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Government said to maintain fuel tax relief in next year’s budget

Tax benefit ends officially on December 31, but President Bolsonaro has already signaled he would seek its extension

08/30/2022

Jair Bolsonaro — Foto: Cristiano Mariz/Agência O Globo

Jair Bolsonaro — Foto: Cristiano Mariz/Agência O Globo

The fuel tax relief, a trump card of President Jair Bolsonaro’s (PL) in the election campaign, is expected to be maintained next year. The tax benefit ends officially on December 31, but the president has already signaled that he would seek its extension.

The 2023 budget bill, which will be sent to Congress by Wednesday, provides for tax breaks of R$50 billion due to the fuel tax relief, officials say, including R$18 billion for diesel alone.

Another important campaign promise, however, will not be included in the budget bill. According to the budget blueprint, Auxílio Brasil, the social program created to replace Bolsa Família, will only distribute R$400 a month, compared with R$600 now. A legal provision – that currently does not exist – is needed to keep the current value next year, as promised by President Bolsonaro, who is running for re-election, and some of his opponents, including former President Luiz Inácio Lula da Silva (Workers’ Party, PT) and Senator Simone Tebet (Brazilian Democratic Movement, MDB).

Mr. Bolsonaro will include the forecast of paying R$600 in 2023 in the message that accompanies the budget bill to Congress. The idea faced some resistance from officials because it is not a usual step. However, it was the way found to reinforce the promise. In the debate held by a pool of news outlets led by TV network Band, Mr. Lula da Silva criticized him for failing to include the higher Auxílio Brasil cash transfers in the 2023 budget bill.

In campaign advertising, the president has said that the aid will be paid in line with “fiscal responsibility” principles. Behind the scenes, Economy Minister Paulo Guedes has advocated that the source of funding for the additional expense of R$50 billion to R$60 billion should be the collection of individual income tax on dividends. Government estimates suggest that the collection would be similar to that.

This taxation is part of a bill in Congress, which has already been passed by the Chamber of Deputies but faced resistance from senators. During the debate on Sunday, Mr. Bolsonaro said he would seek the means to raise and finance the aid in dialogue with Congress after the elections.

The adjustment of the income tax rates, a promise of Mr. Bolsonaro’s 2018 campaign, is not expected to be included in the budget bill, sources say. One reason is the requirement of an alternative source of revenue.

The budget bill is likely to include R$10.5 billion to adjust the salaries of civil servants next year.

Although the federal accounts tend to end the year in the black, the budget bill is likely to project a R$65 billion deficit.

As Valor reported last week, R$430 billion would be needed to foot all the promises speculated that require spending and tax breaks next year. Officials specializing in the budget, both from the Executive and the Legislative branches, expect the 2023 budget bill to be modified after the elections, in October.

*By Lu Aiko Otta — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Government speeds up change in forest concession

Law update to end restrictions seen as positive by specialists

06/21/2022

The Bolsonaro administration is betting on a bill being considered by the Chamber of Deputies to update the law on forest concessions and unlock the auction of nine areas this year. The proposal, authored by an oppositionist federal deputy, has already been approved by two committees and allows the use of these forests for the carbon market, which is growing rapidly worldwide.

The current legislation prohibits forests under a concession from being used in the carbon market (in which interested companies pay to maintain the vegetation of a place and, by doing so, offset their own emissions). The bill ends with this restriction, a move specialists understand as positive to draw interest in the sustainable exploration of these forest areas.

Jaqueline Ferreira, a portfolio manager at Instituto Escolhas, says that countries like Peru and Bolivia already explore the carbon market in the Amazon and that Brazil “is lagging behind.” “These are areas that need revenue to maintain themselves and the concessionaires themselves need diversification of income sources to maintain them,” she said. A study by the institute shows that in the region there are 37 areas with the potential to generate R$125 million per year in this market – revenue that, according to the project, will be shared with the federal government.

