A new economy for the Amazonas State: Manaus Free Trade ...

A new economy for the Amazonas State: Manaus Free Trade Zone and Bioeconomy

A new economy for the Amazonas: Manaus Free Trade Zone and Bioeconomy

São Paulo, October 2019

A new economy for the Amazonas State: Manaus Free Trade Zone and Bioeconomy 2

OBJECTIVE: TO PRESENT ALTERNATIVES AND OPPORTUNITIES FOR DIVERSIFICATION OF THE AMAZONAS'S ECONOMIC ACTIVITY


STRUCTURED MODEL A. DINAMIZATION OF LOCAL INDUSTRIAL PARK AND CURRENT MODEL

B. USE OF THE BIODIVERSITY POTENTIAL IN A SUSTAINABLE WAY

C. SCIENTIFIC, TECHNOLOGICAL DEVELOPMENT AND INNOVATION ORIENTED

D. ECONOMIC DECENTRALIZATION AND GENERATION OF SOCIAL AND ENVIRONMENTAL GAINS

OPPORTUNITY AXES BIOECONOMY

DIGITAL TRANSFORMATION ECONOMY CENTER

ECOTOURISM

FISH FARMING


Visions for the Future

AMAZON

FURNITURE SCANDINAVIA

MANAUS:

BIOECONOMY SILICON VALLEY

MANAUS: LIMA OF AMAZON

GASTRONOMY

MANAUS: PARIS OF

ECOTOURISM

GENERATION

OF GREEN JOBS

MANAUS:

ECOLOCIGAL FASHION

MILAN

PROTECTED

FOREST

AMAZONAS WITHOUT POVERTY

SUSTAINABLE AND SHARED

WEALTH


Contents

Part 4:

IMPACT Estimates

Part 1:

CHALLENGE Identification

Part 2:

OPPORTUNITIES Identification

Part 3:

CRITICAL SUCCESS FACTORS Identification


PART 1: CHALLENGE IDENTIFICATION


Part 1: Challenge identification

VULNERABILITIES of Manaus Free

Trade Zone

SOCIAL

VULNERABILITY

PIM integrated economic development

model, based on innovation and sustainable use of local biodiversity,

offering business activities diversification.


SOCIAL VULNERABILITY A. Extreme

poverty 564 thousand people in the Amazonas live in extreme

B. Sanitation water sewage

There are

194,000 extremely poor in Manaus

poverty equivalent to

14.4% of the population

20.3% of Amazonas population without access to water

90.6% of Amazonas population do not have access to sewage collection

MANAUS HAVE ONE OF THE WORST INDEXES FROM THE COUNTRY: 88.9% of population without sewage collection

Source: IBGE Source: Trata Brasil

This index for: Northern Region: 89.76%

Brazil: 47.64%

Extreme Poverty: Northern Region: 11.8%

Brazil: 7.4%


THE CURRENT MODEL OF REGIONAL INCENTIVES IS INEFFECTIVE

1 INEFFICIENT ALOCATION OF FACTORS OF PRODUCTION

2 DISTORTS MARKETS AND PRODUCTION CHAINS

Companies and investments are moved to regions offering incentives, not considering comparative advantages and competitiveness factors.

Costs of logistics, supply chain development, access to intermediate and final goods generate market distortions.

3 THERE ARE NO CONDITIONALITIES AND GOALS

4 PATH DEPENDENCE

There are no commitments on productivity, employment, market access, and technology for the private sector. For the public sector, social and fiscal goals also do not exist.

Little encouragement for beneficiary sectors and companies seek independence from incentives and subsidies.


AMAZONAS MESOREGIONS Intraregional imbalance Population and economic concentrations

Mesoregion

Population

GDP

Amazonian Center 78.7% 92.6%

Amazonian North 3.4% 1.0%

Amazonian Southwest 9.9% 3.3%

South Amazonian 8.1% 3.1%

Source: IBGE

Geographic Support Elaborated from IBGE map base

CAPTION

AMAZONIAN CENTER AMAZONIAN NORTH AMAZONIAN SOUTHWEST AMAZONIAN SOUTH


INTRAREGIONAL IMBALANCE Municipal GDP: highlights in the Amazonas, 2016

Municipality

Mesoregion

GDP (BRL millions)

