This article will give you a short introduction to the Manaus Free Trade Zone.
You might wonder what has attracted more than 600 companies, including many of the world's largest enterprises, to establish production in states like Acre, Amazonas, Roraima and Rondônia which by all means have some of the least disagreeable commercial locations in Brazil.
Between the businesses established in the area, you will find companies like Nokia, Honda, Pepsi, Coca Cola, Panasonic, Harley-Davidson and many more.
To understand the current situation today, it's necessary to look at the almost 60 years old history of the Manaus Free Trade Zone.
The initial idea of the Manaus Free Trade Zone came from Deputy Francisco Pereira da Silva in 1951. For a long time, the project had very little national credibility and was located in a single warehouse rented from Manaus Harbour, in the Port of Manaus.
In 1967, President Castello Branco signed a law redefining the Manaus Free Trade Zone in more concrete terms. The new law gave the Manaus Free Trade Zone a radius of 10,000 km with an industrial center and an agricultural center; it also created the base for the Manaus Free Trade Zone Superintendence (SUFRAMA).
SUFRAMA is a Public Administration agency affiliated to the Ministry of Development, Industry and Foreign Trade (MDIC). Besides promoting development strategies for Western Amazon, its mission is to manage and control the fiscal incentives granted to the companies established in the Manaus Free Trade Zone. Thus, it has the role of an investment promoting agency for the area.
In the first few years after its redefinition in 1967, the Manaus Free Trade Zone served as a huge shopping center for all Brazilians. In 1976, the Federal Government affixed a baggage quota for passengers leaving the Manaus Free Trade Zone. Tourists whose sole purpose for visiting was shopping slowly lost interest due to the increased cost of flights, lodging and transportation.
Fiscal Incentives in the Manaus Free Trade Zone
There are several highly beneficial incentives in the Manaus Free Trade Zone. It's worth highlighting the following:
- 88% reduction in Import Duty on the inputs of industrial goods
- For electronic products the Import Duty is reduced proportionally to the local added value
- No tax on industrialized products (IPI)
- 75% reduction on the income tax. Exclusively for reinvestments
- 0% COFINS for incoming goods and inter-industry internal sales
- 0% PIS for incoming goods and inter-industry internal sales
In addition, businesses can receive a 55% - 100% credit on the ICMS rates if they demonstrate some contributions to the funds for support of high education, tourism, R&D and others.
Other Incentives in the Manaus Free Trade Zone
International Warehouse: Special system that allows the storage of foreign and national goods that are under tax control, with suspension of the payment of the federal and state taxes. The goods may stay there for a one-year period, extendable to a period of no more than five years.
Land for Industrial purpose: Large areas with real estate properties that are appropriate for the establishment of industrial enterprises, sold at nominal prices. The incentive price is BRL 1.00/m2, it may be required a minimum of 30% of occupation 5 years after the project was approved.
In order to obtain the approval of industrial projects within the Manaus Free Trade Zone the companies will be evaluated based on the following parameters:
- Execution of Basic Productive Process
- Job creation in the area, with the concession of social benefits to the workers
- Compliance with demands on products and standards of production
- Permanent training of the workforce in order to obtain growing levels of productivity
- Reinvestment of profit in the region
- Investment for scientific and technological development
- The current status of Manaus Free Trade Zone
- Today more than 60% of all trading within the Manaus Free Trade Zone is related to electronics and motorcycles, with chemicals and metallurgy as two other significant industries.
Approximately 100 000 jobs in western Amazonia are directly related to the Manaus Free Trade Zone and with an estimated 400 000 indirectly related jobs outside the Free Trade Zone.