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BOLIVIA-BRAZIL: One-Sided Free Trade at the Border

Mario Osava

BRASILÉIA, Brazil, Nov 8 2010 (IPS) - There are no toy stores or electronics shops in Brasiléia, a city in Brazil’s northwestern Amazonian state of Acre. To buy toys or computer items, the city’s 20,000 inhabitants have to go to neighbouring Cobija, across the border in Bolivia.

Cobija, in far northwestern Bolivia, happens to be a tax-free zone. That exemption has suffocated commerce in Brazil’s municipalities of Brasiléia and Epitaciolândia. The three cities are all neighbours, united by two bridges that cross the Acre River, which marks the border.

“We are suffering ‘disloyal competition’,” complained Aparecido Saturnilho, president of the Brasiléia Commerce Association. “A television here costs twice as much as it does there,” he said. “Even products made in Brazil are cheaper in Cobija” because of the tax difference,” he added.

Clothing and shoes are also sold at lower prices on the Bolivian side, but he is keeping his clothing store open in the Brazilian city despite shopper flight, “because I am stubborn,” Saturnilho said. The truth, he added, is that the Bolivians have made less progress in the clothing market because “it is less profitable.”

In the effort to rebuild commerce in Brasiléia, Saturnilho is calling on the Brazilian government to follow up on a law passed in 1994 to enact free trade both in his municipality, located in southeast Acre, and Cruzeiro do Sul, in the far west of the state, near the Peruvian border.

The law ensured some tax benefits for imports and industrialisation of products in those two Acre municipalities, but failed to boost local commerce because there are still no import quotas or entities needed to activate free trade, he said.

Furthermore, other taxes continue to undermine the Brasiléia businesses’ ability to compete, he said.

The 154-metre bridge between Brasiléia and Cobija, which opened in 2004, does not yet have any police or customs checkpoints.

However, on the Bolivian side, the military barracks and the language are the evidence that one is entering a different country — one worried about the security of its border.

Cobija has some 4,000 “mototaxis” (motorcycles used as passenger transport), a figure estimated by the taxi drivers organised in nine unions. The comings and goings of the motorbikes underscore the activity in Cobija’s shops — which are crowded with merchandise. But people do not come here for luxury goods.

“Ninety-nine percent of my customers are Brazilians,” said Candela Coimbra, manager for the last four years of a shop that mostly sells laptops and digital cameras on the Bolivian side of the border. “Everything comes from China, the United States, Chile — nothing from Brazil,” she said.

But this city of an uncertain size — the population could be 27,000 or 47,000, depending on the source of the estimate — “did not grow because of commerce,” but due to traditional products like natural latex, nuts and wood,” said Coimbra.

The Tax Free Zone did not benefit the locals because “the merchants come from outside,” said the 24-year-old shop manager, who is from Santa Cruz de la Sierra, Bolivia’s economic hub in the central eastern part of the country.

But it is clear that commerce has generated jobs and led to the expansion of other activities, like the mototaxis, which boosted local incomes.

The Pacific Highway, which is being paved in Peru to complete an inter-oceanic route, and which passes through Brasiléia, will not mean much for Cobija, according to Coimbra. “Our market is Rio Branco,” she said, in reference to the capital of Acre, 240 kilometres to the north.

When the BR-317 highway, which links the more than 300,000 residents of Rio Branco to the triple frontier area of Brazil, Bolivia and Peru — where Brasiléia and Cobija are situated — was paved eight years ago, the number of Brazilians heading to the Bolivian city to do their shopping increased.

The region, a long way from the economic centres of each of the three countries, is highly dependent on resources from the Amazon, where agriculture is gaining a foothold.

But trade here is meagre in comparison to the triple frontier of Brazil with Argentina and Paraguay, where the tax-free area in Paraguay’s Ciudad del Este has also generated “shopping tourism” of gigantic proportions.

Cobija’s Commercial and Industrial Tax Free Zone was created by a 1983 law for a 20-year period, and renewed in 1998. Domestic and foreign travellers alike can leave the zone with up to 1,000 dollars in new purchases.

Through regular trips to Cobija, Elene Oliveira supplies her shop in downtown Rio Branco back in Acre, which specialises in cameras, mobile telephones and other portable electronic devices.

But she is thinking of diversifying her suppliers. In two recent trips to São Paulo to visit relatives, she discovered that she can buy a mobile phone there for 130 reais (75 dollars) and sell it at more than twice the price in Rio Branco.

An easier business would be costume jewellery like rings, earrings and necklaces, which cost just cents wholesale in São Paulo, and sell for dozens of reais retail. But Oliveira prefers to stay in the electronics business.

The possibility of enormous profits is the result of Acre’s continued isolation. It always takes longer for lower prices associated with economies of scale to reach this remote state.

Oliveira has found that bringing some products from São Paulo more than makes up for the cost of airline tickets on scarce and expensive flights to and from Acre.

What many residents describe as “neglect by the government” also exists in the Bolivian province of Pando and the Peruvian region of Madre de Dios, but all of that should change with the Pacific Highway, known in Peru as the Southern Inter-Oceanic Highway.

The possibilities for local development, increased tourism and local investment would have strong effects on the population — and on the vast local biodiversity, which is a worry for citizens and institutions that formed the MAP Initiative (the initials of the three provinces involved: Madre de Dios, Acre, Pando).

The MAP Initiative promotes cooperation, human rights and environmental preservation.

Brasiléia is fuelled by “the dream of industry,” more than by commerce, according to Luz Marina Menezes, head of the municipal government’s Cabinet. Already in operation is a chicken business that employs 200 people and stimulates local production of maize for feed. Also on the horizon are food-processing industries for typical Amazonian products, like wood, nuts, and açaí and cupuaçú fruits, she said.

Saturnilho, the commerce association president, prefers farming, which brought his family from the southern Brazilian state of Paraná to the Amazon jungle four decades ago. “My father, who had 60 hectares there, was able to buy 6,000 here, with money left over,” he said, explaining the attraction of cheap land even without roads.

He said Acre needs to expand its agricultural production because the state has to buy much of what it consumes from elsewhere, otherwise the type of development that the highway will bring “will only worsen food dependence.”