She regrets, however, that the Environment Committee in the Chamber of Deputies has removed from the blueprint the possibility of periodic review of the contracts. “One of the main problems of the concessions is precisely price volatility. Today the main activity is the sustainable management of wood and there is a lot of competition with the illegal market. The possibility of reviewing the amounts paid, logically with rules, would be an important gain,” she said.

One author of the project, Deputy Rodrigo Agostinho (Brazilian Socialist Party, PSB, of São Paulo) defends that concessions are the best model to protect forests against illegal logging and deforestation. “I know that it will be criticized by environmentalists who think that this means selling the forests, but today there are two very efficient strategies in the world to keep forests standing: payment for environmental services, in the case of private areas, and concessions, in the case of public areas,” said Mr. Agostinho, part of the opposition to the government.

For Mr. Agostinho, the current law is very bad and has slowed down these operations. He points out that the government estimates that it is possible to grant 43 million hectares to the private sector, an area larger than the entire territory of Germany, but that only 1 million hectares have been granted after more than a decade. “And these contracts are very focused on the extraction of wood, which suffers with the illegal market. In the world, what has been working well are concessions for tourism, for the production of medicines and cosmetics or forest agriculture, like heart of palm, chocolate and açaí,” he highlighted.

The proposal modernizes the rules for the bidding and environmental licensing of these areas. One of the main changes is to invert the order of the bidding process. Today, the documents of each company are analyzed, with possible contestations, before the proposals are checked. If the project is approved, only the winning company would have its documents checked.

In addition, the project transforms the forest allocation plan prepared by the government from annual to multi-year, every four years. The objective is to allow the employees of the Brazilian Forest Service (SFB) dedicated to this task to be free to take care of other functions, such as the inspection of the concessions.

The Finance and Taxation Commission approved the bill last week, with Deputy Sanderson (Liberal Party, PL, of Rio Grande do Sul) as rapporteur. The federal government put the matter on its list of priorities for the year and even accepted, in order to approve it, the voting of other proposals with which it disagreed, such as updating the revenue ceiling for companies included in the Simples Nacional, a simplified tax regime for small businesses. “The government is very interested in speeding up this project to attract private-sector companies to a business that, with the current legislation, is prohibitive. There are areas waiting for this to go to auction,” Mr. Sanderson said.

The Bolsonaro administration included 22 projects in the Investment Partnerships Program (PPI) in 2020, but so far only four areas have been tendered and contracted. According to PPI data, the 18 contracts signed so far had yielded R$70 million in grant payments and helped preserve forests with sustainable management.

The bill’s consideration in Congress is not yet fully defined. Two ways are being discussed: to vote in the Constitution and Justice Commission (CCJ), where the blueprint would have conclusive approval, without needing to go through the plenary; or to present an urgent request to take it directly to the plenary, which Chamber of Deputies Speaker Arthur Lira (Progressive Party, PP, of Alagoas) has already signaled he agrees with if there is a consensus among the parties.

*By Raphael Di Cunto — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Government shows no interest for $1bn to protect forests

Eron Bloomgarden — Foto: Sandy Young/PA Wire
Eron Bloomgarden — Foto: Sandy Young/PA Wire

The lack of engagement of the federal government is leaving Brazil out of an innovative initiative by three countries — the U.S., Norway, and the United Kingdom — and a group of large companies with an initial $1 billion to protect forests.

It is the Leaf Coalition (Lowering Emissions by Accelerating Forest Finance). It pays countries or local governments for their performance in stopping deforestation faster, while helping them achieve their Nationally Determined Contributions (NDCs) under the Paris climate agreement.

In an interview with Valor, Eron Bloomgarden, founder and CEO of the Emergent organization, which launched the Leaf Coalition, said 20 major companies are already participating. They include Salesforce, Amazon, Nestlé, Unilever, BlackRock, Burbery, EY and Walmart, for example. Another five are about to be announced.

According to the executive, many companies are interested in paying for the reduction of deforestation in the Amazon, but that it takes political will to make this happen.

