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Between origin and destination: imagining futures for the Manaus Free Trade Zone (MFTZ)

July 06, 2021

Context

A Concertação pela Amazônia (Concertation for the Amazon ) is a network of leaders that was born out of the need to promote synergies and enhance the impact of initiatives committed to development in the Amazon, institutionalizing a plural and democratic debate. To this end, the movement is structured on four pillars:

  1. desenvolvimento:  construção de visões de futuro para a região, considerando novos conceitos de desenvolvimento com valorização dos ativos ambientais e culturais, conciliando capital natural e justiça social; 
  2. negócios: inclusão do setor empresarial atuante na Amazônia (mineração, agronegócio, florestas, logística, energia, turismo etc.), a partir de suas próprias perspectivas, buscando conciliação com a agenda construída pela sociedade civil e academia; 
  3. institucional: apoio ao desenvolvimento de um arcabouço institucional para esta nova perspectiva de desenvolvimento; 
  4. governança: propostas de mecanismos de governança mais eficazes. 

In this context, the Manaus Free Trade Zone (MFTZ) is inserted in the debate from several perspectives that encompass the past, the present, and especially the future of the Amazon region. As the focus of a national industrial policy linked to regional development and based on the concession of tax incentives, the current MFTz model divides opinions about its effectiveness, both economically and socially, representing an important topic of discussion regarding the sustainability of the Amazon over the next 50 years. Thus, addressing the Amazonian challenges also requires listening and unlearning in order to learn again about new possible development paths, which necessarily involves critical consideration, and especially the diversity of proposals for the MFTz.

Why hold a dialogue about the future of the Manaus Free Trade Zone?

The end of the rubber cycle in 1920 led to Amazon stagnation and a consequent search for new vectors of valorization of the region. In 1967, the Manaus Free Trade Zone was officially established, mainly with the justification of occupying the Amazon territory and creating a free trade region based on tax incentives. The initial objective of the MFTZ model was to create an industrial, commercial, and agricultural center in the interior of the Amazon. However, throughout its different stages of development, the agricultural dimension has not materialized. Today, around 450 companies develop their activities in the Industrial Pole of Manaus (PIM), accounting for approximately 500 thousand direct and indirect jobs. The industrialization of the region was based on the logic of import substitution, attracting multinationals and later instituting minimum percentages of nationalization of the products manufactured there, besides a counterpart from the benefited companies. In 2018, tax expenditures with the MFTZ and Free Trade Areas – which occur through exemption from import tax, IPI, PIS, CONFINS, in addition to ICMS at the state level – totaled R$26.36 billion, with R$9.35 billion for the MFTZ alone, which represents 26.95% of industry-related spending in the country. In 2016, the IT sector’s contribution for RD&I totaled almost R$700 million, which can be directed to different types of investment, including funds, incubators and accelerators, startups, public and private ICT, social organizations or the priority programs, which encompass five spheres of great relevance to regional development: digital economy; human resources; bioeconomy; fostering innovative entrepreneurship; and, industry 4.0 and industrial modernization.

Initially expected to provide tax incentives until 1997, the law that defined the MFTz has had its deadline extended several times, with the most recent one extending the benefits until the year 2073. While businessmen and local associations defend the current model, alleging social, economic, and environmental gains, scholars from different areas point to the need to improve the MFTZ policy. Indeed, many agree that adjustments are needed, but differ on the pace, intensity, and focus of potential changes. Those in favor of more subtle changes argue that the free trade zone model in the Amazon was and is the main development mechanism in the region, bringing increased GDP, tax revenues, and jobs, as well as being directly responsible for the conservation of the Amazon forest in its western portion.

On the other hand, those who advocate for more significant transformations point out that the costs are very high compared to the benefits, with low income transfer and distribution, lower quality jobs than expected, distortions in production and in national markets, and little or no use of the region’s potential, besides questioning the real impact of the MFTz in stopping deforestation. In fact, the PIM lacks diversity in its economic activities, since only 7 subsectors account for more than 90% of the production chains installed in Manaus, with sales being concentrated in only 3 products: LCD televisions, cell phones, and motorcycles.

In this debate, the allocation of business counterparts is a key element for the development of new activities, with most players pointing to a future in which the development of the state of Amazonas is aligned with its comparative advantages arising from the forest and its biodiversity. The counterparts should be used to complement the activities of the PIM, establishing an environment of innovation, modernization, and sustainability, besides being economically diverse, based on the expansion of sectors such as bio-economy, tourism, and pisciculture. Thus, to discuss the future of the Manaus Free Trade Zone is to discuss the allocation of a significant amount of federal and state resources that must still be maintained for at least another 50 years and that, therefore, must be allocated in a way that maximizes local, regional and national interests in relation to the Amazon in the short and long term.

The industrial policy of the MFTZ is strategic for the state and for the country, and can be a vector for structural transformations in the economy of Amazonas and benefits to its population. Finally, the current model is showing signs of exhaustion, with the more than 50 years of benefits already granted not implying productive autonomy or efficiency gains. Thus, to imagine and discuss the future of the MFTz is to ensure a necessary transition in line with global trends and demands, preventing Manaus and Amazonas from having to face, once again, stagnation as a result of the forced end of a production cycle that is not renewed.

Guiding questions

As an initial provocation, we listed the following questions to the invited panelists:

  • O que poderíamos aprender com a experiências de outras zonas francas ao redor do mundo?
  • Quais sistemas produtivos na Amazônia estão sendo subutilizados e que poderiam impulsionar uma nova fase da ZFM? O que estamos perdendo por não desenvolver tais atividades?
  • Como seria um futuro em que as potencialidades da Amazônia estão integradas a cadeias produtivas locais, promovendo o dinamismo da economia? Como o Amazonas pode orientar a consolidação dessa trajetória própria?
  • Quais são as principais barreiras para a diversificação de setores atuando na ZFM e no estado do Amazonas?
  • Como construir uma estrutura de planejamento e governança que converse profundamente com as vantagens comparativas da floresta e com os anseios da população local?
  • Que iniciativas já estão ocorrendo no sentido de construir esse futuro?

Organization

Considering the breadth of the discussions that can emerge from the highlighted themes, we intend to start a series of dialogues, lasting between 1h and 1h30, with brief presentations by two or three panelists, followed by comments and debate among the participants, with moderation by a journalist.

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Details

Date:
06/07/2021
Time:
10:00 - 11:30 -03
Event Category:
Website:
https://www.youtube.com/watch?v=NYziLk5lJ5E