% of GDP

% Accumulated

Main Economic Activities

1 Manaus Amazonian Center 70.3 thousand 78.97% 78.97% Manaus Industrial Pole

2 Itacoatiara Amazonian Center 2.1 thousand 2.31% 81.28% Wood and Brazil nuts exploitation

3 Manacapuru Amazonian Center 1.2 thousand 1.40% 82.67% Agriculture, fishing, and tourism

4 Coari Amazonian Center 1.1 thousand 1.27% 83.95% Natural gas

5 Parintins Amazonian Center 1.0 thousand 1.15% 85.10% Tourism, agriculture, and livestock

6 Tefé Amazonian Center 650.3 0.73% 85.83% Fish, tourism and oil exploration

7 Codaiás Amazonian Center 648.1 0.73% 86.56% Tourism

8 Iranduba Amazonian Center 636 0.71% 87.27% Vegetable producers, beyond bricks and tiles

9 Pres. Figueiredo Amazonian Center 546.2 0.61% 87.89% Ecotourism, agriculture and mineral extraction

10 Humaitá South Amazonian 493.7 0.55%

88.44% Farming and plant extractivism

11 Manicoré South Amazonian 477.4 0.54% 88.98% Agricultural production (banana, watermelon, and flour)

Source: Profile of Municipalities, IBGE


VULNERABILITIES OF MANAUS FREE TRADE ZONE

A PRODUCTIVITY AND COMPETITIVENESS SCHEDULE

INDUSTRY 4.0

TRADE OPENING

VALUE CHAIN INTEGRATION

DIGITAL CONNECTIVITY

EXPORT

ECONOMIC, SOCIAL AND FISCAL FEASIBILITY OF THE CURRENT PIM RISK MODEL

REFLECTION ON COST x BENEFIT FROM CURRENT MODEL

B

TAX AND TRIBUTARY CONTEXT

FISCAL STRANGULATION NEED FOR DECREASE IN SUBSIDIES FOR PRODUCTION

REVIEW OF REGIONAL DEVELOPMENT MECHANISMS


ELEMENTS FOR GOOD REGIONAL STIMULUS POLICY 1 FOCUS ON RESEARCH AND

DEVELOPMENT - R&D 2 GENERATES INNOVATION

An environment conducive to the integration of universities, research institutes, and industry for scientific and technological development.

Innovation in business models, processes, products, market approaches, based on the use of inputs existing in each region and, in particular, those of local biodiversity.

PRODUCTIVE CHAINS INTEGRATION

4 FOCUS ON COMPETITIVENESS

5 SHOULD NOT BE AN ISOLATED STATE ACTION

Companies are qualified and competitive to integrate global value chains, generating exports and internationalization of businesses.

Companies are stimulated to seek continuously competitiveness increase by the use of new technology, process, or products.

It should not be the only stimulus policy. It should be part of a set of measures to stimulate technological, productive, industrial, and social developments, inducing the creation of an innovation ecosystem that brings together the three federative levels, companies, and academia.

3


PART 2: OPPORTUNITIES IDENTIFICATION


Opportunities identification

BIOECONOMY ECOTOURISM

DIGITAL

TRANSFORMATION ECONOMY CENTER

FISH FARMING


1 - Bioeconomy OVERVIEW OPPORTUNITIES Species: Brazil holds 20% of the world's known species. In terms of endemic species - those that exist only in our territory -, the Amazon has 24.5% of the fauna and 11.2% of the Brazilian flora. The Amazon Rainforest holds one-third of all living species on the planet. It is estimated that there are more than 5 million plant species in it, from which only 30,000 have been identified*.

Area: Açaí, Brazil nut, and cocoa are produced in five states from the Northern Region in a much smaller area than that used for soy production.

Biodiversity: The Amazon biome is home to a still little known and little used biological diversity. Usage is concentrated in the food and beverage sector.

Amazonas Planning Secretariat and SUFRAMA see the bioeconomy as strategic.

Comparative advantage in the bioproducts market. More efficient production expansion, which requires less land area for income generation.

Diversity can be explored and used by the Brazilian industry.

The main sectors benefited are food, beverages, and

cosmetics.

Expansion potential for sectors of high economic importance, such as textiles, energy, and pharmaceuticals, which can exploit elements along their productive chain.

High economic potential, due to its relationship with environmental preservation and for being able to boost local communities.

*Source: Brazilian Biodiversity Information System (SiBBr) from the Ministry of Science, Technology, Innovations, and Communications (MCTIC).


2 - Digital transformation economics pole OVERVIEW OPPORTUNITIES Priority: Considered a priority by the Amazonas Planning Secretariat.

The segment can represent 10% to 12% of state GDP in 10 years.

Powered by Manaus Digital Pole and Rio Negro Technology Pole (still in project).

Informatics Law: Nearly BRL 800 million are generated by Computer Law (destined for RD&I).


3 - Ecotourism OVERVIEW OPPORTUNITIES

BRAZIL: PERFORMANCE IN 2018 Direct jobs: generation of 80 thousand. Income: BRL 2.2 billion in 2018. GDP added value: BRL 3.1 billion. Sales: BRL 8.6 billion.

AMAZON: PERFORMANCE IN 2018 Visitors: 41 thousand. Direct and indirect impact: 300 thousand families. Average household income: BRL 7,900 per family.

ECOTOURISM Growth: 15-25% per year worldwide. In Brazil: Represents 16% of tourism as opposed to 10% in the world. AMAZON PRESERVATION According to Amazonas Cluster Turismo, tourist areas had almost zero fire rates in 2018.

Source: Ministry of Tourism Note: In this study, we use as a proxy for Tourism the activity “accommodation and food services.” The number of visitors considers all types of tourism.


4 – Fish farming OVERVIEW OPPORTUNITIES

More efficient land use than for cattle breeding.

One ton of fish is produced in 3% of the area needed to produce the same amount of beef.

Much lower GHG emissions

Fish is healthier than beef.

The fish-based development model is more compatible with the Amazon ecosystem.

Main animal protein in production and global trade.

58% of the fish consumed in the state are purchased from Rondônia/ Roraima.

• In the case of tambaqui, this percentage is 90%.

Industrial chain for fish elements- Maximum utilization of fish by the industry - processed food, flour, oil, leather, biopharmaceuticals, etc.

Gastronomy and cooking.


PART 3: IDENTIFICATION OF SUCCESS CRITICAL FACTORS


Competitiveness factors A. PRODUCTIVE EFFICIENCY B.PUBLIC MANAGEMENT EFFICIENCY C INNOVATION Increased productivity and reduced production costs: labor market, financing, tax system, and physical infrastructure.

