Policies to stimulate economic growth and competitiveness
New programs and expansion of Greater Brazil actions to encourage investment and promote growth in 2013
GREATER BRAZIL (BRASIL MAIOR) PLAN
Payroll tax relief
In 2012, 15 sectors benefited from payroll tax relief. In 2013, the number of beneficiaries will increase to 40. Savings for these sectors will total R$ 3 billion in 2012 and R$ 12.83 billion in 2013.
Trucks and wagons - units purchased between September and December 2012 may have their depreciation accelerated from 48 to 12 months. This measure will reduce the basis for calculating income tax and social contribution on net profit, thus providing resources for investment. The expected impact will be R$ 586 million in 2013.
Capital goods - valid for all purchases of machinery and equipment (agricultural, industrial, and commercial) made between September 16 and December 31, 2012. The deadline for depreciation was reduced to five years (20% per year). The impact of the measure between 2013 and 2017 will correspond to R$ 6.8 billion.
Extensions of tax reduction or exemption to stimulate production and employment
Automobiles - Exemptions and reductions of the Tax on Industrialized Products (Imposto sobre Produtos Industrializados - IPI) have been extended to December 31, 2012. The tax waiver will total R$ 2.8 billion in 2012. In October, the licensing of new vehicles had reached 341,600 units, reflecting an increase of 21.8% over October 2011.
White Line Appliances - Measures of IPI reduction and exemption for high energy efficiency products have also been extended to December 31, 2012. The rate for stoves and wash tubs are kept at zero; for freezers and refrigerators at 5%; and for washing machines at 10%. Savings in the industry in the last four months of the year has been estimated at R$ 361 million. Until August 2012, the production of White Line appliances had increased 12.1%, following a period of stability in 2011.
Furniture, panels, laminates and lighting fixtures - until December 31, 2012, the IPI rate on these products will be zero. The cost savings resulting from the extension will be R$ 393 million in the last three months of the year. Production in the furniture industry has grown for the fourth consecutive year.
Capital Goods - The IPI reduction was extended to December 2013, with an estimated tax waiver of R$ 1.1 billion next year.
Construction Materials: IPI exemptions have been extended to December 2013. New products have been included since September, with zero rate: laminate, solid wood and vinyl flooring, and drywall. The measure will lead to a cost reduction of R$ 2.2 billion next year for the industry.
Investment Support Program – (Programa de Sustentação do Investimento – PSI)
The special credit lines for the purchase of capital goods, buses, trucks, machinery and equipment through the PSI, set to end on August 31, have been improved and will be maintained until December 31, 2012. Improvements include a 2.5% reduction in the annual fee to finance machinery and equipment (FINAME) and trucks.
Two new credit lines have been established:
Acquisition of used capital goods - with a provision of R$ 1 billion, it came into force in September and is intended for the purchase of used and domestically manufactured goods such as machinery, tools, trucks, tractors, truck an trailer, semi-trailers, and aircraft.
Refinancing - in force since September, it is intended to refinance existing debts of companies in the machinery and equipment production sector, and companies in the road cargo sector.
From its inception in 2009 to October 2012, the PSI has provided R$ 162.6 billion in funding.
Since August, new products have benefited from the margin of preference for domestically manufactured products in government procurement, namely: urban trains (20%); currency printing paper (20%); trucks (17%); and vans (15%).
More resources in the economy - Reduction of reserve requirements on deposits
In September / October, reserve requirements were reduced from 6% to 0% on demand deposits and from 12% to 11% on term deposits. In the months of September and October, the total amount of reserve requirements on deposits decreased by R$ 29.5 billion. In the year-to-date through October, this reduction totaled R$ 78.6 billion. These are resources which are no longer deposited in the Central Bank and that are now in circulation and heating up the economy.
New companies enjoy access to benefits as exporters
In September, the minimum percentage of exports in the revenues of companies was reduced to 50%, so as to characterize them predominantly as exporters. Up until then, this percentage was 60% in labor-intensive sectors or 70% in the other sectors. The decision increased the number of companies enjoying the benefit of IPI, PIS and COFINS exemption on the purchase of production inputs.
Innovation in Oil and Gas
Launched in August, the INOVA PETRO Program is a joint initiative of FINEP and BNDES, with technical support from Petrobras. With resources worth R$ 3 billion, the program provides incentive to projects that include research, development, engineering, technological absorption, production and marketing of products, processes and / or innovative services, aimed at the development of Brazilian suppliers in the production chain of the oil and natural gas industry. The first public notice was published in September, for innovation projects to be developed entirely in Brazil in the areas of "surface processing", "underwater facilities" and "wells". The INOVA PETRO is valid until 2017.
Incentive to private funding for investment
Law 12715 of September 2012 improved the rules to encourage the funding of long-term investment projects. The changes introduced ensure greater security to this market and are an incentive for the private sector to raise resources for funding long-term investment. The mechanism provides for special tax treatment for income from bonds that are used to raise funds for investment in infrastructure, or intensive economic production in research, development and innovation.
Main measures include:
Capital Gains - the reduction in the income tax rate now applies to any amounts representing remuneration of invested capital, including capital gain realized on the transfer of ownership.
Use of funds raised - funds raised can now be used to cover expenses, costs or debts associated with the project, up to two years before closing of the public offer of securities.
Penalties - where resources are not used in accordance with legal requirements, responsibility will lie with the bond issuer, which will pay the corresponding fines. The investor’s right to the tax benefit is therefore maintained.
Mutual funds with tax benefits – reduction from 95% to 85% of the minimum amount of bonds or securities included in the composition of the net equity of the funds set up for the remuneration rate to be reduced. This rte could be 67% in the first two years.
