US embassy cable - 05BRASILIA128

UNCLAS SECTION 01 OF 03 BRASILIA 000128 
 
SIPDIS 
 
STATE PLEASE PASS TO USTR/CHOOKER 
GENEVA PASS USTR/AGREENIDGE 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
 
E.O. 12958: N/A 
TAGS: ETRD, BR, WTO, Trade 
SUBJECT:  WTO SERVICES NEGOTIATIONS: REQUEST FOR COMMENTS 
ON U.S. MARKET ACCESS PRIORITIES 
 
REF:  04 STATE 270998 
 
1. This cable is based upon input provided by FCS Sao 
Paulo. 
 
2. Per reftel request, below is a ranking of the various 
service sectors in terms of priority for the USG and 
level of openness.  Where appropriate, we have included 
comments regarding doing business issues for a specific 
sector. 
 
3. Begin text. 
 
SECTOR                      PRIORITY   LEVEL OF 
                              LEVEL    OPENNESS 
------------------------    --------   -------- 
 
LEGAL SERVICES                  3        MEDIUM 
COMMENT: FOREIGN COMPANIES CAN OPERATE THROUGH 
PARTNERSHIP WITH LOCAL FIRMS OR BY ESTABLISHING AN OFFICE 
IN THE COUNTRY AND HIRING LOCAL ATTORNEYS.  FOREIGN 
PROFESSIONALS CANNOT PRACTICE IN BRAZIL DIRECTLY. 
 
ACCOUNTING, AUDITING AND        5        LOW 
 BOOKKEEPING SERVICES 
COMMENT: ONLY LOCAL ACCOUNTANTS REGISTERED AT THE 
ACCOUNTANTS' COUNCIL CAN PROVIDE SERVICES. THE BRAZILIAN 
BOOKKEEPING SYSTEM IS SLIGHTLY DIFFERENT FROM THAT OF THE 
U.S. 
 
ARCHITECTURAL SERVICES          5        LOW 
COMMENT: FOREIGN ARCHITECTS MUST HAVE THEIR DEGREES 
VALIDATED IN BRAZIL.  THE PROCESS IS VERY COMPLICATED AND 
TAKES A LONG TIME. 
 
ENGINEERING AND INTEGRATED      3        MEDIUM 
 ENGINEERING SERVICES 
COMMENT: FOREIGN FIRMS ARE REQUIRED TO HAVE A LOCAL 
REPRESENTATIVE WHO HOLDS A LICENSE TO PRACTICE 
ENGINEERING IN THE COUNTRY, AND THE COMPANY HAS TO BE 
REGISTERED AS AN ENGINEERING FIRM IN BRAZIL. 
 
URBAN PLANNING AND LANDSCAPE    5        LOW 
 ARCHITECTURAL SERVICES 
COMMENT: FOREIGN ARCHITECTS MUST HAVE THEIR DEGREES 
VALIDATED IN BRAZIL.  THE PROCESS IS VERY COMPLICATED AND 
TAKES A LONG TIME. 
 
COMPUTER AND RELATED SERVICES   3        MEDIUM 
Comment: Computer and peripherals are manufactured in 
Brazil.  (One example is Dell Computers.) Almost all 
electronic components used in the industry are imported. 
However, used computers and peripherals cannot be 
exported to Brazil.  Open Source Software is being 
adopted by the Brazilian government.  Brazil is set to 
adopt a digital TV standard in the near future. 
 
RESEARCH AND DEVELOPMENT        1        HIGH 
 SERVICES 
 
REAL ESTATE SERVICES            3        MEDIUM 
COMMENT: FOREIGN COMPANIES CAN OPERATE THROUGH 
PARTNERSHIP WITH LOCAL FIRMS OR BY ESTABLISHING AN OFFICE 
IN THE COUNTRY. 
 
RENTAL/LEASING SERVICES         3        HIGH 
 
ADVERTISING SERVICES            5        HIGH 
 
MARKET RESEARCH AND PUBLIC    N/A 
 OPINION, POLLING SERVICES 
 
MANAGEMENT CONSULTING SERVICES  1        HIGH 
COMMENT: IN CASES INVOLVING THE TRANSFER OF TECHNOLOGY, 
THERE IS A LENGTHY REGISTRATION PROCESS AT INPI - THE 
BRAZILIAN INSTITUTE OF INTELLECTUAL PROPERTY.  IN 
ADDITION, ALL IMPORTS OF SERVICES ARE SUBJECT TO THE 
FOLLOWING TAXES/FEES: IRRF - INCOME TAX: 15%, CIDE - 
CONTRIBUTION TO THE ECONOMIC INTERVENTION DOMAIN: 10%, 
ISS - MUNICIPAL SERVICES TAX: 5%, AND PIS/COFINS - SOCIAL 
INTEGRATION AND SOCIAL SECURITY FINANCING CONTRIBUTIONS: 
9.25%. 
TECHNICAL TESTING AND           3        MEDIUM 
 ANALYSIS SERVICES 
SERVICES INCIDENTAL TO          1        MEDIUM 
 AGRICULTURE, HUNTING AND 
 FORESTRY, AND FISHING 
 
SERVICES INCIDENTAL TO MINING   3        MEDIUM 
COMMENT: POTENTIAL ONLY FOR FRONT-END ENGINEERING 
STUDIES, SUCH AS MINERAL PROCESS ADVANCED CONTROL 
SYSTEMS.  IN GENERAL, FOREIGN SUPPLIERS MUST WORK IN 
CONSORTIUM WITH LOCAL COMPANIES, BOTH TO LOWER COSTS AND 
TAP LOCAL EXPERTISE. 
 