The way the coalition operates is with an open call for proposals. In the first call, last year, the coalition received 35 project proposals, half of them from countries such as Costa Rica, Ecuador, Ghana, Nepal, Vietnam, and half from states or municipalities, which together cover more than half a billion hectares of forest.

In the case of Brazil — a country considered key to combating deforestation globally — the federal government has not presented any proposal, but eight states (Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Roraima and Tocantins) have made proposals in order to have access to resources — and the Legal Amazon Consortium wants to sign a memorandum of understanding.

However, without Brasilia, the situation is complicated. “The states need approval from the federal government to participate. We will not sign a contract [with the states] unless there is approval from the federal government,” Mr. Bloomgarden said. And so far, there is no sign of engagement from Brasilia.

According to the executive, Brazil is a green superpower that should be thinking “about how to preserve this asset to help solve the issue of climate change and for its economic growth.” He says that what the Leaf Coalition is trying to do is “provide a very clear path for companies to help support Brazil by paying to reduce deforestation.”

“Unfortunately, the trends are going in the other direction, at least in Brazil, where there was almost a 65% jump in deforestation in the first three months of 2022 compared to last year. So, the problem is an urgent challenge. We are ready to be a partner,” he added.

Under the Leaf Coalition, emissions reductions are made across entire countries or large states and municipalities through programs that involve key stakeholders, including indigenous peoples and local communities, in five-year contracts. The initiative will use satellite imagery to verify results over wide areas. The monitoring would, at least in theory, prevent governments from protecting forest in one place only to let it be cut down in another area, for example.

A global effort that already exists called REDD+ is seen as affected by bureaucratic problems, for example. The Leaf Coalition says that while the international community has historically paid $5 per tonne of CO2 avoided, it pays a minimum of $10. And if the companies buying the credits sell them above that amount later, the extra resource goes to the country or state.

This new model of public-private finance for forests is attracting growing interest, and an illustration of this is Mr. Bloomgarden’s participation this time at the World Economic Forum in the Swiss Alps.

“At COP 26 in Glasgow it was the first time that nature and forests played such a large and relevant role,” he says. “And now this idea of protecting, preserving, restoring nature as a climate solution is high on the international agenda. There are many other things happening in the world with Ukraine and Russia, and the pandemic. [But] there’s urgency to do that now, both for companies and for biodiversity communities.”

“Companies are saying: you build climate strategies for the next 5-10 years. We would like to use high quality credits, say from Brazil, to protect forests,” he says. According to the executive, if it is shown that there is high-quality supply and political will on the ground, the initial $1 billion fund could reach $10 billion.

Source: Valor International

https://valorinternational.globo.com

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Government eliminates import tax to curb inflation

Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil
Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil

The government is zeroing the import tax rate of several products to contain inflation, said on Wednesday the executive secretary of the Ministry of Economy, Marcelo Guaranys, in an interview to announce decisions taken by the Executive Management Committee of the Foreign Trade Chamber (Gecex/Camex). “These measures don’t reverse inflation, but businessmen think twice before raising prices,” Mr. Guaranys said. The discussion about steel was intense in the last two days, he added.

Beef, chicken meat, wheat and wheat flour, corn grain, cookies and crackers, and other pastry products had their import tariffs reduced to zero. Besides these, sulfuric acid and mancozeb (the latter had its tax reduced to 4%) are also on the list.

Tariffs were also reduced for two categories of steel, which are rebar used in construction, said Camex secretary Ana Paula Repezza “The impact, in this case, will not be direct on inflation,” she added, noting that the request to reduce steel taxes had been under consideration for eight months. For rebar, the import tariff fell to 4% from 10.8%.

The reductions are valid until December 31, 2022, and will bring an impact of R$700 million in tax waivers, said Herlon Alves Brandão, undersecretary of Intelligence and Statistics of Foreign Trade at Camex.

This loss, however, will not need to be compensated with the indication of other sources of revenue, because it is a regulatory tax, clarified the deputy executive secretary of Camex, Leonardo Diniz Lahud. “Import taxes don’t have a collection function, they regulate the market, either for one side or the other,” he said.

