Brazil considers lowering price ceiling on medicines

Proposal sparks debate amid inflation concerns, raising risks for small pharmacies

03/11/2025

The Brazilian federal government is set to discuss a proposal in the coming weeks to lower the maximum price of medicines, currently regulated by the Drug Market Regulation Chamber (CMED) under ANVISA, the country’s health surveillance agency. The move aims to narrow the gap between the price ceiling and actual retail prices, as pharmacies typically offer an average 30% discount off the government-set maximum.

Pharmaceutical retailers and manufacturers argue that the measure could discourage competition and harm small and regional pharmacies. Independent and small-chain drugstores, which make up 80% of the sector, tend to charge full price to maximize revenue and could be disproportionately affected.

Pharmaceutical companies warn that reducing the price ceiling could result in the withdrawal of lower-cost medicines from the market, as some drugs are already sold with tight profit margins.

While CMED is exploring ways to bring the ceiling closer to market prices, officials suggest that any reduction will be moderate to preserve the current system of retail discounts.

This debate is not new. In 2020, Senator Fabiano Contarato (Sustainability Network Party, Espírito Santo) introduced a bill on the issue after the Brazilian Institute for Consumer Protection (IDEC) raised concerns that the gap between the price ceiling and actual market prices allows for sudden price hikes during supply shortages.

With inflation control a priority for the federal government, the issue has resurfaced as part of the regulatory framework for medicines, which was listed in January as one of 25 key initiatives for the Finance Ministry. Some industry representatives believe that proposing a drug price cut now is a political move, aimed at offsetting the government’s image damage caused by rising food inflation.

During an event held by the National Association of Private Hospitals (ANAHP) last month, CMED Executive Secretary Daniela Marreco confirmed that the topic is under discussion. “We have debated this extensively, and there is even a bill from 2020 suggesting that CMED should bring the actual market price closer to the ceiling due to the discounts commonly observed,” she said.

However, Nelson Mussolini, president of Sindusfarma, Brazil’s pharmaceutical industry association, said that the sector has not been consulted by the government on this issue and firmly opposes the proposal, warning of potential disruptions to market competition.

“In my view, if the price drops, profit margins shrink in absolute terms. There will be pressure to maintain profitability. Initially, smaller companies will feel the impact, but ultimately, the cost will be passed on to consumers,” he said.

Mr. Mussolini also warned that lowering the price ceiling could make it unviable to manufacture certain low-cost medicines, as production costs might exceed government-imposed prices.

When asked whether the proposal is linked to the broader economic landscape, Mr. Mussolini dismissed the idea. “It doesn’t make sense for the government to lower medicine prices to fight inflation, because pharmaceutical inflation is low and not a major factor. This year, we are already seeing the smallest price adjustment in years,” he said. At 3.8%*, the increase is set to fall below inflation for the first time in seven years.

Ms. Marreco, from CMED, acknowledged that a sudden policy shift could create market risks. “One concern we need to consider is that in countries that have adopted similar measures—aligning the price ceiling with actual market prices—over time, we’ve seen a reduction in the discounts offered by manufacturers and retailers,” she noted during the event.

She also pointed out that in some cases, aligning the price ceiling with market prices has led to price increases for certain medicines whose prices were previously lagging behind inflation.

The public consultation on the new regulatory framework, which addresses various issues, including high-cost medicines, is expected mid-year. Any changes could be implemented through an interministerial decree, involving the Health, Finance, Chief of Staff Office, and Justice Ministries, as well as ANVISA.

Ms. Marreco clarified that the ongoing discussions do not impact the annual price adjustment mechanism, which is determined in March and governed by Law 10.742 of 2003.

In a statement, Interfarma, which represents the pharmaceutical industry, said it was unaware of any formal government discussions on altering the price ceiling. “Poorly structured pricing policies could lead companies to withhold product launches or even cause supply shortages,” the group warned.

In the retail sector, the biggest risk of lowering the price ceiling for medicines would fall on small, independent pharmacies, which serve remote areas far from urban centers. These businesses operate with higher costs and limited scale, making it difficult for them to sell medicines at lower prices.

Impact on small pharmacies

Many of these small pharmacies remain profitable not through high sales volumes but by selling at full list prices or operating in the informal market. Given their role in providing essential medications to low-income populations, these businesses are critical to the government’s efforts to expand the Farmácia Popular program, which subsidizes medicines for low-income Brazilians.

“It’s important to recognize that business models in this industry vary significantly. The market is not uniform, and companies are not all the same,” said a representative from the pharmacy sector.

According to the executive, lowering the price ceiling could force 50,000 to 60,000 pharmacies out of business, as these stores rely on pricing flexibility to stay afloat. “Many small drugstores survive by selling at full price and only offering discounts when absolutely necessary—often when a customer is about to walk out without making a purchase. Selling at consistently lower prices would be unsustainable for them.”

Brazil has approximately 90,000 pharmacies, according to the Federal Pharmacy Council (CFF), with 80% classified as micro or small businesses. Many are family-run operations or sole proprietorships, generating an average monthly revenue of around R$60,000, based on industry association data.

Two major pharmacy chains interviewed said they do not expect negative impacts from the potential policy change. These companies already operate with highly competitive pricing, often below the market average, which is not expected to be directly affected.

The debate over the medicine price ceiling comes just weeks after the government announced changes to the Farmácia Popular program, a move that drew criticism from small pharmacies.