Control of expenses; macroeconomic predictability of interest and exchange; higher investment rates; environmental sustainability.

Framework for incentives to innovation, modernization of business management, expansion of technology-intensive services.

D. LEGAL SECURITY E. MARKET EXPANSION F. SOCIAL INFRASTRUCTURE Judicial efficiency and bureaucracy reduction.

Integration in value chains, both local and global.

It includes, among others, health, housing, transportation, and sanitation, and is based on education (primary and professional).

Considering the opportunity sectors:

BIOECONOMY DIGITAL TRANSFORMATION ECONOMY CENTER ECOTOURISM FISH FARMING


1 - Bioeconomy INFRASTRUCTURE Decentralized logistics solution plan (ports, barges, distribution centers).

Credit lines for integrated logistics (river, land, and air).

Innovation in air freights for large logistics (uavs, airships and drones).

Creation of the Manaus Furniture Pole, integrated to PIM (combining modern production techniques and bold design, aiming at commercialization in the foreign market of high standard furniture) (50 companies).

Creation of credit line for modernization of sawmills.

Creation of the Manaus Biopharmaceutical Pole, which will ensure Brazil's qualified insertion in the industry of the future (10 Biotech companies).

Creation of Food Tech Pole based on plants and insects of the Amazonian biodiversity, using the highest molecular biology techniques (20 companies).

Creation of “Engineered” Tropical Wood Production Pole for use in green building, providing forest/sawmill/industry integration (5 companies).

Creation of Concentrate for Cosmetics Pole from Amazonian biodiversity (6 companies).

Decentralized Conversion centers for processing.

Analysis of the critical state of the ports and berths, as well as the inadequate draft of the municipal port facilities.

Absence of bank branches in most cities. Fintechs could play some role in the development of bioeconomy in the state.

Aerodroms not approved. How to enable runaways for drone testing?


1 - Bioeconomy HUMAN RESOURCES School of sustainable business (SEBRAE da Floresta).

Transform Hotel Tropical de Manaus into a school hotel.

Include requalification package for young people: high school, technical, electronic.

Creation of Bioeconomy course at universities in the state of Amazonas.

Training in Entrepreneurship and Governance of Process (accounting, formalization of associations, formalization of community companies, Basic IT, among others) (SEBRAE da Floresta).

Training for innovation of wood extraction and processing processes (training of professionals).

Training for construction industry professionals for the handling of “engineered” tropical wood.

Training of specialized designers for the use of “engineered” tropical wood in the construction industry.


1 - Bioeconomy LEGISLATION/REGULATION Assuring of the necessary licenses from the environmental, sanitary, and commercialization control and inspection bodies.

Obtainment of certificates (FSC, Fair Trade).

Records of origin and biogenomics designation.

Elimination of red tape from research authorization processes and access to genetic resources.

Elimination of red tape in authorization processes involving access to genetic resources.

Tax incentives for the use of “engineered” tropical wood in the construction industry to increase the competitiveness of the sector's companies in the construction industry market (BRL 380 billion in Brazil, or 5.5% of GDP).

Regulate the use of “engineered” tropical wood in the Construction Industry to meet the requirements of insurance companies.

Creation of tripartite governance (governments, private sector, academic sector, and think tanks) to structure an innovation ecosystem.

Strengthen licensing, provide transparency in the organization of the process of licensing.

Strengthen fiscalization.


1 - Bioeconomy RESEARCH AND DEVELOPMENT ABC Dynamization (Amazon Biotechnology Center) to become the forest ITA.

Double the annual research budget of the National Amazon Research Institute (INPA).

Manaus, as the first bioeconomy research hub, integrated with the world's leading research centers (London's Kew Garden, New York's Botanical Garden, Germany's Mark Plank Institute), with specific knowledge of tropical forest ecosystems.

Creation of R&D for the use of “engineered” tropical wood, on an industrial scale, in the Green Building structural systems, which represent 25% of the cost of the work (the best delamination technology, termite control, humidity control, and fire resistance).

Creation of R&D for the use of forest products in the fashion and textile industry.

Creation of R&D for the use of Amazonian fibers in the automobile and green plastics industry.


1 - Bioeconomy RESEARCH AND DEVELOPMENT

Creation of R&D for the use of plants and insects of Amazonian biodiversity on food tech.

Creation of R&D for studies on the economic impacts of biodiversity, including, among others:

• Studies that identify and detail the share of

biodiversity in shaping the value production chain, employment, and exports.

• Studies to measure and classify other forms of

biodiversity valuation, including the non-use value and associated indirect values and their contribution to the creation of local wealth.

• Research to measure broadly and at the same time

disaggregated the economic importance of biodiversity in the states and in the country, including the biodiversity already in use, the one being exploited and the one that can be sustainably utilized in the future.

Creation of R&D for the use of Amazonian biodiversity products in the cosmetics industry.


1 - Bioeconomy MARKETING

Creation of the brand made in Amazon Brazil (hecho en el Amazonia del Brazil).

Participation in civil engineering events to publicize the use of “engineered” tropical wood.

Participation in food events in Brazil and worldwide (such as the Anuga Fair, in Germany) to promote products from the Amazon Forest (food tech and fish).

Participation in fashion events in Brazil and worldwide to promote products from the Amazon rainforest (São Paulo Fashion Week, Fashion Week in Milan, Fashion Week in New York).

Participation in furniture and design events in Brazil and around the world to promote products from the Manaus Furniture Hub.

