Brasília – This Tuesday (3rd), the Brazilian federal government announced fostering measures targeting industry. The measures are geared toward exchange rates, taxes, reduction of export financing costs, strengthening trade defences, improving credit conditions by means of the Brazilian Development Bank (BNDES), and creating more favourable conditions for the auto industry. These actions expand upon Plano Brasil Maior (Greater Brazil Plan), launched in August of last year.
Regarding exchange rates, the minister of Finance, Guido Mantega, declared that the measures will remain in effect permanently, including higher foreign exchange reserves. The policy of raising the aliquot of the Tax on Financial Operations (IOF, in the Portuguese acronym) will be maintained on speculative external operations.
Regarding companies’ payrolls, the lowering of the 20% aliquot of the National Social Security Institute (INSS) will be expanded into other sectors. On the other hand, a 1% to 2.5% tax will be charged on companies revenues. Under the Greater Brazil Plan, announced in August last year, the aliquot was 1.5%, but not all sectors were covered.
A total of 15 different sectors will benefit from the tax break. The estimated annual amount is 7.2 billion reals (US$ 3.9 billion). In 2012, the amount will be 4.9 billion reals (US$ 2.9 billion), because the measures will become effective in July.
The sectors covered are: textile, clothing, shoes and leather, furniture, plastics, electrical material, auto parts, buses, naval, aerospace, mechanical capital goods, hotels, information and communication technologies, call center equipment, and computer chip design. Of these, clothing, shoes and leather, and IT were already covered by the Plan, and their aliquots were lowered again.
“In a time of crisis, the competitiveness of other countries increases, some countries sell at prices lower than the cost price, they grant subsidies, and right now we need to boost our competitiveness,” said Mantega on presenting the measures at a ceremony at Palácio do Planalto, the seat of the Brazilian government.
The government also set a preference rate of up to 25% for domestic goods and services in government purchases, in detriment of imported goods.
A transfer of 45 billion reals (US$ 24.5 billion) from the Treasury to the National Development Bank (BNDES) was also announced. Interest rates on loans will be lowered for several segments, including exporting industries, and the repayment periods will be extended.
The government has also decided to set up 19 Competitiveness Councils. According to the Brazilian Ministry of Development, Industry and Foreign Trade, these councils will comprise approximately 600 people, among them government officials, companies’ and workers’ representatives, and they will discuss sectorial issues.
The idea arose out of businessmen’s complaints about the lack of communication with the government. According to the Ministry, the following industries will be covered: oil and gas, naval, auto, healthcare, defence, aerospace, space, information and communication technologies, electric and electronic goods, capital goods, mining, metals, personal hygiene, perfumery and cosmetics, chemicals, pulp and paper, renewable energies, civil construction, furniture, shoes, clothing and jewellery, agroindustry, trade, services, and logistics services.
Bullish production
Also on this Tuesday, the Brazilian Institute of Geography and Statistics (IBGE) announced that industrial production grew by 1.3% in February compared with January, and there was an increase in 18 out of 27 activities surveyed. Still, the national industry is still operating at a much lower level than 2011’s.
Production dropped by 3.9% in February this year compared with the same month of last year. In the first two months, there was a 3.4% decline compared with the same period of 2011.
*Translated by Gabriel Pomerancblum