The Health Ministry recently expanded the list of subsidized products to include adult diapers and dapagliflozin, a medication used to treat diabetes associated with cardiovascular disease. However, independent pharmacies have voiced frustration over delayed government reimbursements for these subsidized sales. With the program’s expansion, more products will be subject to this payment system, further complicating cash flow for smaller businesses.

These payment delays disrupt financial operations for small pharmacies, which often have limited access to working capital. The problem is particularly acute in low-income regions, where demand for subsidized products is highest, making small drugstores increasingly dependent on government reimbursements to stay in business.

When contacted for comment on concerns raised by the retail and pharmaceutical sectors, CMED did not respond before publication. The Brazilian Pharmacy Retail Association (ABRAFARMA) also declined to comment.

*By Beth Koike e Adriana Mattos— São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazil, U.S. reignite critical mineral exploration efforts

Research to focus on rare earths, lithium, cassiterite, and tin in three mining regions

03/11/2025

Brazil and the United States are set to resume joint research to identify areas rich in critical minerals within Brazilian territory. Signed last year, the agreement initially planned studies in four states: Minas Gerais, Goiás, and a region spanning Rio Grande do Norte and Paraíba.

Rare earth elements, lithium, tin, and cassiterite were among the key minerals targeted in the partnership, with initial sample collection already underway last year.

In January, Brazilian authorities were informed by the U.S. Department of State that President Donald Trump’s administration had decided to suspend the cooperation. However, in early March, the U.S. government reversed course.

“We received a delegation from the U.S. government, which informed us that all aspects of our agreement would be honored because the U.S. Supreme Court ruled that agreements already in progress must be completed,” said Francisco Valdir Silveira, director of Geology and Mineral Resources at the Geological Survey of Brazil (SGB), which operates under the Ministry of Mines and Energy.

“The decision to move forward was made because the agreement had already been signed, funding had been allocated, and Deloitte had been contracted for consulting services,” Mr. Silveira added.

Brazil was notified of the cooperation’s resumption during a meeting between Brazilian and American representatives at the Prospectors & Developers Association of Canada (PDAC 2025) Annual Convention, one of the world’s leading mining industry events, held from March 2 to 5 in Toronto.

Strategic interest

Critical minerals, also known as strategic minerals, are essential for the production of electric vehicle batteries, mobile phones, solar panels, semiconductors, and military technologies.

Mr. Silveira highlighted Brazil’s significant potential to become a major global producer of rare earth elements, a market currently dominated by China.

Since the administration of then-President Joe Biden (2021-2025), the United States has sought agreements to secure access to critical mineral deposits in other countries, aiming to reduce its dependence on China. Mr. Trump has reinforced the strategic importance of securing these resources, making them a key point of negotiations between the U.S. and Ukraine. The U.S. president has also focused on deposits in Canada and Greenland.

In Brazil, the cooperation agreement remains a limited-scale initiative, operating as a pilot project involving U.S. and Brazilian teams in the search for mineral deposits.

The agreement established three regions for the initial phase of joint research, carried out by specialists from both the SGB and the U.S. Geological Survey.

The first is the Seridó/Borborema region, which spans Rio Grande do Norte and Paraíba.

“Last year, we conducted fieldwork there, including sample collection, geophysical surveys, and geological mapping. The final step was sending the samples for analysis,” Mr. Silveira said. The main focus in this region is lithium, with tantalum and niobium also drawing interest. Additional field activities were planned for April and May 2025.

The Alto Paranaíba region in Minas Gerais is another target area, where the focus is on rare earth element deposits.

The third area designated for joint exploration is the tin province of Goiás, where researchers aim to gather data on reserves of rare earths, tin, and cassiterite.

Beyond field research, the agreement includes specialized training for three SGB geophysicists by the U.S. Geological Survey. Additionally, the U.S. government is funding five scholarships for Brazilian researchers to visit mineral deposits in Finland that share geological similarities with Brazil.

The partnership was developed following a visit to Brazil last year by Geoffrey Pyatt, then U.S. Assistant Secretary for Energy Resources at the State Department.

Mr. Silveira noted that while U.S. financial contributions to the project amount to less than $1 million, the primary benefit of the agreement lies in scientific collaboration and laying the groundwork for larger-scale projects.

“The focus was more on scientific cooperation and establishing an initial partnership to advance toward bigger projects,” he said.

Before the Toronto event, Valor contacted the U.S. State Department’s press office, which declined to comment. Following Mr. Silveira’s remarks on the agreement’s reinstatement, Valor reached out again via email but received no response.

*By Marcos de Moura Souza — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Taxation on foreign profits could cost taxpayers R$142bn

The issue is on the Supreme Court’s agenda; score so far is in favor of the National Treasury

03/07/2025

The ongoing debate at Brazil’s Federal Supreme Court (STF) regarding the taxation of profits from foreign subsidiary and affiliate companies could potentially result in a R$142.5 billion impact on Brazil’s federal government if the ruling goes against it. This estimate, outlined in a technical note from the Brazilian Revenue Service, pertains to the reimbursement or loss of Business Income Tax (IRPJ) and Social Contribution over Net Profit (CSLL) revenues from 2017 to 2021. Additionally, the decision could reduce the National Treasury’s annual revenue by R$28.5 billion moving forward.

This calculation—part of the Federal Revenue note (“Nota Cetad/Coest No. 14 of 2023”)—was prepared at the request of the Attorney General’s Office of the National Treasury (PGFN) and is based on data from the Central Bank concerning profits and dividends received abroad from direct investments between 2017 and 2021. The document notes that this estimate does not account for all affected taxpayers but rather a subset assumed to share a similar taxable situation.