Participation in cosmetic events in Brazil and worldwide to promote products from the Amazonian biodiversity.

Creation of advertising campaigns for the dissemination of food products obtained from Amazonian biodiversity in Brazil and worldwide (promoting the brand and the concept).

Creation of advertising campaigns for the dissemination of cosmetic products from the Amazonian biodiversity.


2 - Digital transformation economics pole

INFRASTRUCTURE HUMAN RESOURCES

Launching of a geostationary satellite* to boost broadband access throughout the Legal Amazon, mainly benefiting its remote regions (digital inclusion), with HQ in Manaus.

Utilization of Manaus Digital Polo R&D resources to encourage/attract the creation of a software and hardware industry (uavs, biosensors, radars, among others) integrated into the Amazon remote monitoring system, primarily to protect its ecosystems.

PPP program to enable the production of clean and renewable energy for the Digital Pole and Datacenters based in Manaus Free Trade Zone.

Entrepreneurship Training.

Staff training for Manaus to be a hub for software development and digital economy services.

*Note: Other alternatives are also being considered, such as launching a medium Earth Orbit satellite (MEO) - or the constellation - and adopting a hybrid system, including underwater fiber optic cabling.


2 - Digital transformation economics hub

LEGISLATIONREGULATION

MARKETING

RESEARCH AND DEVELOPMENT

Ensure that the R&D resources of the Informatics Law are used to boost innovation at the Manaus Digital Pole.

Creation of the Amazônia Digital brand.

Participation in the main technology fairs worldwide to promote digital products from the Amazon.

Creation of tripartite governance (governments, private sector, academic sector, and think tanks) to structure an innovation ecosystem in Information and Communication Technology.


3 - Ecotourism INFRASTRUCTURE HUMAN RESOURCES

Decentralized logistics complex for the establishment of five regional Ecotourism hubs (airports, ports, hotels, and broadband).

Five logistics hubs for tourist reception (Ecotourism and adventure, fishing tourism, scientific tourism, ethnic tourism, and business tourism).

PPP Program for enabling concession of parks - forests and conservation areas.

Concession of Manaus International Airport and expansion from 5 to 15 fingers.

Infrastructure upgrade at Manaus international airport to expand passenger reception capacity from 2.5 to 5 million.

School of sustainable ecotourism (SEBRAE da Floresta).

Training in Ecotourism Entrepreneurship and Process Governance (accounting, formalization of associations, formalization of community companies, basic IT, among others) (SEBRAE da Floresta).

Training in haute cuisine based on Amazonian cooking and ingredients (Manaus will be the Lima of Amazonian fish).

Language training: English and Spanish.

Support for obtaining licenses to vessels' pilotage.


3 - Ecotourism LEGISLATION REGULATION Regional aviation stimulation policy.

Obtainment of the sustainable ecotourism certificate.

Policies to combat predatory and sexual tourism.

MARKETING Creation of the Amazon Ecotourism brand.

Participation in the main tourism fairs worldwide to promote ecotourism in the Amazon.

Conducting advertising campaigns in São Paulo, Rio de Janeiro, London, Paris, Shanghai, and Hong Kong to publicize the state of Amazonas as a destination for ecotourism.

RESEARCH AND DEVELOPMENT Identification of specific niches for developing scientific ecotourism in the state of Amazonas.

Note: Brazil spends BRL 40 million per year on tourism promotion. Colombia uses U$ 100 million, and Ecuador allocates U$ 60 million to leverage tourism.


4 – Fish farming INFRASTRUCTURE HUMAN RESOURCES Decentralized cold chain logistics complex (refrigerated warehouses and containers).

Five logistics hubs of fishing reception in the state.

Credit line for fishing farms.

Creation of an Amazonian fish based industrial park for food and biopharmaceuticals processing and production.

• Premium food for hotel chains and upscale restaurants

around the world and food service.

• Meat processing plant, feed factory, incubator, fish farm, and offal processing plant).

• Investments to ensure stability in the supply of electricity

on fishing farms to prevent production losses.

School of sustainable business (SEBRAE da Floresta).

Training in Entrepreneurship, Process Governance (accounting, formalization of associations, formalization of community companies, basic IT, etc. (SEBRAE da Floresta).

Training for innovation in fishing processes, cultivation, and fish processing (EMBRAPA do peixe).

Training in haute cuisine based on Amazonian cooking and ingredients (Manaus will be the Lima of Amazonian fish).

Support for obtaining licenses to vessels' pilotage.

33 A new economy for the Amazonas State: Manaus Free Trade Zone and Bioeconomy

4 - Fish farming LEGISLATION

RESEARCH AND REGULATION MARKETING DEVELOPMENT Reduced bureaucracy in obtaining the necessary licenses from environmental, sanitary, and commercialization control and inspection bodies.

Obtainment of the certificates (Fair Trade).

Origin designation certificate.

Elimination of red tape from research authorization processes and access to genetic resources.

Creation of the Pescado da Amazônia brand.

Conducting culinary festivals with Amazonian fish and ingredients in Manaus, São Paulo, New York, London, Berlin, Shanghai, and Hong Kong, and Tokyo.

ABC Dynamization (Amazon Biotechnology Center) to create research lines related to Amazonian fish that will make it the first research hub on the theme in the world, integrated with the central international scientific institutions.

R&D for the use of Amazonian fish on an industrial scale in foodservice and premium food.

Creation of R&D for the use of Amazonian fish leather in the fashion industry.


