Market Focus : U.S. Exporters Excited by Opening Up of Brazil : ‘A slumbering giant is waking up . . . ,’ says the commercial counselor at the embassy in Brasilia. The revival should increase the country’s importance on the world market.

The good news for American exporters is spreading fast: Latin America’s biggest national market is opening its doors to foreign imports.

The U.S. Foreign Commercial Service office at the American Consulate in Sao Paulo is being swamped with inqueries from businessmen looking for ways to take advantage of the new opening. The phone there “is ringing off the hook, and people can’t get any work done,” said Kevin C. Brennan, commercial counselor in the U.S. Embassy in Brasilia.

Brennan views the Brazilian move to liberalize import policy as part of an economic “sea change” that will increase this country’s importance on the world market. “As I see it, a slumbering giant is waking up in Brazil,” he said.

With a population of 150 million, Brazil has one of the world’s 10 biggest economies, accounting for half of the industrial base in Latin America. Brazilian industry was built up during decades of “import-substitution” policy that protected domestic producers from foreign competition.

But President Fernando Collor de Mello, who took office in March, has rejected protectionism and has begun lowering tariffs and other import restrictions as part of sweeping economic reforms. Since the United States already is Brazil’s No. 1 source of imports, with sales of $4.8 billion in 1989, American industry is in a good position to take advantage of the new opening.

“I think the story of Brazil is as exciting as what’s going on in Eastern Europe in many ways, and for U.S. manufacturers, Brazil is a much more lucrative market,” Brennan said.

He said U.S. exports to Brazil increased by 11% in the first half of 1990 and are expected to rise 5% to 8% in the next year.

“That is a conservative estimate based on the fact that there is a recession going on in Brazil,” he noted. “The long-term trend is very favorable.”

Brennan said some potential U.S. exporters are scared off by Brazil’s $117-billion foreign debt and how it might affect supplier financing. But, he added, “As far as I’m aware, there hasn’t been any problem with short-term credits.”

After Mexico, Brazil has the second-largest portfolio in the U.S. Export-Import Bank, which currently lists $3.2 billion in outstanding credits for exports to the Brazilian market. And last week, Brazilian authorities announced that this country is dropping a requirement that all imports of $200,000 or more must be financed abroad.

The U.S. Foreign Commercial Service, an agency of the Commerce Department, has representatives in the Brazilian cities of Rio de Janeiro, Sao Paulo, Brasilia, Belem and Belo Horizonte, and has district offices in Los Angeles, San Diego and San Francisco. They all offer services to businessmen interested in exporting to Brazil.

One of the services is “industry sector analysis” reports on different segments of the Brazilian market. For $750, the Foreign Commercial Service will prepare a tailored market research report called a “comparative shopping survey” that analyzes opportunities, price ranges and competition in Brazil for a specific line of products.

The U.S. agency also helps line up Brazilian companies to serve as representatives and distributors for U.S. manufacturers and exporters. But Alexandre Barros, a consultant to foreign companies doing business in Brazil, predicted that many exporters will find it necessary to train their representatives to market new products.

“Brazilian representatives don’t know how to get to the consumer,” Barros said. “I think marketing is the key to success.”

The first major move in Brazil’s opening to imports came at the beginning of July, when the government abolished a list that had barred imports of 1,800 product categories, from boats to motors to toys.

Since then, the Economy Ministry has been issuing new orders twice a month or so, lowering tariffs on long lists of import products. Many are produced by Brazilian monopolies and oligopolies at prices up to four times international levels.

Joao Cunha, national undersecretary of economy, said a task force in the Trade Department of the Economy Ministry is preparing a reformed tariff master list of 20,000 items that will be ready at the end of the year and will be implemented over the next four years. He said imports will be divided into three categories:

- Products that have no counterpart produced in Brazil will enter the country without tariffs. More than 1,300 products already have been given “zero-tariff” status.

- Common products, including consumer goods, will enter with tariffs averaging 20%. Some will be as low as 5%, and many will be lowered gradually over four years to give domestic industry a chance to adapt.

- Products similar to those being produced by “nascent industries” considered to be in Brazil’s national interest, including ones that need time to develop competitive high technology, will be charged tariffs averaging 40%.

A separate policy is planned for Brazil’s computer industry, called “informatics,” which has been heavily protected. While most informatics items have now been removed from the list of banned imports, the government is studying a proposed list of more than 60 that would continue to be prohibited.

The list includes microcomputers, video monitors, magnetic discs, keyboards, electronic cash registers, transistors, fiber optics, facsimile machines and electronic telex terminals. The ban would expire in October, 1992, with Brazil’s informatics “market reserve.”

As in other industries, foreign companies will be permitted to form joint ventures with Brazilian informatics firms, importing technology and some components. Commercial counselor Brennan said he assumes that computer components not produced in Brazil, such as semiconductor chips, will end up on the zero-tariff list.

Foreign manufacturers and exporters of hundreds of products are applying for and receiving “zero-tariff” status. Brazilian manufacturers have 30 days to challenge such an application, but new regulations make it more difficult for them to justify tariffs.

The reformed tariff list due at the end of the year will include many new zero-tariff items, taking effect immediately, and more will be added as new applications come in, Cunha said. He said manufacturing machinery and equipment have priority for zero-tariff status.