A survey by the law firm Trench Rossi Watanabe reveals that in addition to Vale—which is involved in the STF case—Petrobras, JBS, Ambev, and CSN are embroiled in similar multi-billion disputes. Collectively, these five multinational companies are challenging R$64.1 billion in assessments from the Brazilian Revenue Service: R$22.2 billion from Vale, R$20.6 billion from Petrobras, R$11.3 billion from JBS, R$5.8 billion from CSN, and R$4.4 billion from Ambev. The survey was based on the most recent reference forms disclosed by these companies.

The issue resurfaced on the STF’s agenda in early February, but the analysis was postponed following Justice Nunes Marques’s request for more time. It may resume in May, with a new opinion expected within 90 days. The justices are evaluating the validity of applying IRPJ and CSLL on domestic companies’ profits from affiliates in countries with treaties with Brazil to avoid double taxation. Currently, 38 such agreements are in place.

Lawyers indicate that the Superior Court of Justice (STJ) precedent is more favorable to taxpayers, recognizing the supremacy of international treaties over Brazilian domestic law. However, at the STF, the government currently leads two votes to one. According to Lana Borges, Deputy Attorney General for Court Representation of the PGFN, the STJ did not adhere to STF precedents on this matter.

Most multinational companies’ cases remain in the administrative phase, and their liabilities are not provisioned since losses are deemed possible, based on STJ precedents. The issue is contentious and typically resolved by the tiebreaking vote of the president of the Administrative Council of Tax Appeals (CARF), who represents the National Treasury.

The tax authority argues it is not taxing the profits of the foreign subsidiaries but rather those of the Brazilian parent company, which reflect the foreign entities’ accounting results via the equity method (MEP).

The method aims to assess the value of an investment when a company holds a stake in another. Through it, the investment is initially recognized at cost and then adjusted to reflect the invested company’s results, proportionate to the investing company’s stake.

This methodology is outlined in the Brazilian Corporate Law (No. 6.404/76) and was later incorporated into tax law by Article 74 of the provisional presidential decree No. 2158/2001. The provision states that “profits obtained by a foreign subsidiary or affiliate will be considered available to the Brazilian parent or affiliate company on the date of the financial statements in which they were accounted for, as per regulations.”

Petrobras faces the most cases on the matter, with five in court. Four have already resulted in unfavorable decisions. In the remaining case, Petrobras won at the appellate level, but the PGFN’s appeal is pending. Ambev has four cases, but only one is in court, still in the expert phase.

CSN is contesting four cases before the Administrative Council of Tax Appeals (CARF), with no victories, and one in court. A favorable ruling was made, but the PGFN appealed to the Federal Regional Court of the 6th Region (TRF-6). JBS has faced several tax deficiency notices between 2006 and 2018, and all discussions remain in the administrative realm.

In its explanatory notes, Vale states it has faced multiple deficiency notices for years 1996 to 2008. The dispute for 1996 to 2002 had a R$2.3 billion impact, but it received a final favorable decision. From 2003 to 2012, the impact stands at R$22.2 billion. The company also reports it has entered a payment plan, with a remaining balance of R$10 billion to be paid in 58 installments.

While Vale’s case does not have general repercussions, it will serve as a significant precedent—being the first and only case to reach the STF. The court has not yet thoroughly analyzed the matter concerning treaty precedence. A key precedent dates back to 2013 when Article 74 of presidential decree 2158/2001 was validated for affiliate companies in tax havens or favorable tax regimes (ADI 2588).

The current judgment will determine whether the rule applies to foreign companies in countries with which Brazil has a double taxation treaty. Vale is challenging the “automatic taxation” of IRPJ and CSLL on profits earned by subsidiaries in Belgium, Denmark, Luxembourg, and Bermuda.

So far, Justices Gilmar Mendes and Alexandre de Moraes have sided with the PGFN, contending that treaties do not preclude taxation in Brazil. The rapporteur, Justice André Mendonça, deemed the issue non-constitutional but stated he would support Vale if overruled on that point.

Initial and appellate court rulings favored the federal government, but the STJ partially reversed this, maintaining the charge only for Bermuda, as there is no bilateral agreement with Brazil and it is considered a tax haven.

Simone Dias Musa, a partner at Trench Rossi Watanabe, believes there are chances for a taxpayer victory. She argues that the Treasury’s stance that the equity method inherently presents an economic or legal availability for taxpayers is flawed. “The equity method thesis claims that the profit accounted for in Brazil from foreign affiliates allows for taxation. However, treaties to prevent double taxation should preclude Brazil’s jurisdiction from taxing profit earned by a foreign-based company,” she states.

The equity method, she explains, is an accounting method to prevent a Brazilian parent company’s balance sheet from reflecting the group’s profit. “It does not represent standalone profit,” she says. “It is an accounting reflection of a profit generated by a foreign company, so the double taxation treaty is perfectly suited to prevent taxation in Brazil until it is distributed.”

However, Deputy Attorney General Lana Borges asserts that the profit does not have to be repatriated to be taxed. “It is already within the parent company’s assets,” she claims. Ms. Borges views it as a matter of fiscal fairness. “A Brazilian company with no foreign affiliates pays taxes once its profits are accounted for, not when they are distributed. Should a parent company with foreign subsidiaries not pay taxes?”

