U.S. calls for greater openness in Brazil government procurement contracts

RIO DE JANEIRO, BRAZIL – The United States is the first country to formally call on Brazil to expand its offer to open the Brazilian government procurement market to foreign companies, which would enable Brasília to join the World Trade Organization’s (WTO) Government Procurement Agreement (GPA).

Washington has urged the Brazilian government to include access to foreign companies in public procurement bids for financial services and strategic health products and supplies for the Brazilian National Health System (SUS), among others.

In practice, the United States is calling on Brazil to eliminate most of what it excluded in the initial offer presented in February. At stake is permitting foreign companies to compete for a portion of the government contract market worth up to US$145 billion (R$813 billion).

The GPA is also regarded as an “anticorruption agreement” of the WTO, where the committee will meet tomorrow.

In its initial offer, Brazil established a threshold of between US$186,000 and US$572,000 at which foreign suppliers can bid for goods and services, and of US$7.150 million for construction services.

The GPA does not automatically apply to all purchases by the member governments to this agreement. Brazil’s final list of concessions will depend on negotiations, including what it will receive in return from partners.

In its 13-point demand, the U.S. is asking for inclusion in the offer of purchases made by the National Institute of Colonization and Agrarian Reform (INCRA), and the National Nuclear Energy Commission (CNEN). It alleges that, for its part, Washington has committed to open purchases made by NASA and the Nuclear Regulatory Commission to foreign countries.

It also asks Brazil to expand the list of foreign purchases by the Ministry of Defense, which typically includes sensitive areas.

For the first time Brazil has offered foreigners access to the public procurement of some states – Amazonas, Minas Gerais, Pará, Paraná, Rio Grande do Sul, and the Federal District – and municipalities, joining the federal government and several state-owned companies. But the U.S. considers this too little and is asking Brazil to expand the number of states, undoubtedly interested in the São Paulo and Rio government procurement markets.

It also wants foreign companies to be able to bid for the Defense and Justice Ministries in the case of purchases of products from chapters 84 to 87 of the Harmonized Commodity Description and Coding System. This includes everything from cars and tractors to nuclear reactors, machinery, and electrical appliances.

The U.S. asks Brazil first to explain why it has excluded government procurement of financial services, and then calls for the inclusion of these services in the Brazilian offer. Likewise, the U.S. asks about the value of goods and services purchased by the SUS, which the Brazilian government wants to exclude from a WTO agreement.

Bilateral negotiations will proceed during the coming months. According to the Brazilian government, joining the GPA agreement “will reduce public spending and improve the quality of government goods and services, and will encourage Brazilian exports and foreign investment in the country.”

The National Confederation of Industry (CNI) has reservations regarding Brazil’s accession to the GPA and calls for caution from the government in the opening commitments under negotiation. It fears that opportunities in other countries will be far less advantageous than the potential losses from foreign competition.

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