PART 4: IMPACT ESTIMATE


Impacts on the Economy of AM over 10 years

Opportunities

CURRENT production*

DEMAND Annual Growth **

Increase in Production

Increase in Wage Income

Direct Job Creation Indirect Job

Creation Induced Job

Creation

Total Job Creation

Bioeconomy BRL 3.1 billions 10.0% BRL 9.7 billions BRL 1.5 billion 37,413 9,021 13,374 59,809

Digital Transformation Economics Hub

BRL 1.1 billions 11.0% BRL 3.9 billions BRL 770.3 millions 9,292 29,318 34,863 73,472

Ecotourism BRL 1.7 billions 3.5% BRL 1.3 billions BRL 541.5 millions 45,194 5,586 11.681 62,461

Fish farming BRL 72.1 millions 10.0% BRL 169.4 millions BRL 69.6 millions 8,356 995 1,432 10,783

TOTAL BRL 5.97 billions - BRL 15.1 billions BRL 2.9 billions 100,255 44,921 61,350 206,525

Impact on GDP: 16.96% Rising Wage Income per Job: BRL 13,887.12 Rise from Current Number of Formal Employment ***: 35.30%

Source: Ministry of Tourism Note: In this study, we use as a proxy for Tourism the activity “accommodation and food services.”


Forecast of investments in physical infrastructure with low social and environmental impact

Geostationary satellite* to boost broadband access 5 logistics hubs for tourist reception

Manaus International Airport (a new terminal with 10 fingers)

Decentralized cold chain logistics complex

Engineered tropical wood production pole for use in the construction industry (5 companies)

BRL 3 billion

BRL 500 million BRL 300 million

Manaus Furniture Pole

Industrial park for food and biopharmaceuticals processing and production from Amazonian fishes 5 logistics hubs for fishing reception Manaus Biopharmaceutical Pole (10 biotech companies)

Food Tech Pole based on plants and insects from Amazonian Biodiversity (20 companies)

BRL 1 billion

BRL 50 million

BRL 500 million

Additional investments: Marketing, Qualification & Training, R&D, Management & Entrepreneurship

Source: own preliminary estimates based on analogous cases. *Note: Other alternatives are also being considered such as launching a medium Earth Orbit satellite (MEO) - or the constellation - and adoption of a hybrid system, contemplating underwater fiber optic cabling.



206,000 DIRECT/INDIRECT JOBS


Opportunities - economic diversification and sustainable development OPPORTUNITY AXES

BIOECONOMY

DIGITAL TRANSFORMATION ECONOMY CENTER

ECOTOURISM

FISHING

BRL 7.15 billions in investments in physical Infrastructure (public and private resources)

Creation of

218 thousand jobs Considering sectors involved and investments to be made - direct and indirect

Over 10 years

12 THOUSAND JOBS DURING INFRASTRUCTURE WORKS


ILLUSTRATIVE CASE - Fish Farming Global production Is the Amazonas

capturing this window of opportunity?

58% of fish for consumption in

Amazonas are acquired from Rondônia and Roraima

In the case of tambaqui, this percentage is

90%

Beef and veal Sheep meat Aquaculture fish

Swine Fish

Chicken Catch fish

Source: OECD-FAO

Mill

ion

Tons


Complementarity of identified economic opportunities Contributions to the PIM integrated economic development model based on innovation, job creation and sustainable use of biodiversity

BIOECONOMY ECOTOURISM

DIGITAL TRANSFORMATION

ECONOMY POLE

FISH FARMING

R&D, sustainability, exploitation of local inputs, and insertion in the Global Production Chains.

Employment (labor-intensive, strongly linked to other economic activities).

Youth employment, as well as support to traditional sectors and Bioeconomy (digital revolution).

Reduction of social (income generation) and intraregional (interiorization) inequalities.

MANAUS: LIMA OF AMAZON

GASTRONOMY

MANAUS:

BIOECONOMY SILICON VALLEY

GENERATION

OF GREEN JOBS

AMAZON

FURNITURE SCANDINAVIA

MANAUS:

ECOLOGICAL FASHION

MILAN

SUSTAINABLE AND SHARED WEALTH


FUTURE VISIONS

AMAZONAS WITHOUT POVERTY

PROTECTED

FOREST

MANAUS: PARIS OF

ECOTOURISM


METHODOLOGICAL NOTES AND BIBLIOGRAPHICAL REFERENCES


Interviews conducted Adalberto Verissimo, Co-Founder of IMAZON.

Alcimar Marques de Araújo Martins, Planning Assistant Superintendent at SUFRAMA.

Alfredo Alexandre de Menezes Junior, superintendent of SUFRAMA.

Alfredo Lopes, consultant at the Amazon State Industry Center - CIEAM.

Ana Bastos, CEO of AMATA.

Carlos Nobre, Climatologist.

Carlos Schneider, Executive Director of the CERTI Foundation.

Daniela Lerda, Coordinator of Climate and Land Use Alliance - CLUA.

Denis Minev, economist and chief executive officer of the BEMOL group.

Fabio Calderaro, Director of the Amazon Biotechnology Center.

Guilherme Leal, businessman in the cosmetics sector.

Ismael Noble, Biologist.

Izabella Teixeira, former Minister of the Environment.

Jessé Rodrigues dos Santos, Department of Economic Researches at SUFRAMA.

João Tezza Neto, Original Trade Executive Director and IDESAM consultant.

Jório de Albuquerque Veiga Filho, State Secretary for Planning, Development, Science, Technology, and Innovation of Amazonas.