New companies under RECOF
In September, the operating rules for the Special Customs Regime of Industrial Warehouse under Computerized Control (Regime Aduaneiro Especial de Entreposto Industrial sob Controle Informatizado - Recof) were relaxed. Also known as "virtual customs", the regime allows inputs and parts intended for industrial processes to be shipped more quickly and transported directly to importers, with suspension of tax collection against the commitment to achieving a specified volume of exports and industrialization of imported inputs.
Main changes include:
• End of sectoral restrictions for participating in the regime, which now includes any company in the industrial segment, essentially in assembling;
• Unification of the minimum amount exported at R$ 10 million, with flexible inclusion rules;
• Establishment of a two-year deadline for companies to achieve the minimum amount of exports required in return.
Considering the data for 2011, about 185 new companies would be able to join RECOF, representing an increase of R$ 13.8 billion in exports and R$ 15.5 billion in imports under the regime.
Tax reduction for Armed Forces Suppliers
Sale transactions of goods and services to the Brazilian Armed Forces are exempt from PIS/PASEP, COFINS and IPI taxes due to the expansion of the Special Tax for the Defense Industry (Regime Especial Tributário para a Indústria de Defesa - Retid).
For more information, visit http://www.brasilmaior.mdic.gov.br/
Program of incentive to the technological innovation and densification of the automotive supply chain
Regulated in October, the program aims to encourage the production and technological development of the automobile industry in the country by promoting the safety, quality and energy efficiency of vehicles.
Companies in the sector estimate that investment will rise from R$ 44 billion to R$ 60 billion by 2015 under the new regime, especially regarding the development of new technologies for cars produced in the country. These figures represent more production, technology, employment and income generation in Brazil.
By early November, 29 companies had filed 32 requests of eligibility to Inovar-Auto, of which six were for investment projects, eight from importers and 18 from manufacturing companies (already established in the country).
The states of Bahia, Goiás, Rio de Janeiro, Santa Catarina and São Paulo will receive these new investment projects worth R$ 5.07 billion, three of which are from companies that have not yet produced in Brazil.
Savings and environmental protection with more efficient cars
To participate in the program, producers and importers must commit to a minimum reduction of 12.08% in fuel consumption by vehicles.
Estimated savings between 2017 and 2021 stand at 7.3 billion liters of gasoline and 6.6 billion liters of alcohol.
CO2 emissions are also expected to be reduced by 12.4 million tons between 2017 and 2021.
FISHERY AND AQUACULTURE HARVESTING PLAN 2012-2014
Launched in October, the plan sets out measures to be adopted by 2014 to increase fish production in Brazil, the competitiveness of the fishing industry and the income of fishermen’s families.
Investments will total R$ 4.1 billion, with R$ 3.6 billion from rural credit and R$ 500 million from the new BNDES – Pro-aquaculture program.
The goal is to increase production to two million tons of fish per year by 2014. In 2010, production totaled 1.2 million tons.
Fishing is the main activity for one million workers and the production chain involves three million indirect jobs.
The plan provides for: better credit conditions, benefiting more than 330,000 families with increased limits for participation, longer maturity terms, lower interest rates, and new funding lines; technical assistance and infrastructure, with the inclusion of 120,000 fishermen in the technical assistance program, training for 16,000 professionals from the production chain, renovation of vessels, supply of machinery and equipment kits, and establishment of aquaculture parks among others; incentive to the sale of fish, with educational and advertisement actions, increased fish procurement by the government, partnerships with restaurants and supermarkets; strengthening of associations and cooperatives; and modernization of the industry with incentives to research, development and innovation, by increasing the resources allocated to the sector.
For more information, visit http://www.mpa.gov.br/index.php/safra
INCENTIVE TO PUBLIC-PRIVATE PARTNERSHIPS - PPP
Steps have been taken to improve the legislation (MP 575), in order to encourage PPP: increase from 3% to 5% of the current revenue of the states for commissioning PPP projects; accounting of counter-payments (remuneration to the private sector for construction projects) as capital contribution, with the consequent exemption of PIS / COFINS taxes and Income Tax.
TI MAIOR (IT MAJOR) Program
Promotion of the software and IT services industry
The Strategic Program for Software and Information Technology Services – TI Maior was launched in August, with an estimated investment of R$ 500 million between 2012 and 2015. The program's goal is to promote the development and competitiveness of the software and services industry in the area of information technology.
To meet these targets, the government will provide credit lines, grant-in-aid, training grants, investment in research and development (R&D). In addition to these measures, the industry already enjoys a margin of preference for local content in government procurement, besides payroll tax relief.
The program will sponsor up to 150 start-ups – innovation companies that accelerate research and development in the sector; support the development of software and solutions of high complexity and high economic and social impact in 12 strategic sectors, with the attraction of global research centers, engineering of IT ecosystems, and integration of academic and business networks, both public and private; and the training of 50,000 professionals for the sector by 2014.
For more information, visit http://timaior.mcti.gov.br/
SUPPORT FOR ENTREPRENEURSHIP
Crescer – National Microcredit Program
In October, the program reached the mark of 2.87 million operations, totaling R$ 3.61 billion. The average amount of the operations was R$ 1,258.
Individual Micro entrepreneur (Microempreendedor Individual – MEI)
The number of individual entrepreneurs who have formalized their business has grown more than 160% since 2011, having reached 2.56 million registrations in October 2012.
Law 12,715 provides for the exemption of up to 9.25% in federal taxes on smartphones - ideal devices for internet access - produced in Brazil. The act covers equipment that meet the Basic Productive Process (Processo Produtivo Básico – PPB; requirement of minimum production stages in the country as well as counter party investment in R&D) established for the devices, and with final cost to consumers of up to R$ 1000.