Ms. Borges also argues that there is no reason to invoke treaty-based double taxation relief, as there is no tax on profits generated abroad. “Typically, the parent company pays the tax. Being in Brazil, the Brazilian law applies, so there is no double taxation,” she explains.

She notes that Brazilian legislation provides mechanisms for the parent company to deduct any taxes paid on the same profits abroad by the subsidiary—such as Article 26 of Law No. 9.249/1995 and, later, Article 87 of Law No. 12.973/2014.

Tax lawyer Telírio Saraiva, also a partner at Trench law firm, emphasizes that the STJ has ruled in favor of treaty precedence. “Brazil must honor its commitments with other nations,” he states. He disagrees with the votes of Justices Mendes and Moraes, who argue that Brazilian taxation aligns with OECD principles. “OECD only permits double taxation in cases of abusive tax planning,” he argues, noting the significant impact of the thesis on multinationals—34% on profits from foreign subsidiaries.

Tax attorney Eduardo Pugliese, a partner at Schneider Pugliese Advogados, claims that the Revenue Service seeks to tax foreign subsidiaries’ profits automatically. “It won’t wait for a foreign company to remit the funds to Brazil and intends to tax the profit as soon as it is realized abroad as if it were an automatic availability,” he says.

In a statement, CSN asserts that international treaty rules hierarchically supersede domestic universal taxation rules. “Therefore, international tax law rules prevail over ordinary domestic legislation,” the company states, citing STJ rulings.

Vale, JBS, and Ambev declined to comment on the matter. Petrobras did not respond immediately.

*By Marcela Villar — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Itaipu decree expected to raise power bills for low-income consumers

Change to help manage exchange-rate fluctuations reduces bonus that would go toward offsetting electricity increases for residential and rural consumers

03/07/2025

Decree 12,390/2025, published in the Diário Oficial da União (DOU) on February 5, may impose additional costs on low-income consumers, experts told Valor. They discussed the government’s decision to redirect part of the so-called “Itaipu bonus” commonly used to reduce electricity bills for poorer customers. With this decree, a portion of these funds will now be allocated to cover the deficit of the Itaipu Commercialization Account.

The Itaipu Account comprises various revenue sources, primarily from payments made by distributors in the South, Southeast, and Central-West regions, which share the cost of power generation from the binational plant. After covering the hydroelectric plant’s expenses, any remaining balance is returned to consumers.

Following Wednesday’s decree, Empresa Brasileira de Participações em Energia Nuclear e Binacional (ENBPar)–the state company overseeing Brazil’s stake in Itaipu–is authorized to establish a financial reserve, directing up to 5% of the positive balance from the Itaipu Account to manage fluctuations in the plant’s power cost. These fluctuations occur because the cost is booked in U.S. dollars and subject to currency variations throughout the year. Currently, the hydroelectric plant’s power cost is $17.66/kW, effective until the end of March.

Although the government argues that the measure prevents a 5.99% increase in average costs, experts warn that, in practice, using the “bonus” will result in disadvantages for lower-income consumers. Since up to 5% of these resources might be used to reduce the tariff deficit, the financial amount available for consumers will decrease. This amount is credited as a discount on the bills of residential and rural classes in Brazil with consumption billed below 350 kilowatt-hours per month.

The decree was issued after the Brazilian Electricity Regulatory Agency (Aneel) identified a calculation error in the price agreement between Brazil and Paraguay in 2024, resulting in a $120.9 million deficit (approximately R$700 million) in Itaipu’s accounts. Former Aneel director Edvaldo Santana notes that the Itaipu Account balance is not a real bonus but rather a refund of overpaid amounts by consumers.

The National Front of Energy Consumers had already warned that redirecting the bonus balance would increase electricity bills: “This is happening due to the poor agreement signede last April by Minister Alexandre Silveira and the successive increases in Itaipu’s socio-environmental expenses with funds that should have ensured tariff moderation,” said the front’s president, Luiz Eduardo Barata.

The Ministry of Mines and Energy stated that the decree “refers to a complementary strategy to the annual contribution already made by Itaipu.” According to the ministry, it is “a structural solution used to cover remaining balances of the commercialization account over time.”

For former Aneel general director Jerson Kelman, the decree resolves the calculation error in the negotiation between Brazil and Paraguay regarding power costs in 2024. However, a technical note from the National Academy of Engineering indicates that the $301 million cashback was insufficient to ensure cost stability in power bills.

“Like a magician, the government put money in the consumer’s left pocket, taking it from their right pocket. If the government had adhered to the treaty, refraining from inventing socio-environmental sponsorships in Brazil and Paraguay unrelated to the plant’s funding, Brazilian consumers would be paying about half of what they currently pay for Itaipu’s power,” he asserts.Decree 12,390/2025, published in the Diário Oficial da União (DOU) on Wednesday (5), may impose additional costs on low-income consumers, experts told Valor. They discussed the government’s decision to redirect part of the “Itaipu bonus” used to reduce electricity bills for poorer customers. With this decree, a portion of these funds will now be allocated to cover the deficit of the Itaipu Commercialization Account.

The Itaipu Account comprises various revenue sources, primarily from payments made by distributors in the South, Southeast, and Midwest regions, which share the cost of energy generation from the binational plant. After covering the hydroelectric plant’s expenses, any remaining positive balance is returned to consumers.

Following Wednesday’s decree, the Empresa Brasileira de Participações em Energia Nuclear e Binacional (ENBPar) – the state company overseeing Brazil’s stake in Itaipu – is authorized to establish a financial reserve, directing up to 5% of the positive balance from the Itaipu Account to manage fluctuations in the plant’s tariff. These fluctuations occur because the Itaipu tariff is denominated in U.S. dollars and is subject to currency variations throughout the year. Currently, the hydroelectric plant’s tariff is US$17.66/kW, effective until the end of March.

