Brazil Criticized for Aiding Computer Industry

A law that has kept major parts of Brazil’s growing and lucrative computer market off limits to foreign-owned multinationals may condemn Latin America’s biggest country to technological backwardness, according to a growing number of critics.

The “informatics law,” which three years ago formalized a decade-old government practice called “market reserve,” gives local companies the exclusive right to manufacture and sell microcomputers and minicomputers. The import of foreign software also is restricted.

Multinationals such as IBM are allowed only to produce the more sophisticated mainframe machines.

The policy has frustrated U. S. computer companies wanting a greater share of what Brazilians have termed the world’s sixth-largest computer market after the United States, Japan, West Germany, England and France.

The United States, claiming market reserve is an unfair trade practice, has retaliated with limited trade sanctions.

President Reagan announced the sanctions on Friday, saying Brazil had failed to keep a commitment to allow U. S. companies access to the Brazilian software market.

“Should Brazil reverse its action and live up to its commitments to the U. S., I will be prepared to lift these sanctions,” he said.

He said he will increase tariffs on selected Brazilian products by an amount sufficient to make up for the loss suffered by U. S. companies, estimated at $105 million.

In the past decade, the number of Brazilian computer companies grew to 306 from nine, while the multinationals operating in the country rose to 30 from two.

The industry grew from almost zero to a $3 billion annual market in 1986--about half of which is off limits to foreign firms.

Advocates say without market reserve, local firms would never survive the competition from multinationals and Brazil would never achieve technological autonomy.

Opponents, who agree that market reserve helped develop a thriving domestic industry, say the policy has outlived its usefulness and now prevents Brazil from obtaining up-to-date technology.

All Brazil really does is make more expensive and obsolete clones of foreign computers, critics allege.

Jose Ezil Veiga da Rocha, head of the Special Secretariat of Informatics, the government agency that sets the rules for the computer industry, admitted in an interview that a “majority of the computers made in Brazil are copies of American and European models.”

“But this practice is diminishing as we develop and perfect computer systems that are 100% Brazilian,” he added.

Josue Souto Maior Mussalem, president of the Brazilian Society of Computer Users, said he believes that market reserve has ceased to benefit the country, and now works against Brazil’s interests.

‘Survival Threatened’

In an article he wrote for the Folha de Sao Paulo newspaper, Mussalem said that because of market reserve, Brazil’s computer technology was “lagging far behind what has been developed in the United States.”