José Eduardo Fiates - General Superintendent of the CERTI Foundation.

Marcos Daré, Director of the CERTI Foundation's Green Economy Center.

Marcos Mueller, CEO of Darwin Startups.

Mariano Cenamo, founder and director of New Business at the Institute for Conservation and Sustainable Development of the Amazon - IDESAM.

Oskar Metsavah, Textile entrepreneur - Instituto E.

Patry Marques Boscá, economist, master in Environmental Sciences and Sustainability in the Amazon (Federal University of Amazonas).

Renato Mendes Freitas, Executive Secretary of Amazon Development.

Tatiana Schor, Executive Secretary of Science, Technology, and Innovation of Amazonas.

Note: All of the individuals mentioned have participated in individual conversations, meetings, or dialogues with the responsible team. The inclusion of names does not represent support, validation, endorsement, or agreement with the proposal in whole or in part.


References • “A Zona Franca e a Conservação da Amazônia,” by Carlos Durigan, Director

of the Amazon Program of WCS-Brazil (Wildlife Conservation Association).

• “Amazon Creative Labs and Rainforest Business School,” by Carlos Nobre et al.

• “Amazônia – Por uma economia do conhecimento da natureza, ” Ricardo

Abramovay.

• “Amazônia: gastronomia, ingredientes e cozinhas”. Roberto Smeraldi, June 2019.

• “Caminhos para o investimento sustentável na Amazônia: Oportunidades

para a aplicação dos incentivos fiscais da Zona Franca de Manaus”, prepared by PPA (Partners for the Amazon).

• “Forestry &Biomaterials Endowment Fund (FBEF),” an equity fund created

by USP's Luiz de Queiroz College of Agriculture, with resources management carried on by Estudos Agrários Luiz de Queiroz (Fealq), to boost knowledge in forest and biomaterial resource areas.

• “Importance of Knowledge-Intensive Economic Development to Conservation of Biodiversity in Developing Countries,” Claudio Valladares-Padua (IPE).

• “Oportunidades de apoio a atividades produtivas sustentáveis na

Amazônia”. Carlos Valério Gomes, Christiane Ehringhaus, Claudia Martins Dutra, Eugênio Pantoja, Fabiano Toni, Johannes Schielein, Jorge Hargrave, Katia Carvalheiro, Luciana Rocha, Manuel Amaral Neto, Monika Röper, Viktoria Zipper, Waldemar Wirsig.

• “Pacto das Cidades Amazônicas,” signed in Manaus by

representatives of the Legal Amazon (16 municipalities and 16 entities), which proposes 12 (twelve) environmental measures.


References • “Peixes e o Futuro Sustentável da Amazônia,” by David G. Mcgrath,

deputy director of Earth Innovation, from Federal University of Western Pará (UFOPA).

• “Prioridade e Lacunas de Pesquisa & Desenvolvimento em Silvicultura

de Espécies Nativas no Brasil”, WRI Brazil - World Resources Institute.

• “Amazônia em Transformação” Program, of the Institute of Advanced Studies of São Paulo (IEA/USP) and IMAZON.

• Project “Biopolis Amazonas,” of the Government of Amazonas.

• “Qual o impacto do desmatamento zero no Brasil? ”, prepared by

Instituto Escolhas.

• “Social Innovation by Tourism Strategy in the Western Amazon”, Sâmia Laise Manthey Benevides, Flavio de São Pedro Filho, Maria José Aguiçar Madeira, Irene Yoko Taguchi Sakuno, Valeria Arenhardt, Mar 2018.

• Technology for Innovating the Amazon's Fish-Farming Activity.

Alexandre Leonardo Simões Piacentini, Flavio de São Pedro Filho, Veronica Ribeiro da Silva Cordovil, Elvino Ferreira, Marcos Tadeu Simões Piacentini.

• The News Climate Economy Report. The Synthesis Economy Report. September, 2014.

• Xingu: histórias dos produtos da floresta, VILLAS BOAS, André J.A. et al, Ed. Instituto Socioambiental.

• Zona Franca de Manaus – Impactos, efetividade e oportunidades. Coordinator Márcio Holland - Getúlio Vargas Foundation (FGV) and São Paulo School of Economics (EESP).


Glossary Legal Amazon - It is an area that encompasses nine states of Brazil belonging to the Amazon basin. They are Acre, Amapá, Pará, Amazonas, Rondônia, Roraima, and part of the states of Mato Grosso, Tocantins, and Maranhão.

Bioeconomy - It is a sustainable economy, which brings together all sectors of the economy that use biological resources (living things). This market seeks to provide solutions to some of the major social challenges: economic crisis, climate change, fossil resource substitution, food security, and population health.

Biodiversity - It is the set of all species of living beings in the biosphere; diversity.

Biopharmaceuticals - Also called biological medicines are medicines obtained from the use of genetically modified cells to produce therapeutic proteins. They are provided by the biosynthesis in living cells, that is, by the production of chemical compounds by living beings.

Biochemistry - It is the interdisciplinary science that uses chemistry principles and methods in the investigation of

transformations that occur in substances and molecules from living beings and their metabolic processes; biological chemistry, physiological chemistry.

Biosensors - These are analytical tools that use a bioactive element and a transducer for biochemical substances detection/quantification in the most varied applications. In this work, we highlight the classifications, essential characteristics, and differences related to conventional analytical methods.

Biotech - It is a science that uses living organisms or their products, such as bacteria or enzymes, to manufacture its medicines.

