Will Keep Computer Import Limits--Brazil

Facing U.S. retaliation for its tough policy against computer imports, Brazil appears to be backing down a bit. But government officials, also under pressure from Brazilian nationalists, say the country’s basic policy will remain one of protection for its fledgling computer industry.

While Brazilian officials say a new law passed here Friday will liberalize some restrictions on software imports, the issue that directly triggered the U.S. sanctions announced last month, they insist that a 1984 statute aimed at protecting the Brazilian computer industry from foreign competition will not be altered.

Under that earlier law, Brazil has followed a policy of strictly limiting imports of small computers, components, equipment and software. As a result, the Brazilian industry has grown rapidly; it recently produced its millionth computer.

But critics say the protective policy makes domestic-made computer equipment too expensive, keeps out needed technology and encourages smuggling and pirating.

Those problems might once have been regarded as glitches in the learning process as Brazil built its computer industry, but the need to deal with them has taken on a new urgency. The Reagan Administration, pushing for Brazil to ease its protective policy, is preparing to apply sanctions against Brazilian exports to the United States.

Obviously alarmed, some officials here are giving conciliatory signals, promising a more lenient policy on computer industry imports. Influential protectionists, however, insist that this country must not knuckle under to the United States and open the way for foreign domination of its computer market.

Washington’s main complaints about Brazilian policy under the 1984 “market reserve” law for the informatics, or computer, industry focus on four issues: the barriers to new joint ventures by foreign and Brazilian companies, the severe limitations the law imposes on the purchase of foreign technology and equipment for industrial modernization and for new product lines, the allegedly arbitrary and unfair enforcement of the law by the Special Secretariat of Informatics and widespread pirating of foreign computer programs and designs.

After repeated U.S. warnings that sanctions would be initiated against Brazil under Article 301 of the U.S. Foreign Trade Act, the two countries reached an agreement at midyear to suspend any action. As part of the agreement, Brazil promised to allow the importation of computer software not available on the Brazilian market.

Ruled Against 6 Firms

In September, however, the secretariat ruled against six Brazilian computer companies that wanted to import MS-DOS programs, a widely used basic software system for small computers that was developed by Microsoft Corp. of Seattle. The secretariat said a “functionally equivalent” program exists in Brazil.

The Brazilian program, called the SISNE, is produced by the Brazilian firm Scopus. It is similar to the MS-DOS 3.0, which has been superseded in the United States and Europe by later MS-DOS generations, 3.2 and 3.3.

There is no Brazilian-produced program similar to later MS-DOS generations, but the secretariat’s reasoning appeared to be that if Brazil has a program “functionally equivalent” to the MS-DOS 3.0, future generations of the Brazilian program should be protected against foreign competition.

Acting on Microsoft’s complaint, President Reagan announced Nov. 13 that trade sanctions would be imposed against Brazil. Hearings to determine the specific tariffs to be levied will begin in Washington on Dec. 18.

Possible Trade War

The sanctions announced by Reagan call for tariffs on products worth $105 million, the equivalent of estimated annual losses to U.S. firms caused by Brazil’s protective stand.

Brazilian exporters, including the government-owned Embraer aircraft industry, say some U.S. purchase orders have already been suspended because of the proposed sanctions. Brazil would be expected to retaliate against sanctions by canceling orders for U.S. goods, including Boeing jets, Embraer’s top official has said.

Some commentators have warned of a possible trade war between the hemisphere’s two biggest economies.

Sales on the Brazilian computer market are worth nearly $3 billion a year, including large computers imported from abroad. About 300 Brazilian companies, mainly in the small computer field, account for more than half of the total sales, and software and related services make up an estimated 10% to 14%.

Foreign manufacturers complain that many of the Brazilian computers and their software are unauthorized copies of foreign products.

The law given final congressional approval Friday by the Chamber of Deputies, Brazil’s lower house, is designed to stiffen copyright protection for software and ease restrictions on imports. The law is expected to bring a reversal of the SEI decision to exclude the MS-DOS software.

A final decision on the MS-DOS case is pending in the government’s Inter-Ministerial Commission on Informatics. Finance Minister Luiz Carlos Bresser Pereira has been assigned to make a report on the case before the commission meets in January.

Bresser Pereira has insisted on the “untouchability of the informatics law,” but he has predicted that the new software law will allow advanced MS-DOS programs to be imported and will “help in the negotiations with the United States.”