Although the government argues that the measure prevents a 5.99% increase in average tariffs, experts warn that, in practice, using the “bonus” will result in disadvantages for lower-income consumers. Since up to 5% of these resources might be used to reduce the tariff deficit, the financial amount available for consumers will decrease. This amount is credited as a discount on the bills of residential and rural classes in Brazil with consumption billed below 350 kilowatt-hours per month.

The decree was issued after Aneel identified a calculation error in the tariff agreement between Brazil and Paraguay in 2024, resulting in a US$120.9 million deficit (approximately R$700 million) in Itaipu’s accounts. Former Aneel director Edvaldo Santana notes that the Itaipu Account balance is not a real bonus but rather a refund of overpaid amounts by consumers.

The National Front of Energy Consumers had already warned that redirecting the bonus resources would increase electricity bills: “This is happening due to the poor agreement made last April by Minister Alexandre Silveira and the successive increases in Itaipu’s socio-environmental expenses with funds that should have ensured tariff moderation,” said the front’s president, Luiz Eduardo Barata.

When contacted, the Ministry of Mines and Energy stated that the decree “refers to a complementary strategy to the annual contribution already made by Itaipu.” According to the ministry, it is “a structural solution used to cover remaining balances of the commercialization account over time.”

For former Aneel General Director Jerson Kelman, the decree resolves the calculation error in the negotiation between Brazil and Paraguay regarding the Itaipu tariff in 2024. However, a technical note from the National Academy of Engineering indicates that the US$301 million “cashback” was insufficient to ensure electricity bill stability.

“Like a magician, the government put money in the consumer’s left pocket, taking it from their right pocket. If the government had adhered to the Treaty, refraining from inventing socio-environmental sponsorships in Brazil and Paraguay unrelated to the plant’s funding, Brazilian consumers would be paying about half of what they currently pay for Itaipu energy,” he asserts.

*By Robson Rodrigues And Fábio Couto — São Paulo and Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Government cuts import tariffs on food items to fight inflation

Executive package eliminates tariffs on products such as meat and sugar, includes regulatory measures and incentives to boost staple food production in the next Plano Safra

03/07/2025

Amid mounting pressure and declining approval ratings, President Lula’s administration announced on Thursday (6) a package of measures aimed at reducing food prices in Brazil.

Import tariffs on several items, including coffee, sugar, and meat, will be eliminated. The package also includes regulatory initiatives and incentives to encourage the production of staple foods under the next Plano Safra, Brazil’s main agricultural financing program. The government will also ask state administrations to remove ICMS, a state-level tax, on these essential food products.

The announcement was made by Vice President Geraldo Alckmin after an afternoon of meetings with ministers and private-sector representatives at the Planalto Palace. Mr. Lula did not take part in the discussions, despite the meeting being scheduled on his official agenda. Mr. Alckmin said the president had approved the initiatives. The government has yet to calculate the impact of these measures on tax revenue.

Vice President Alckmin said the import tariffs to be eliminated include those on meat, currently at 10.8%, coffee at 9%, sugar at 14%, corn at 7.2%, sunflower oil at 9%, olive oil at 9%, sardines at 32%, biscuits at 16.2%, and pasta at 14.4%.

Regarding corn, Mr. Alckmin said the exemption would have “significant effects on the cost of eggs and animal proteins, such as meat.” Inflation in these food categories has been cited in surveys as a key factor in public dissatisfaction with the president.

Mr. Alckmin also announced an increase in the duty-free import quota for palm oil from 65,000 tonnes to 150,000 tonnes.

The tax reduction measures still need approval from the Executive Management Committee (GECEX) of CAMEX, Brazil’s Foreign Trade Chamber, with no set timeline for review. The exemptions will not have a predetermined expiration date.

“It’s hard to set a date, but it’s a matter of days. Once we receive the technical notes from the ministries, the new tariffs will take effect within a few days,” Mr. Alckmin said. He added that while specific impact estimates for each product were not yet available, the goal is to lower consumer prices.

Mr. Alckmin also said the government and supermarket sector are studying ways to publicize the best prices as a means to “stimulate competition and benefit consumers.” However, he did not provide details on how this would be implemented.

Staple food

Another initiative will be to ask state governors to eliminate state taxes on staple food products. The vice president noted that federal taxes on these items have already been removed, but some states still apply ICMS to essential food goods.

He added that this is the “first set of measures” agreed upon with the private sector. He also clarified that discussions did not include an export tax on Brazilian agricultural products, an idea that had been previously considered by the government.

The government also plans to strengthen food stockpiles and provide incentives in the next Plano Safra to boost staple food production. Mr. Alckmin did not confirm whether additional budget resources would be allocated for food stockpiling by CONAB, the National Food Supply Company, but assured that the state-owned entity would have the “necessary resources.” The proposed budget for this year, still pending congressional approval, includes only R$189 million for purchasing rice, beans, and corn.

For the Plano Safra, the aim is to extend low-interest financing to medium-sized farmers growing key crops, as previously reported by Valor. “The PRONAF, National Program for Strengthening Family Farming, already prioritizes lower interest rates to support staple food production. The idea now is to extend these subsidies to PRONAMP, which supports medium-sized farmers,” said Agrarian Development Minister Paulo Teixeira. “This will allow for a broader range of subsidized products focused on the staple food basket. We will extend these subsidies to medium-sized producers.”