ABC - Amazon Biotechnology Center.

CERTI - Foundation Centers of Reference in Innovative Technologies.

CLUA - Climate and Land Use Alliance.

Critical success factors - The critical success factor is a management term for an element required for an organization or project to achieve its mission. These are key points that, when well executed, define and guarantee the development and growth of a company.

Fairtrade Certification- Fairtrade Certification refers to the certification following Fairtrade criteria. It is a product certification system in which the social, economic, and environmental aspects of production are certified to Fairtrade Producer and Trader Standards.

FSC Certificate - FSC stands for Forestry Stewardship Council. FSC is an international non-profit institution which gathers representatives of entities from around the world and is one of the only forest certification systems supported by significant bodies, such as WWF and Greenpeace. It is based on three equally important pillars: economic, environmental, and social.

Phytotherapy - A phytotherapic medicine is that obtained from medicinal plants, where it is used exclusively derived from plant drugs, such as juice, wax, exudate, oil, extract, tincture, among others.

Food Service - Covers the entire line of production and distribution of inputs, foods, equipment, and services to provide food services to people away from home.

FoodTech - This is a term used when we use technology to improve agriculture, food production, supply chain, and distribution channel. FoodTech is any technology applied to the way

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we produce, sell, or serve food.

Greenhouse Gases GHG - Greenhouse gases are molecules present in the earth's atmosphere that have the property of warming the atmosphere because they absorb part of the thermal radiation emitted by the earth's surface. The main ones are carbon and methane gases. Carbon dioxide or carbon gas (CO) is secreted mainly by the use of fossil fuels (oil, coal, and natural gas) in human activities.

Green Building - It is a building or any space or environment that is built thinking on social, environmental, and economic sustainability, from its conception, construction and throughout its operation.

Hub - It is a physical space that gathers people to create transformative products and services, which will, in some way, impact society and bring benefits to the future, are used in a community way, as cities with common characteristics.

IBGE - Brazilian Institute of Geography and Statistics.

IDESAM - Institute for Conservation and Sustainable Development of the Amazon.

Industry 4.0 - It is a recently proposed industry concept that encompasses the main technological innovations of the

automation, control, and information technology fields applied to manufacture processes. There were three industrial revolutions followed by the fourth revolution, or industry 4.0.

Transformation industry - It is a term used to classify the production systems that transform one element into another, raw material into a good, differing from the agricultural production sector and the vegetable or mineral extraction industry. It includes all moments of industrial production.

ITA - Aeronautical Technological Institute.

Engineered Wood - This is the result of the application of advanced technologies, chemicals, and production processes to certain woods that ensure high performance and allow engineered wood to be used in civil engineering. In Brazil, are mainly used as wood, pine and eucalyptus as a raw material for structure manufacture.

R&D - Research and Development.

PIM - Manaus Industrial Pole.

PNAD - National Household Sample Survey is the survey conducted by the Brazilian Institute of Geography and Statistics (IBGE) on a sample of Brazilian households that, for having multiple purposes, investigates various socioeconomic society characteristics, such as population, education, work, income, etc.

PPP - Public-Private Partners. RAIS - Annual Report on Social Information is a socioeconomic information report requested by the Ministry of Labor (today without ministry status and linked to the Ministry of Economy) to legal entities and other employers annually. Basic sanitation - The set of services, infrastructure, and operating facilities for water supply, sanitation, urban cleaning, urban drainage, solid waste, and rainwater management, as defined by Law no. 11,445/2007. Sanitation is the set of measures that aims to preserve or modify the conditions of the environment to prevent disease and promote health, improve the quality of life of the population, and the productivity of the individual and facilitate economic activity. Geostationary satellite - It is a communication satellite. They are named after being placed in an orbit above the equator such that the satellite has a period of rotation equal to that of planet Earth (24 hours). In Brazil, the first Geostationary Defense and Communications Satellite (SGDC), launched in space in May 2017, is an essential part of the National Broadband Plan (PNBL), created by the federal government with the mission of universalizing high-speed Internet access to in Brazil. The satellite signal will serve to bring broadband internet to disconnected communities in the remotest corners of the country.


Suframa - Superintendence of Manaus Free Zone - is an autarchy linked to the Ministry of Development, Industry and Foreign Trade (now Ministry of Economy) that manages the Manaus Free Zone - MFZ, with the responsibility of building a regional development model that uses sustainable natural resources, ensuring economic viability and improved quality of life for local populations.

Think tank - Ideas lab, strategic office, thought center or reflection center is an institution or group of investigative and reflective specialists to reflect on the most diverse subjects: economy, culture, technology, social policy.

VANTS - Unmanned Aerial Vehicle. Also called remotely piloted aircraft or drone, it is any aircraft that can be controlled on 3 axes and does not require onboard pilots to be guided.


ATTACHMENT


About Regional Incentives: Some points of analysis of current tax incentives in Brazil, shortcomings, elements for a good policy of regional stimuli, and examples of success in other countries.

1. The granting of tax incentives in the form of tax breaks for companies that invest in research and development (R&D) has gained a good footing among developed countries. There are two examples in France and Japan, that support already represents over 70% of the set of instruments used by governments to fund innovation activities in the private sector. In the 2000s, this proportion was 20%.

2. Economist Ruud de Mooij, head of the IMF's tax policy division, in an article released in early 2019, recommends that incentives be directed to technology-based start-ups rather than to established ones.

