The impact of the Zona Franca on our lives

In a recent visit to Manaus, President Rousseff sent Congress a proposal to extend, for over 50 years, the tax benefits from the Manaus Economic Zone (ZFM – in Portuguese). This act will give up about $650 billion Reais (BRL) of Brazilian revenue. It is an unprecedented act, both for its longevity as for its financial impact.

The Economic Zone is the result of a special tax scheme, with exemptions for those who settle in the region. Representing what the federal government, with the approval of Congress, ceases to raise in terms of federal taxes. Built in the 60s by the military dictatorship, this special tax scheme was nearing its deadline when Lula da Silva extended it for another ten years.

If we consider the 60 years of continuity of the ZFM, this represents a tax break of about $780 billion BRL, $130 billion BRL by the decree of Lula da Silva and $650 billion BRL in President Rousseff’s proposal! This amount corresponds to about two years of everything that is produced in the Amazon.

Probably, Dilma’s action is among the greatest impacting of economic decisions ever proposed by a President of the Republic, not only for the Amazon, but also for Brazil as a whole. This value is possibly greater than the Growth Acceleration Program (PAC) and World Games (Olympics and World Cup).

The ZFM will directly benefit some 550 companies that together grossed about $ 5 billion BRL in 2010. But the ZFM is a peculiarity. It gives incentive for soft drinks manufacturers: nearly $1.1 billion BRL is intended to go to only three companies: Coca Cola, Pepsi Cola and AmBev. These, together, employ no more than 300 people. The action of President Rousseff will benefit these three companies with nearly $55 billion BRL in fiscal stimulus.

These numbers are quite impressive, considering the extreme poverty among the majority of the population in this region (in the North, according to the 2010 Census, IBGE, half of the 12.6 million people live on $134 BRL monthly).

There is great risk from this policy, which will serve 550 companies (and three in particular), to be disconnected from thoughts about the Brazilian Amazon in its fragility, complexity, diversity, and the social and environmental potentials. Don’t we know enough about what the different groups that make up the Amazon think about this tax incentive? How is it possible to enhance biodiversity and social diversity of the Amazon to produce large benefits for their present and future inhabitants?

It would be interesting to evaluate the environmental and social impacts caused by the ZFM in the regions that are heavily traveled by large trucks and boats between the Centre and South of Brazil and Manaus:

1. The freight ships on the Belém-Manaus stretch: despite their impacts and routes through protected areas and indigenous lands, have never obtained any environmental licensing. In addition to causing erosion due to the swells, especially in the Furos region (Marajó, Pará), these ships present an ongoing threat to the riverside. The social impact is prostitution, where women have earned an unfortunate nickname: the rafters, many of them teenagers from 14 to 15 years old in prostitution for a liter of oil for a pound of flesh.

2. Belém’s private ports: there are dozens that do not have licensing and environmental monitoring. This situation worsens due to the fact that they are in areas where ownership is unclear (in Marine wetlands, mangroves etc.).

3. The stretch of highway between Belém and Brasilia, where thousands of trucks travel through four states (Goiás, Tocantins, Maranhão and Pará), besides the Federal District, is known for the risks presented for users and residents in the surroundings.

Wouldn’t it be appropriate to consider these three regions impacted by ZFM as the beneficiaries of tax incentives? Enhance the challenge of the economic boom the Amazon is experiencing, by foreseeing and providing public and private investments in infrastructure (roads, ports, dams), mining and agribusiness, around $ 500 billion (BRL) for this decade.

ZFM as we know it today, barely acknowledges biodiversity, traditional knowledge associated with biodiversity, social diversity expressed by the indigenous people, quilombolas and other traditional peoples. A tax waiver of such importance deserves broad public debate, with public hearings in the Amazonian states, and perhaps the federation.

Certainly Manaus has plenty to tell the Amazon and Brazil about what has been learned from decades of the Economic Zone. How generously does Manaus view A Project for the Amazon, which includes the entire region and, why doesn’t it include all of Brazil?