ENERGY SERVICES                 1        HIGH 
COMMENT:  ELECTRICAL POWER DISTRIBUTION AND OIL AND GAS 
SERVICES TAKE PLACE IN BRAZIL PURSUANT TO A CONCESSION 
REGIME ADMINISTERED BY THE BRAZILIAN GOVERNMENT.  THESE 
SERVICES ARE EQUALLY OPEN TO DOMESTIC AND FOREIGN 
COMPANIES.  THE PRINCIPAL DIFFICULTY FACED BY U.S. FIRMS 
IN THESE MARKET SEGMENTS IS NOT MARKET ACCESS, BUT 
INADEQUATE CONTRACT STABILITY, DELAYS IN OBTAINING 
ENVIRONMENTAL PERMITS, AN UNSTABLE REGULATORY SYSTEM 
(ESPECIALLY IN THE POWER SECTOR), AND THE NEED TO MEET 
LOCAL EQUIPMENT REQUIREMENTS.  HOWEVER, ALL OF THESE 
ISSUES EQUALLY AFFECT DOMESTIC AND FOREIGN COMPANIES 
OPERATING IN BRAZIL. 
 
PLACEMENT AND SUPPLY SERVICES   4        HIGH 
 OF PERSONNEL 
 
INVESTIGATION AND SECURITY      3        MEDIUM 
 
RELATED SCIENTIFIC AND          1        HIGH 
 TECH CONSULTING SERVICES 
COMMENT: IN CASES INVOLVING TRANSFER OF TECHNOLOGY, THERE 
IS A LENGTHY REGISTRATION PROCESS AT INPI - THE BRAZILIAN 
INSTITUTE OF INTELLECTUAL PROPERTY. 
 
MAINTENANCE AND REPAIR OF       5        HIGH 
EQUIPMENT 
 
BUILDING/CLEANING SERVICES      5        HIGH 
 
PHOTOGRAPHIC SERVICES           5        HIGH 
 
PACKAGING SERVICES              2        MEDIUM 
 
PRINTING, PUBLISHING            2        MEDIUM 
 
CONVENTION SERVICES             2        HIGH 
 
COURIER SERVICES                1        MEDIUM 
 (EXPRESS DELIVERY) 
 
TELECOMMUNICATION SERVICES      1        MEDIUM 
 
AUDIOVISUAL SERVICES    N/A 
 
CONSTRUCTION AND RELATED        3        MEDIUM 
 ENGINEERING 
COMMENT: FOREIGN FIRMS ARE REQUIRED TO HAVE A LOCAL 
REPRESENTATIVE WHO HOLDS A LICENSE TO PRACTICE 
ENGINEERING IN THE COUNTRY, AND THE COMPANY HAS TO BE 
REGISTERED AS AN ENGINEERING FIRM IN BRAZIL. 
 
DISTRIBUTION SERVICES           1        HIGH 
 
ENVIRONMENTAL SERVICES          3        MEDIUM 
COMMENT: THE MARKET IS RELATIVELY SMALL BUT EXPANDING, 
PARTICULARLY IN THE REMEDIATION AND CLEAN UP OF 
CONTAMINATED SITES BUSINESS.  U.S. COMPANIES USUALLY 
ASSOCIATE WITH LOCAL ENVIRONMENTAL COMPANIES FOR THE 
DEVELOPMENT OF SPECIFIC PROJECTS. 
 
BANKING AND OTHER FINANCIAL     4        HIGH 
 SERVICES INCLUDING SECURITIES 
 
Comment: Brazil's Central Bank regulates banking and 
financial services, and maintains strict accounting and 
operational supervision.  Private pension funds are among 
the fastest growing sectors of the Brazilian economy, and 
consists of open funds (including those similar to U.S. 
401(k) plans) and closed funds. 
 
INSURANCE SERVICES              4        HIGH 
Comment: U.S companies wishing to enter into the 
Brazilian insurance market are advised to do so through a 
joint venture, acquisition or partnership with a local 
company, or to open a subsidiary.  Under current 
legislation, insurance companies must be organized as 
corporations (Sociedade Anonima, or S/A), and submit to 
local regulatory authorities an application to operate as 
an insurance company. The insurance company may not 
engage in activities other than insurance. These same 
rules apply to reinsurance companies, though their scope 
for action is limited by the existence of a government 
monopoly reinsurer, the Brazilian Reinsurance Institute 
(IRB).  Foreign firms currently are barred from offering 
reinsurance on their own account, but may conduct 
business with the IRB. Foreign insurance companies may 
establish a representative office in Brazil, but are not 
allowed to engage in certain insurance activities, such 
as issuing policies.  Current legislation allows foreign 
insurance companies to hold the entire equity 
participation or voting stock of a Brazilian insurance 
company. 
 
End Text. 
 
CHICOLA