Agriculture Minister Carlos Fávaro announced that for one year, the Brazilian Animal Product Inspection System (SISBI) will recognize products inspected under municipal oversight (SIM), allowing them to be sold nationwide. This policy will apply to milk, honey, and eggs, which were previously restricted to local markets.

“For one year, we will grant nationwide validity to SIM certifications. Products that pose no sanitary risks—such as fluid milk, honey, and eggs—can now be sold across Brazil without compromising food safety,” Mr. Fávaro said during the announcement.

People familiar with the matter told Valor that the meeting included heated debates and disagreements.

One key dispute arose when the government suggested indefinitely maintaining biofuel blending mandates for diesel and gasoline. The proposal upset producers, despite government officials arguing that higher blending levels—particularly for biodiesel and corn ethanol—increase animal feed costs. Industry representatives disagreed, asserting that greater biofuel production actually increases the availability of soybean meal and corn distillers’ grains (DDG), which are essential for animal feed.

Another contentious issue was the government’s proposal to create an app to display which supermarkets offer the lowest prices for certain products. Business associations argued that this could unfairly pressure small and medium-sized retailers, as large chains with greater scale could afford deeper discounts and promotions.

Industry representatives also urged the government to reconsider the recent increase in import taxes on plastic packaging, citing concerns over cost pressures on food producers.

*By Fabio Murakawa e Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Circuit court reinstates antitrust ruling against Apple

Federal Regional Court of 1st Region gives company 90 days to implement app market changes ordered by CADE

03/06/2025

The Federal Regional Court of the 1st Region (TRF-1) has overturned a trial ruling and reinstated an injunction imposed by the Administrative Council for Economic Defense (Cade) on Apple, as part of an investigation into alleged abuse of dominant position in the app distribution market for iOS devices. According to the ruling, the company will have 90 days to implement the changes mandated by the antitrust authority.

At the end of November, Cade’s General Superintendence launched an administrative proceeding against Apple to investigate suspicions of dominant position abuse and issued a series of injunctions to allow, for example, apps to inform users about alternative means of purchasing the products they offer.

Apple subsequently won a ruling from the Federal Court of the Federal District to overturn the injunctions. However, Second Judge Pablo Zuniga of TRF-1 reversed that ruling on the afternoon of February 5.

According to the federal judge, Apple’s argument that there is no urgency in implementing the changes imposed by Cade’s technical department is unfounded. “The closed structure of iOS and the restrictions imposed on third-party app sales are precisely the factors that justify the preventive action of the antitrust authority, as maintaining them without any intervention may hinder the entry of new competitors and impede the restoration of competition in the sector,” the judge noted.

However, Judge Zuniga granted Apple more time to implement the changes. Now, the company will have 90 days to adopt the procedures mandated by Cade, compared to the initially stipulated 20 days.

The magistrate also noted that the injunction “does not hinder Apple’s business model but only imposes adjustments that can be reversed if the final decision in the administrative process is favorable to the aggrieved party.”

“Apple has already complied with similar obligations in other countries without demonstrating significant impact or irreparable harm to its economic model,” the judge pointed out. “The implementation of structural changes in operating systems, indeed, requires some planning and technical development, which may demand more time than stipulated in the administrative decision,” he considered in the ruling.

Furthermore, he wrote that regarding the urgency of the injunction, “it arises from the fast-paced dynamic of the technology market, in which the duration of an anticompetitive practice can determine its irreversibility, even if later deemed illicit.”

The case reached Cade in 2022 following a complaint by marketplace Mercado Livre. The company alleged that Apple was abusing its dominant position in the app distribution market for iOS devices.

The antitrust body argues that big tech companies impose a series of restrictions on app developers of digital goods and services regarding in-app purchases, configuring a dominant position.

In a statement to Valor, Apple said that the preventive measures imposed by the Administrative Council for Economic Defense (Cade), now reinstated by the Federal Regional Court of the 1st Region, may “compromise the privacy and security of our users,” and vowed to appeal the decision.

“Apple believes in vibrant and competitive markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users,” the statement reads.

*By Guilherme Pimenta, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Government gathers industry, retailers amid blame game over inflation

Meeting follows industry’s claim that stores fail to pass on price reductions

03/06/2025

Facing low approval ratings for President Lula, the Brazilian government has convened a second round of meetings within a week with business representatives to seek support in curbing food inflation. This step comes amid a blame game between industries and retailers over the past few days, with no concrete actions defined after last week’s ministerial meetings with sector leaders, as reported by Valor.

A new round of discussions is scheduled for Thursday (6) between the federal government and associations representing sectors such as meat packing, sugar and alcohol, vegetable oils, biodiesel, retailers, and wholesalers. Sources indicate this agenda was organized at the last minute, late Wednesday (5).

Approximately 30 government and sector representatives are confirmed to attend the meeting, the first to involve the entire production and distribution chain since the spike in food prices. “The government wants quick actions and demands measures that generate positive political effects,” said a wholesale company’s executive.

On Thursday (27), Agriculture and Minister Carlos Fávaro and Agrarian Development Minister Paulo Teixeira met with representatives of these same sectors. Hours later, Mr. Fávaro met with supermarket and wholesale leaders in a discussion that extended into the night with no significant progress.

The government’s move last week coincided with the release of a Genial/Quaest survey showing President Lula would only defeat Jair Bolsonaro in a runoff round in the states of Bahia and Pernambuco.

