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4.3 Brazil, foreign direct investment in GATS-2000 and the demands of the
European Commission
In the negotiations on services the Brazilian side and the EU-commission agree
on their definitions of services, in analogy to the four kinds of GATS, where the
topic of investment as Mode 3 includes the treatment of foreign branches of service
companies. 303 But regardless of the existing relatively lax legislation which Brazil
imposes on foreign investors, the European Commission in its “GATS-Requests” in
the framework of GATS-2000 has demanded far reaching liberalization measures for
investment in the area of services. 304 Even if the European Commission has explicitly
asserted in the introductory text to the GATS-2000 Request from the EC and its
Member States (hereafter the EC) to Brazil that:
“the EC is not seeking the dismantling of public services nor the privatization
of state owned companies”, 305
as the procurement of public goods is not to be abolished, but to be commercialized
and opened up to foreign corporations, especially European ones. The
GATS with its broad regulatory framework concerning liberalization is to guarantee
this. And in any case Brazil will have to continue to privatize state enterprises due to
the pressure of the IMF and the practical constraints resulting from its debt-trap. 306
According to the contract made by the former government FHC with the IMF,
which gives way for new credit lines up to 30 billion US-dollars, and which has been
renewed under the same conditions by the Lula-government, Brazil has to reach
an annual primary budget surplus of 4.25%: The politically controlled component of
the Lula-government, from a macroeconomic point of view, consists of making cuts
to the government budget, that is to cut state spending at a high social cost, 307 as
well as the obligation to generate currency earnings through exports, and finally to
303 See Maria Silvia Portella de Castro: Mercosul e União Européia: relações econômicas e comercias e as negociações
do Acordo de Cooperação Inter-Regional, January 2003, p. 35.
304 There are no details available on the requests of the European Commission to Brazil and the MERCOSUR within
the framework of the negotiations on the “association treaty”, except for the avowal of the EU to treat the issue of
“investment” in analogy to the Doha-agenda of the WTO.
305 GATS-2000 Request from the EC and its Member States (hereafter the EC) to Brazil, p. ii., http://www.gatswatch.org/
docs/offreq/EUrequests/Brazil.pdf.
306 See the IMF website at: http://www.imf.org/external/np/loi/2003/bra/04/index.htm: “Brazil - Letter of Intent”,
November 21, 2003: “This Letter of Intent of the government of Brazil describes the policies that Brazil intends to
implement in the context of its request for financial support from the IMF.”
307 See: PAULO NOGUEIRA BATISTA JR. (USP / FGV-EAESP): DIRETO AO PONTO, in: Agência Carta Maior,
December 16, 2003: “O superávit primário passou de 3,5% do PIB em 2000 para 3,6% em 2001, 4% em 2002
e 4,3% em 2003.” Own translation: “The primary surplus rose from 3.5% of GDP in 2000 to 3.6% in 2001, 4% in
2002 and 4.3% in 2003.”