About the import tax of 4% established for steel rebar, Ms. Repezza said it is in line with the world average. She also added that the meeting held the day before with businesspeople from the steel sector was not the first to analyze the issue and that the decision taken now is the result of a process that has been going on for months and included a wide debate.

On Tuesday, after the meeting, leaders of the Instituto Aço Brazil, which represents steelmakers, said that Economy minister Paulo Guedes had instructed the team to re-examine plans to cut the product’s import tariff to 4% from 10.8%. The tariff cut is a request made by the construction industry, which complains of rising prices.

Mr. Guaranys contextualized the decision on the import tax by speaking that the opening of trade is related to improving the business environment and increasing productivity and competitiveness, one of the major pillars of economic policy. “We have made very important steps in this context,” he said. “Minister Paulo Guedes’s line is to make gradual opening.”

The first move was the 10% cut in import tariffs on capital goods and technology; then the 10% reduction of practically the entire Mercosur Common External Tariff (TEC). Then, an additional 10% cut was made on the tariffs for capital goods and technology and at the moment there are negotiations with Mercosur for a new cut in the TEC. Internally, the government cut the Industrialized Products Tax (IPI) by 35%.

“We have been going through a moment of great inflation, harmful to the population,” said Mr. Guaranys. “We he reduces rates on some specific products, with an impact on the population”.

Source: Valor International

https://valorinternational.globo.com

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Government to raise salaries of federal civil servants

Paulo Guedes — Foto: Washington Costa/ME
Paulo Guedes — Foto: Washington Costa/ME

The federal government has decided to raise salaries of all federal civil servants by 5% from July. According to sources, the decision was made on Wednesday afternoon, during a meeting between Chief of Staff Ciro Nogueira and Economy Minister Paulo Guedes. The decision had the backing of President Jair Bolsonaro.

President Bolsonaro had promised to raise the salaries of federal police officers, federal highway patrol officers and employees of the prison system. But other groups had been threatening to go on strike if they were not also contemplated. In the middle of an election year, Mr. Bolsonaro ended up giving in.

As there is not enough money within the spending cap to an across-the-board salary increase, it will be necessary to reallocate funds from other segments, according to government sources. The 5% increase for all federal civil servants would cost something like R$5 billion to R$6 billion this year, according to information circulating among the technical staff. This is more than the amount set aside in the 2022 budget for this purpose: R$ 1.7 billion.

In order to create conditions to have a higher spending on salaries, the government needs to cut expenses. The preferred target of these cuts are parliamentary amendments to the budget. Officials have been scanning the budget in recent weeks to find expenses that could be cut.

The idea of a 5% adjustment was not the preferred option of Mr. Bolsonaro, who intended to please the police, particularly prison guards. The amount of R$1.7 billion was originally intended for this group, but the president was warned by Mr. Guedes that granting an increase for only part of the servants would be like pulling a grenade pin.

The associations that represent civil servants reacted negatively to the proposal. “This is completely unsatisfactory,” said Rudinei Marques, president of the Permanent National Forum of State Careers (Fonacate), which represents the civil service elite. According to him, the mobilizations “will intensify until mid-May, when we understand that the Provisional Measure will need to be sent to Congress to be converted into law.”

Source: Valor International

https://valorinternational.globo.com

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Government to launch biomethane promotion plan

Biogas, Green Gas, or Biomethane? Explained

The federal government is preparing a set of measures to encourage the production and consumption of biomethane, a gas produced from the decomposition of organic materials, equivalent to natural gas of fossil origin, whose main manufacturing potential is in agriculture. The measures, which will be announced on March 21, involve tax relief on investments and attraction of international resources, according to a source who followed the discussions.

The first measure will be a decree by the Ministry of Mines and Energy to include investments in biogas and biomethane in the Special Incentive Regime for Infrastructure Development (REIDI), which suspends social taxes PIS and Cofins on contributions in new industries in the segments of infrastructure and mobility. The tax exemption is expected to reduce the cost of investments in biomethane by 9%.

