New Brazil regime

Exec order raises costs for U.S. majors

RIO DE JANEIRO — Brazil’s President Fernando Henrique Cardoso has upped taxes and fees on U.S. films and programming coming into the country. But the landmark executive order regulating the film and TV sectors, which does not need congressional approval and is already effective, fell short of the draconian measures feared by Motion Pictures Assn. chairman and CEO Jack Valenti (Daily Variety, Aug. 1).

U.S. majors’ local distributors will be taxed 11% on profits they make in Brazil. This will be exempt if the pic is a local co-production.

The order also doubles fees on films entering the country. Distributors will have to pay 3,000 reais ($1,200) per film per market (theatrical, home video and broadcast), up from $600.

TV trouble

Pay TV programmers must pay $800 per feature and $180 per series episode. According to local sources, this fee only applies to local programmers, while pan-regional channels such as HBO, Discovery and Sony, will remain exempt.

MPA veep for Latin America Steve Solot told Daily Variety: “We are still cautious about the pay TV part of the decree. It will require a complete analysis.” But he labeled the 11% film tax “Machiavellian” because it practically forces majors to co-produce in Brazil. Columbia, Warner and Fox currently invest in local co-productions, while Buena Vista and UIP do not.

Effort, which aims to consolidate the local film industry, is the result of a year’s work by Gedic, a task force of industry reps and government officials set up to advise Cardoso.

The decree creates two government entities, one to set the film sector’s policies and the other to implement them, and provides funds to finance the local production, distribution and exhibition sectors.

The local film industry mostly welcomed the decree. “The executive order is very positive for the sector,” Brazil’s leading producer and Gedic member Luiz Carlos Barreto said.

But some film sector members said they were disappointed with last-minute changes to Gedic’s original proposals which would have forced local networks to put a percentage of their revenues into co-productions with cash-hungry filmmakers and respect screen quotas for Brazilian films.

“The last-minute changes showed how strong the nets’ lobby is, especially Globo’s,” said director Paulo Sergio Almeida. “Without the participation of the TV nets, the film sector will never become a solid industry. Let’s hope the government addresses this issue in the upcoming congressional bill.”

A concerned Valenti weighed into the row in June when he wrote to Brazil’s ambassador to the U.S., Rubens Barbosa, outlining the MPA’s fears about Gedic’s proposals. He told Daily Variety: “No one has had the opportunity to present alternatives.”

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