During the previous meetings, industry and retail leaders were questioned about passing on certain food price reductions to the market and asserted to ministers that they were not responsible for high prices. These discussions occurred separately with each sector.

“Everyone was passing the buck, but they all know the problem lies with the government, which needs to cut expenses and restore market and public confidence, not with the companies. However, this was not addressed in the meetings,” said a source familiar with the matter.

According to two sources consulted after the meetings, there is increased pressure from the government than in previous meetings, especially with retailers. However, for a third source, nothing unexpected was seen in the meetings and the level of pressure was natural. “That is normal; in their position, I would adopt the same stance,” a producer said.

Representatives from the soybean oil and meat sectors questioned the trade sector’s stance, reporting that many retailers and wholesalers are slow to pass on recent price drops.

Meatpacking companies said retail and wholesale sectors have not fully passed on the reductions in meat prices in 2025. However, later, during discussions with retailers, supermarket representatives claimed this had occurred and that the reductions submitted by producers were minimal compared to last year’s significant increase.

Meat packing industry leaders indicated during the meeting that there had been a nearly 15% reduction in meat prices at the farm and processing plant levels earlier this year and pointed out that there is potential for further declines over the year.

Minister Fávaro advocated for a faster reduction in soybean oil prices in stores and urged the sector to propose solutions. According to the Extended Consumer Price Index (IPCA) measured by the Brazilian Institute of Geography and Statistics (IBGE), soybean oil’s price rose 18.7% in 2024 and 5.1% in December alone. Industry representatives revealed graphs portraying declining prices and photos of prices in Brasília supermarkets.

Additionally, producers suggested temporarily eliminating import tariffs on crude soybean oil (9%) and packaged refined soybean oil (10.8%).

This suggestion was influenced by the 2023/24 soybean crop failure and strong domestic demand, largely from the biodiesel industry. “Eliminating import taxes aims to offer the government a concrete short-term solution. I don’t know if they will find it sufficient, but it provides something competitive,” a source said.

The potential expansion of wheat import quotas is also an issue on the government’s agenda. A strategy of taxing soybean, corn, meat, and ethanol exports remains without consensus in the government.

When meeting with retail leaders, Mr. Fávaro questioned the price increases and the pace of passing on price fluctuations. Supermarket representatives argued that price moves have reached consumers and added that the sector’s net margins are below average, affected by Lula’s administration’s high interest rates.

“We stated that the situation is normal. In other words, what we receive from producers is passed on to consumers. It’s impossible to speculate, as the most inflated products are perishable and cannot be stocked,” said a segment spokesperson.

A price table for meats, considering average prices, was reportedly presented to the ministry, showing that from October to December, the price variations received from meatpacking plants were almost entirely passed on. In January, the table indicated an average 2% price decrease from meatpacking plants to retailers compared to December.

The reduction retailers receive from producers is passed on the following month, and not immediately.

“Meat attracts foot traffic in stores; if the price drops had been more significant, we would have passed them on as it’s in our interest,” a wholesale CEO said.

According to three sources, the minister suggested that industry and retail agreed to a commitment to ensure that all price reductions would reach consumers. “There was an understanding that companies could monitor everything, both increases and decreases,” said a vice president of a wholesale chain.

Representatives argued that this already occurs, according to each company’s strategies. However, sector entities do not account for the decisions of their members, who are competitors and operate in a free market with no government interference.

On Friday (28), after both meetings, expectations were that measures to curb rising food prices would be discussed in a meeting between Mr. Fávaro and Mr. Lula. However, the conversation did not progress as it would require deeper engagement of sectors and companies, Valor learned.

For both producers and retailers, there is no government focus on actions that could impact companies’ productivity or efficiency, resulting in potential price reductions.

At the end of November, supermarket representatives had submitted suggestions to the government, including greater flexibility in labor contracts due to payroll costs, as well as creating a new price validity marker for a basket of products without eliminating expiration dates. That could reduce sector losses, potentially impacting prices.

These topics have not advanced since initial discussions and were not the government’s focus in the meeting.

From the perspective of beef and pork producers, technical issues that could enhance productivity were also presented at the meeting.

Privately, companies associated with entities that have been meeting with the government told Valor that the rise in food inflation is partly due to a weaker real against the dollar, amid a tense external environment with Donald Trump’s administration, along with new pressures such as avian flu and crop failures. However, there is also a loss of investor confidence in the government due to a lack of clear measures to contain public spending.

In the round of meetings scheduled for Thursday (6), two sessions will be coordinated by Vice President and Minister of Development, Industry, Commerce, and Services (MDIC) Geraldo Alckmin. There is no confirmation of President Lula’s participation or an announcement of measures.

The first session will include ministers Fávaro and Teixeira and representatives from the Ministry of Finance. In the afternoon, the meeting will be attended by retail representatives and producers. The MDIC did not respond when contacted.

When contacted on Wednesday (5), the Ministry of Agriculture, the Ministry of Agrarian Development, and supermarket association ABRAS did not comment. ABIEC (beef exporters’ association) chose not to comment. ABAD, representing wholesalers, said it would make all efforts to counter inflation threats and support a competitive and legally secure country.

*By Adriana Mattos e Rafael Walendorff — São Paulo and Brasília

Source: Valor International

https://valorinternational.globo.com/
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Brazil may align dividend taxation with OECD model

Government considers an approach that combines corporate and dividend taxes as it discusses income tax reform and an increase in the exemption threshold

03/06/2025

The Brazilian government plans to implement income tax on dividends based on a model used by the Organization for Economic Cooperation and Development (OECD), a member of the economic team told Valor. In this approach, taxes paid by the company and those levied on dividends are considered together.

