The World Trade Organization announced on Wednesday that it was giving Brazil 90 days to withdraw a wide range of industrial stimulus programs, supporting complaints by Japan and the European Union over unfair competition
Brazil`s government will appeal the WTO decision, a foreign ministry source told Reuters.
The decision applies to subsidies for exporters and industrial stimulus programs for such sectors as steel, electronics and autos.
All these measures are prohibited under WTO rules, which forbid subsidies that are dependent on preference rules for local content and exports` performance.
During the appeal process, the EU and Japan cannot implement retaliatory measures if Brazil does not comply in scrapping the programs by the 90-day deadline.
Still, the blunt WTO announcement may bolster a recent push under President Michel Temer towards free-market policies and to reduce the role of a cash-strapped state in supporting economic growth.
Temer`s government has already eased labor rules, put state companies and assets up for sale and sought trade agreements in a bid to shake off the worst recession in Brazil`s history.
Some Brazilian stimulus measures cited were introduced in 1991.
The European Union and Japan decided to file their complaints in 2013 and 2015 after former President Dilma Rousseff ramped up subsidies to fend off an imminent recession.
The WTO`s decision on the Brazilian subsidies was first reported by Reuters in November. However it was not made public by the world body until Wednesady.