The measure is supposed to equalize the tax treatment of biomethane projects to that of natural gas, which are already included in REIDI and, therefore, have the tax break. As it stands today, investments in natural gas of fossil origin end up in practice having an economic advantage over investments in biomethane, which avoid methane emissions.

The second measure will come from the Ministry of the Environment, which is expected to issue a decree to expand the resources of the Climate Fund, managed by the Brazilian Development Bank (BNDES), aimed at investments in biogas and biomethane. The expectation is to guarantee an offer of around $500 million in financing for the sector.

Biogas is already one of the energy routes planned for financing the Climate Fund’s renewable energy sub-program. Current rates range from 1.9% to 5.4% in indirect operations and stand at 1.9% in direct operations. The term of the financing agreements is 16 years, with a grace period of up to eight years.

The two decrees come as after the country joined the Global Methane Pledge during the last COP26, by which 100 countries committed to cutting gas emissions by 30% by 2030. Brazil is the fifth largest emitter of methane in the world, but the main culprit is the cattle’s enteric fermentation (belching and flatulence), which accounts for more than half of the country’s methane emissions.

Environment minister Joaquim Leite has said in recent public statements that the government also intends to create a “methane credit” instrument, along the lines of a carbon credit, which could serve as additional revenue for biomethane production projects.

In a recent event by consultancy Datagro, Mr. Leite said that methane credits could guarantee extra income to biomethane producers, both related to methane that ceases to be released into the atmosphere with the biodigestion of waste, and related to diesel that is no longer consumed in heavy vehicles and is replaced by renewable gas. The tool, however, will not be announced next week.

In recent months, ministry officials have met with representatives of the private sector to discuss the new measures. There was also a request to make the environmental licensing requirement more flexible for biogas projects with up to 10 megawatts in power.

Source: Valor International

https://valorinternational.globo.com

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Government to inject credit in small companies, special advisor says

7 Glorious Advantages of Being a Small Business

The government intends to inject credit into micro and small companies in 2022, special advisor to the Economy Ministry Guilherme Afif Domingos told Valor. He expects volumes to continue growing. From April 2020 until now, R$146.9 billion have been released, according to data from Portal do Empreendedor, a gateway to small independent businesses.

“It will be the time and the turn of the guarantee funds”, he said. Credit expansion will be supported by these instruments, which serve to cover banks’ losses in the event of default.

According to Mr. Afif, the Brazilian National Bank of Social Development (BNDES) will specialize in the management of specific guarantee funds for certain types of companies – credit to startups, for example.

In addition, there are plans to make permanent the resources of the Guarantee Funds of Operations (FGO), which in the last two years covered losses on loans from the Program of Support to Micro and Small Businesses (Pronampe), and from the Investment Guarantee Fund (FGI), which did the same in relation to Emergency Program for Credit Access (Peac).

These two funds received contributions in 2020 and 2021, as part of measures to fight the pandemic, but now they need to return the money to the Treasury. However, the maintenance of resources in the FGO and FGI is discussed, since Pronampe was converted from an emergency program into a permanent policy and there are plans to extend the Peac Maquininhas, the receivable guarantee modality.

The bill 3.188/21, authored by Senator Jorginho Mello (Liberal Party, PL of Santa Catarina state), under analysis in the Senate, goes in that direction. The proposal still needs to go through the Chamber of Deputies.

According to Mr. Afif, the FGO can be replenished with the funds that return from operations carried out in the last two years.

There are doubts in the technical area, for example, about how this resource should be treated in relation to the spending cap.

The continuity of the FGO is necessary to guarantee the expansion of credit for micro and small companies in 2022, said the president of the Brazilian Development Association (ABDE), Jeanette Lontra. The organization brings together development institutions, from BNDES to regional development agencies and credit cooperatives.

“It is in these countercyclical periods that the national development system shows its importance,” said Ms. Lontra. The amount contracted by micro and small companies in these institutions grew 118% during the pandemic, she said. The national development system made R$62.5 billion available to Pronampe.

