Brazil’s Manaus industrial hub created some 100,000 direct jobs in 2020

RIO DE JANEIRO, BRAZIL – “We cannot allow the debate about the Manaus Free Trade Zone to be contaminated by a fiscal perspective.” This was one of the vice-president of the Chamber of Deputies Marcelo Ramos’ statements during the webinar “Amazon Dialogues – Proposals for the Amazon of the Future,” hosted by the São Paulo School of Economics of the Getúlio Vargas Foundation (FGV/EESP).

The legislator criticized the notion of some government sectors that tax waivers can hinder the country. “It is a dumb and mistaken calculation,” he declares.

“Arthur Lira (president of the Chamber) says that the annual tax waiver of R$18 (US$3.4) billion from the soft drinks industry in the Free Trade Zone pays for half of the Bolsa Família (Family Grant). I asked him if he thought that with the incentive extinguished these plants would continue producing soft drinks in the Manaus Free Trade Zone. Of course not. An example of this is that, with the tax change in 2018, Pepsi left the Free Trade Zone. Except that no one pays what these companies pay in terms of ICMS and ISS, no one hires at their level of employment.”

Márcio Holland, organizer of “Amazon Dialogues” and coordinator of FGV’s Postgraduate Program in Finance and Economics, says that it is a very common perception that the Manaus Free Trade Zone is a burden. “In fact there are tax expenses, there are tax incentives, but the region is a producer of financial resources. The goal is to use these resources for the development of the entire Brazilian Amazon,” he says.

The academic added that the Amazon is a winning ticket and could be the cornerstone of a new cycle of Brazilian development. But he complains that little is debated about the region. “It covers half of the national territory and we have turned our backs on it. It is crucial that the Amazon enters the heart of national debate, whether due to debates about climate change or the new economy and the post-pandemic world, or even the bio-economy and biotechnology powers and productive diversification.”

Holland further states that the Amazon’s sustainable development is the mainstay of a new cycle of post-pandemic socioeconomic development. “The role of promoting research, development, and innovation of new economic vectors should be reinforced. It is also important to understand the Amazon bio-economy and biotechnology, combined with regional productive diversification, as genuine forms of development. Finally, to think that an environment with legal security for low carbon economy investments in the Amazon is essential.”

The professor also mentions the employment potential as a huge differential. “The Manaus Industrial Hub generated some 100,000 direct jobs in 2020. Considering the multiplier effect, we are talking about over 400,000 jobs. The turnover is R$120 billion per year.”

“The generation of 100,000 jobs is quite relevant. We are talking about a model that makes Amazonas have one of the highest ICMS tax collections per capita in Brazil and that makes the state one of the few in Brazil with a balanced fiscal and social security system, with public servants’ salaries strictly up to date,” Marcelos Ramos says.

“A hardware industry for a software future”

During the webinar, the legislator said that self-criticism about the Amazon development model is necessary. In his opinion, in the globalized economy no industrial model can be sustained forever based solely on tax incentives.

“Either we become aware of this or we will reach 2053 begging for a new extension of the Manaus Free Trade Zone. I don’t want to wait until 2053 to realize that we should have adopted our sustainable model. I usually say that we have a hardware industry for a software future. Either we adapt or we are going to be run over.”

In this context, Ramos states that it is important to channel the wealth generated by the Free Trade Zone to investments in logistical infrastructure, improvement and construction of ports, airports, waterways, roads, improvement in telecommunications and energy, and, on the other hand, to expand the product mix.

“There is no point in Minister Paulo Guedes saying that he wants a bio-industry established here, the fish industry, regional fruit concentrates, phytotherapeutic biocosmetics, because in order for this forest potential to become wealth on the supermarket or drugstore shelves, investments in applied research are required. And the federal government has never even considered settling the legal nature of the Amazon Biotechnology Center.”

The desirable model

Also present at the webinar, journalist Carlos Rydlewsky reiterated that the development model should take into account “the redundant and continuous failures from the sustainable standpoint of preserving demarcated areas and indigenous and riverine populations.”

“Given this scenario, I would like to better understand what can be done, what is the climate in Congress with respect to this issue of Amazon preservation since the model we propose is for development for preservation. Will it be left to future governments?” he says.

“It is very difficult to tackle an economic and sustainable debate from the environmental standpoint in the current government, because it is based on the mistaken assumption that it is only possible to produce wealth in the Amazon if the forest is cut down. This is a crude perspective that pervades various sectors of the government,” Ramos says, adding that he will use the COP 26 environment (26th Conference of Parties to the United Nations Framework Convention on Climate Change) to introduce Bill 528.

“It aims to regulate the carbon market in Brazil by challenging the government’s debate, showing that the standing forest can produce more wealth and fight the poverty of traditional populations in the interior of the Amazon more than deforestation.”