This measure is part of the broader income tax reform the government intends to submit to Congress soon. The centerpiece of the proposal is raising the personal income tax exemption threshold to R$5,000.

This increase would lead to a revenue loss of approximately R$35 billion, which the government aims to offset by introducing a minimum tax rate of up to 10% for individuals earning more than R$50,000 per month—covering all types of income, including dividends.

“It is very common for countries to assess taxation collectively, considering both the entity paying the income (the company) and the recipient (the shareholder),” the source said. “It makes sense.”

In Brazil, individuals with higher incomes pay relatively little tax as individuals compared to salaried workers, who are taxed at the source, the official noted. However, corporate taxation must be taken into account. When both are considered, the tax burden on the wealthy is not as low as it may seem.

To understand how the OECD applies taxes on dividends, Valor consulted tax experts.

“There are several possible models,” said Daniel Loria, a partner at Loria Advogados and former director at the Secretariat for Tax Reform. He said he was unsure how Brazil’s tax authority would integrate OECD rules into the income tax reform.

Generally, he explained, countries tax dividend distributions but grant tax credits for corporate taxes already paid. If applied in Brazil, this model could mean dividends would be taxed at up to 27.5% under the individual income tax (IRPF) table, but with a tax credit corresponding to the corporate income tax (IRPJ) and Social Contribution on Net Profit (CSLL) paid by the company.

However, OECD countries have increasingly abandoned this tax credit model in favor of a split-rate system, said Helena Trentini, a tax lawyer who previously worked at the OECD and is now a partner at Heleno Torres Advogados.

In Ireland, for example, corporate profits are taxed at 12%, while dividends face a 51% tax rate. Lithuania employs a more balanced approach, with 15% taxation on both corporate profits and dividends.

Ms. Trentini said the goal in many countries is to reduce corporate income tax rates to encourage economic activity.

She noted that, in Brazil, the discussion is happening in a context where the government is seeking to increase tax revenue to offset losses from raising the exemption threshold. The risk, she warned, is that the reform could end up only imposing taxes on dividends without following the global trend of lowering corporate income tax.

Currently, corporate income in Brazil is taxed at 34%, considering both IRPJ and CSLL. “That’s very high,” she said. By comparison, the U.S., the U.K., and the Netherlands levy corporate taxes at 25%.

“If you add dividend taxation to the existing 34% corporate tax rate, the result would be a completely distorted tax burden—one that does not exist in any other country,” Ms. Trentini warned.

The fiscal impact of the proposed changes remains uncertain, she added. “It’s unclear how much revenue could be generated from dividend taxation, as many companies may simply stop distributing them.”

Longstanding tax structure

Ms. Trentini explained that Brazil’s high corporate tax rate is rooted in a 1995 reform that merged dividend taxation with corporate income tax. This change was made to simplify tax enforcement by concentrating taxation at the corporate level, leaving dividends exempt.

Because of this, experts argue that dividends in Brazil are not truly exempt, as is often claimed. “That’s a lie,” said Tiago Conde Teixeira, a partner at law firm SCMD Advogados. “Dividends are taxed, just at the corporate level.”

In his view, the government’s plan to tax dividends at the individual level amounts to double taxation—applying the same tax to the same income twice. “That is unconstitutional,” he said.

The OECD’s split-rate system offers more incentives for reinvestment than Brazil’s current model, Ms. Trentini said. Currently, from a tax perspective, there is no difference between using profits to expand a business or distributing them as dividends, since the entire amount is taxed at 34% upfront.

Under a split-rate system, however, corporate tax rates would be lower, encouraging reinvestment.

For example, if a company earns R$100 in profit and faces a 25% corporate tax rate, it would pay R$25 in taxes, leaving R$75. If the company reinvests the R$75, no additional tax is levied. If, instead, it distributes the amount as dividends, an additional tax—around 15%—would apply.

This approach ensures more funds remain available for reinvestment, free from further taxation, while dividend distributions would be subject to additional taxes.

Raising the IRPF exemption threshold to R$5,000 poses a risk to public finances, according to experts, as the outcome of congressional debates is uncertain. Lawmakers have already voiced opposition to tax hikes, even for high-income earners. If the proposed revenue offsets fail to materialize, the expected tax shortfall may not be fully compensated, contrary to what Finance Minister Fernando Haddad has argued.

Beyond fiscal concerns, the new exemption threshold could also clash with the Central Bank’s inflation-control strategy.

Rafaela Vitória, chief economist at Banco Inter, said that in today’s tight labor market, the increased disposable income from tax cuts would drive up middle-class consumption, potentially fueling inflation. “For 2026, however, it’s still too early to predict, as it will depend on how economic activity and job creation evolve throughout the year,” she noted.

“Increasing spending, whether through greater transfers or income tax cuts, in an economy already near full capacity won’t lead to growth—only more inflation,” she said.

Felipe Salto, partner and chief economist at Warren Rena, argued that even with fiscal neutrality, the overall impact on economic demand would likely be positive, putting upward pressure on inflation.

That’s because, he explained, even if the government finds ways to fully offset lost revenue, the burden of new taxation may fall primarily on wealthier segments of the population.

*By Lu Aiko Otta e Guilherme Pimenta — Brasília

Source: Valor International

https://valorinternational.globo.com/
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