According to Mr. Afif, guarantee funds make credit available to micro and small companies because they circumvent a problem that this public faces: lack of guarantees to be offered to financial institutions. It was based on this diagnosis that he, at the head of Sebrae (small-business support service), created the Guarantee Fund for Micro and Small Businesses (Fampe), 25 years ago. The formula proved to be right during the pandemic, with the performance of FGO and FGI.

Mr. Afif smiled when asked how much the hike in basic interest rates would derail plans to strengthen credit. “Microentrepreneurs have always worked with high interest rates,” he said. The creation of guarantee funds works in the opposite direction, that of reducing the cost of operations. “The spread goes down because the risk is lower.”

Source: Valor International

https://valorinternational.globo.com

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Government mulls opening healthcare data to encourage competition

Marcelo Queiroga — Foto: Cristiano Mariz/O Globo
Marcelo Queiroga — Foto: Cristiano Mariz/O Globo

The federal government is mulling over a provisional measure — a legal act that allows the president to enact an interim law prior to Congress voting — aiming at increasing competition in the health insurance market, by the creation of an “open health” system. It is inspired by the open banking platform — a system conceived by the Central Bank to give greater transparency to the banking sector.

Health Minister Marcelo Queiroga told Valor that the idea was formulated from conversations with Central Bank President Roberto Campos Neto and has already had the approval of President Jair Bolsonaro in recent weeks to implement the plan in the country.

The measure is still being developed in Brasília, but the main idea is that, similarly to what is being implemented in stages in Brazil with the banks, there will be greater transparency in the health insurance sector. A large, extensive national registry of data on patients and indicators on supplementary health would be created to be shared between operators and patients.

According to the Mr. Queiroga, the sharing of client data, through the “open health” platform, would allow an operator to offer a cheaper plan for a patient who uses few hospitals or healthcare services.

Government officials also explain that, in the future, the intention is to facilitate the portability of beneficiaries from one plan to another, which currently takes about 90 days.

Mr. Queiroga believes that if there is more competition and supply of health plans, Brazil’s public healthcare system (SUS) can stop being overloaded and part of its public migrate to the private sector.

The “open health” is inspired by a model adopted in the financial market in Australia and is inserted in the general guidelines approved by the National Council of Supplementary Health (Consu) at the end of last year. It is supposed to encourage a greater offer of health services, stimulate the appearance of more operators in the sector, and reduce the prices in this market in the future.

The Consu, in turn, is a collegiate body formed by ministers Queiroga, Paulo Guedes (Economy), Anderson Torres (Justice) and Ciro Nogueira (Chief of Staff).

In the evaluation of the health ministry, there is room for the entry of more companies in the supplementary health segment, because there were more than 2,000 health plan operators in the country at the beginning of the 2000’s, when the National Agency for Supplementary Health (ANS) was created.

Last Monday, Valor released a study conducted by CADE, the antitrust watchdog, which indicates that the number of health insurance companies dropped 47% between 2011 and 2020. This trend of market concentration over the last decade has been criticized by ministers.

President of the Brazilian Association of Health Plans (Abramge), Renato Casarotti says he has seen the Minister of Health mention many times the benefits of “open health” in public events in the sector. The entity, however, has not yet been called to a specific meeting on the matter.

“The idea is good, it is timely with the General Law of Data Protection, of information belonging to the beholder. The logic makes a lot of sense,” says Mr. Casarotti. “The important thing is to understand how this fits into the health sector, which is a little different from the banking sector.”

According to him, there are two main issues that tend to limit at some level the impacts of the federal government’s proposal. The first is that medical information about patients is still “very fragmented” in Brazil, without the existence of a single medical record.

“In the health sector, there is data with the doctors, hospitals, laboratories, operators, that still don’t talk to each other,” he said. “If the single medical record existed, then ‘open health’ would make perfect sense.”

Source: Valor international

https://valorinternational.globo.com/

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