.

Author: Juliana Michelon Alvarenga. BSc. International Relations, MBA Business Intelligence. [julianama@aldeotaglobal.com]

Accession of the Russian Federation to the World Trade Organization

Russia’s accession to the WTO cleared a major hurdle when the WTO Working Party on its accession approved, ad referendum on 10 November 2011, the package spelling out Russia’s terms of entry to the organization. The Working Party will now send its accession recommendation to the 15 – 17 December Ministerial Conference, where Ministers are expected to approve the documents and accept Russiaas a WTO Member. [1]

All unrestricted WTO documents on accession of Russian Federation.

As part of the accession accord, Russia has agreed to undertake a series of important commitments to further open its trade regime and accelerate its integration in the world economy. The deal offers a transparent and predictable environment for trade and foreign investment.

From the date of accession, the Russian Federationhas committed to fully apply all WTO provisions, with recourse to very few transitional periods (see details below). The Russian Federation’s commitments will include the following:[2]

  • Market access for goods
  • Market access for services
  • Export duties
  • General commitments on market access
  • Industrial and agricultural subsidies
  • Pricing of energy
  • Sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT)
  • Trade-related investment measures
  • Protection of trade-related intellectual property
  • Transparency
  • Functioning of the Custom Union betweenRussia,KazakhstanandBelarus

There is considerable concern about the disparity in incomes in Russia. The richest Russian regions are 67 times richer than the poorest Russian regions in nominal terms and 33 times richer when price differences between the regions are taken into account (World Bank, 2005). The richest regions include the European North, Moscowand the resource rich regions of Siberia and the Far East. The poorest regions include the North Caucuses, Southern Siberia and Central Russia.[3]

All text is reposted Ipsis litteris from its official sources for information purposes only.

Climate fund for renewable energy in Brazil

The Climate Fund was created through the Brazilian Law 12.114 of 09/12/2012 and regulated by the Decree 7.343 of 26/10/2010 as an instrumento for the National Policy for Climate Change. The fund is tied to the Ministry of Environment and is meant to garantee resources for projects or studies and financing initiatives that foresees mitigation of climate change.

It has been announced on February 13th, 2012 by the Minister of Environment, Izabella Teixeira, and by Luciano Coutinho, the president of the National Economic and Social development Bank (BNDES) that the amount of R$ 360 million has been made available for the 2012 budget.

The lowest rate is 2,5% per year for solar energy projects, with a pay back period able to reach up to 25 years.According to Mrs. Teixeira, solar and ocean energy are the projects most likely to get support from the fund, being that wind and biomass industries in Brazil have already advanced significantly.

Bilateral Relations Brazil – Finland

On February, 14 2012, Mr Jyrki Katainen, Prime Minister of Finland was received by Dilma Roussef, President of Brazil, with the second largest ever official delegation sent from Finland to anywhere in the world. They talked about strengthening bilateral cooperation on science, technology, innovation and education.

On Education, Mr Katainen assumed the commitment of providing better access to institutions and research centers in Finland, to students and researchers under the Brazilian national program Science without Borders. Representatives from the Brazilian national institutions that coordinate the program will sign an agreement that adds Finland to the program. It has also been agreed on adding the entrepreneurial sector to the educational opportunity in order to qualify workers already in the job market.

It the press release by the Brazilian Ministry of External Relations, it is said that in order to strengthen bilateral cooperation on environmental issues, the countries are structuring a Memorandum of Understanding.

The bilateral diplomatic relations between Brazil and Finland has in records 6 (six) bilateral treaties, from which two are not valid. The existing agreements are as follows:

  • Agreement on Economic and Industrial Cooperation – celebrated in 1981 and put into force in 1983
  • Agreement on Cultural, Educational and Scientific Cooperation – celebrated in 1988 and put into force in 1990
  • Agreement to avoid double taxation and to prevent tax evasion on matters of income taxes – celebrated in 1996 and put into force in 1997
  • Memorandum of Understanding on Cooperation in the Areas of Climate Change and the Development and Execution of Projects under the Clean Development Mechanism from the Kyoto Protocol – celebrated and put into force in 1997

It is important that private sector, civil society and other interests groups follow up on these governmental agreements. They are important instruments and subsidies for project development initiated by institutions other than governmental agencies.

Roadmap for discussion for the United Nations Conference for Sustainable Development (UNCSD)

The United Nations Organization plan

Agenda 21

Global Compact

ICC Anti-corruption policy and business practices:The Anti-Corruption Commission encourages self-regulation by enterprises in confronting issues and provides business input into international initiatives to fight corruption.

Business Objectives for the UN convention against corruption: Monitoring, technical Assistance, and asset recovery.

ICC Rules of conduct and recommendations: Enterprises should establish reasonable controls and procedures; follow-up and promote the rules.

Natural Resouces

The U.S., Australia, Brazil, Indonesia, and island states across the Pacific and Caribbean are among those advancing calls for more marine environments to be placed under legal protection, providing sanctuary for threatened species, habitats and ecosystems.

  • Public Health
  • Water

Corporate Sustainability

  • Energy and climate
  • Water and ecosystems
  • Agriculture and food
  • Social development
  • Urbanization and cities
  • Economics and Finance of sustainable development

Ex-Im Bank US – Brazil business financing agenda

The Export-Import Bank of the United States (Ex-Im Bank) will present in its 2012 annual conference the conditions for purchasing goods and/or services from US industries through their long-term and low-interest financing support.

During the April 12-13 event in Washington DC, representatives from US companies, financial and government institutions, and foreign offices will meet on one-on-one schedules to discuss business opportunities in industries: agribusiness, aircrafts/avionics, construction and medical equipment, power-generation, renewable energy, telecommunications and technology.

Export-Import Bank Support for U.S. Exports to Brazil: Financing purchases of US equipment, products and services. Business opportunities for US industries in the brazilian market: telecommunications, solar energy, industrial services, technology, machinery and equipment supply.

Governmental subsidies to foreign companies in Belgium looking for access to European markets

On March 5th 2012, in Curitiba Brazil, Thierry Muschang, a Luxembourg PwC Director, presented the beneficial aspects of the project for attracting foreign companies to the Belgium / Louxembourg region, constructed in partnership with IDELUX, a government agency that was represented at the meeting by Joel Marinozzi, the Business Development Manager from the Economic Development Division, while in a mission in Brazil. The meeting was organized by the local Center for International Business (CIN) at the Federation of Industries of the State of Paraná (FIEP) and had the support of the Consulate General of Belgium in São Paulo, Brazil.

Located at the heart of Europe, the region of Belgium/Luxembourg means a strategic gateway to the European markets, very competitive in the international logistics point of view. This advantage is enhanced by the local government subsidies offered to foreign companies and specially start-ups who wish to install a regional office and/or a regional manufacturing distribution warehouse.