WTO SERVICES NEGOTIATIONS: REQUEST FOR COMMENTS

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
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