BRAZILIAN PHARMACEUTICAL EXPORTERS TO BENEFIT FROM NEW TAX INITIATIVE

The Brazilian pharmaceutical sector will benefit from the government's new tax incentives to exporters of hi-tech products, worth BRL3.3bn (US$1.47bn). Other sectors that will benefit from the initiative include machinery, semiconductors and software.

Brazilian drug exports are worth around US$220mn per year, with this trade expected to grow 30% by 2007 as companies diversify operations beyond the domestic market. The new bill will help reduce the cost of new factory investments by 11% and is expected to secure an estimated US$20bn in export-orientated investment into Brazil.

In addition, the Northern State of Amapa and four municipalities in Para State have been declared free-trade manufacturing zones. This means that makers of technology-driven goods will be exempt from manufacturing tax, helping local drugmakers to expand operations, and creating a hub for hi-tech industry in the region.

Industry observers expect the reforms to breathe new life into the Brazilian drug export market, which has stagnated in recent years due to economic problems and reduced spending power in its main export markets of Argentina and Venezuela. However, they also point out that not all drug exporters will benefit, as only those that ship 80% of their products abroad will qualify for the tax breaks.