3. The OECD report, released in 2018, titled “Tax Incentives for R&D and Innovation,” also suggests offering tax incentives to startups that need capital to invest in new technologies. It is common in Europe, including Germany. However, the OECD makes one crucial observation: these public incentives should not be the only way to promote R&D in the private sector;

4. International literature has highlighted that it is much better to invest in education, infrastructure, and research institutions than offering tax benefits for multinationals. The idea is that education, infrastructure, and research institutions increase a country's ability to absorb new knowledge and encourage the transfer of technologies developed by advanced economies. In the case of Brazil, we have to take advantage of the size of our market, integrate our economy internationally and improve our infrastructure and our business environment; this is much more relevant for a multinational to decide to invest here than to grant tax benefits. China is a good example of this as it continues to attract foreign investment even with the elimination of various tax incentives;

5. In Brazil, the indiscriminate granting of tax and credit benefits by states - a direct consequence of the 1988 Constitution, which altered the tax system, reducing federal transfers to states and municipalities - has generated inevitable revenue losses for the country. This is even more serious in the current scenario of enormous difficulties in controlling public accounts;

6. Equally serious is the negative impact on overall productivity as benefits can determine

inefficient allocation of investments - benefits to sectors in which states have no vocation or have no best production and trading conditions;

7. Emphasis should be placed on distancing the type of competition based on tax incentives from the modern agenda of industrial competitiveness. As noted in the literature, global investments are much more conditioned by systemic productivity and market-specific characteristics than by arbitrage of production costs, such as wages and tax incentives.

8. Therefore, we need to deepen discussions on what can make us more competitive. The way that seems most rational to us is to stimulate in our industry a production structure strongly related to knowledge. It is equally vital in reducing our regional inequalities.


Prospective Analysis 1. It is an approach that induces collective reflection in light of changing trends in the local and global environments.

2. Through the application of systematic and participatory processes, it enables the construction of knowledge about possible perspectives, leading to the creation of shared visions of the future, in the medium and long term, and the identification of actions that need to be performed in the present and in different time horizons to achieve a specific proposed vision.

3. It is not intended to predict the future, but to study the various possibilities of plausible futures that exist and to prepare organizations to face any of them, or even to create conditions for modifying their probabilities of occurrence or minimizing their effects.


Effects 1. Direct effect - expresses the impact of variations in the final demand of the considered activity coming only from the businesses that provide direct inputs to this activity;

2. Indirect effect - expresses the impact of variations in the final demand of the activity arising only from activities that provide indirect inputs to this activity;

3. Induced Effect (or Income Effect) - expresses the impact of variations in the final demand for the activity arising from differences in income when an activity is stimulated.


Reflections

Amazonas Governor Wilson Lima (PSC / AM) “The forest must be perceived as an attraction of values and not a hindrance to development.” He stressed the importance of viewing the Amazon rainforest as an "asset." It is “imperative” to modernize the state economy, with “special attention” to the industrial hub of Manaus.” 01/01/2019 Valor Econômico

Mayor of Manaus, Arthur Neto (PSDB / AM) “The Amazon has to be self-sustaining by incorporating its biodiversity into the MFZ. The whole world would applaud Brazil if Amazonian biodiversity were the region's flagship for sustainable development. Everyone will run here if they can invest in biodiversity”. October,24,2019 Fato Amazônico

Alfredo Alexandre de Menezes Junior, superintendent of SUFRAMA. “We talked to the economic team all the time about how we could improve our entire Free Zone. To use our model to leverage new possibilities for economic matrices.” 02.15.2019 D24AM

Federal Representative Sidney Leite PSD/AM “The Free Zone model that has so far yielded very positive results can be rethought to bring the economy of the Amazon into the 21st century. The focus should now be on innovation. We need to encourage the knowledge economy in the Amazon and northern Brazil. That means investments in cutting-edge agriculture, technology, and biotechnology.” 09.14.2019 Congresso em Foco


Reflections

Federal Representative Atila Lins PP/AM “Without economic alternatives, the state can suffer from deforestation and end its policy of environmental preservation.

“In addition to the need to preserve its model, we have this environmental issue where the whole world is turning its sights to the Amazon.” 09.06.2019 BNC Amazonas

Delegate Pablo PSL/AM “We also have medicine products. Why are these sources not used? Why doesn't tourism go forward here in the Amazon? The name 'Amazonas' is one of the strongest in the world, this name should be highlighted so that we win the globe, the world, and that can make it different from what has been done until today.” 01.08.2019 D24AM

Federal Representative - Marcelo Ramos PL/AM “We need to evaluate it permanently and make adjustments. Any reflection on MFZ must start from two premises. One finding is self-critical. No industrial model stands forever with tax incentives and barriers to imports.

We need to understand the model as a temporary policy that requires infrastructure planning, productivity, and labor training so that it can be competitive in the future in an environment of fewer tax incentives.” 05.23.2019 Poder 360


Technical Team

General Coordination Ricardo Sennes, Partner Director of Prospectiva Consultoria Sergio Leitão, Executive Director of Instituto Escolhas

Executive Coordination Gabriel Kohlmann, Prospective Consulting Manager

Economic Development Consultants Carlos Alberto Manso, researcher at Ceará Federal University Isadora Costa Osterno, researcher at Ceará Federal University

Sustainability Consultant Sergio Leitão, Executive Director of Instituto Escolhas

Communication Advisory Salete Cangussu

Partnership:

www.escolhas.org

http://www.escolhas.org/

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