Letter IEDI n. 1238—Recent actions to strengthen Brazilian industry
Today's Letter IEDI presents a summary of the measures adopted by the federal government throughout 2023 with the objective of modernizing the industrial sector and reversing the country's deindustrialization process, promoting innovation and industrial digitalization, with a view to inclusive and environmentally sustainable development.
The information presented here was taken from the official websites of Palácio do Planalto [executive branch], different Ministries, the National Congress, Agência Brasil, BNDES, FINEP and Embrapii, as well as from articles and interviews published in the press. It should be noted that the survey seeks to include the main actions and is not exhaustive.
The measures were classified into four categories: 1) institutional actions; 2) direct industrial strengthening measures; 3) short-term countercyclical actions articulated with long-term industrial policy; 4) initiatives that indirectly contribute to industrial development.
Among the institutional actions, the following stand out:
• The re-creation of the Ministry of Development, Industry and Trade (MDIC), which re-established one of the main agents for productive development in the country and a prominent channel for dialogue with the private sector;
• The reactivation of the National Council for Industrial Development (CNDI), which was assigned to elaborate a new industrial policy for Brazil around the established missions, ensuring principles of sustainability, competitiveness and social responsibility;
• Firm support for the processing of the Tax Reform in the National Congress, which reduces the complexity of the tax system, eliminates economic distortions and favors growth;
• Recomposition and release of resources from the National Fund for Scientific and Technological Development (FNDCT), essential for financing investments in structuring projects in science, technology and innovation;
• Reformulation and capitalization of the National Fund on Climate Change, which will finance activities involving technological innovation and sustainability;
• Authorization for FAT funds transferred to BNDES and destined to funding innovation and digitalization to be remunerated by the Reference Rate (TR);
• Creation of the Interministerial Commission on Innovation and Acquisitions (CIIA-PAC), which will coordinate public procurement, prioritizing Brazilian companies in the supply of products and services to projects of the Growth Acceleration Program (Novo PAC);
• Permission for the BNDES to resume financing infrastructure projects and other services of Brazilian companies abroad and create an Eximbank subsidiary.
Throughout 2023, in convergence with the six missions defined by the CNDI, several programs to support the so-called “neo-industrialization” were also launched and/or reformulated by the federal government. Negotiations were also announced between government agencies to define additional programs for this same purpose.
Among the programs launched, reformulated or being structured with a direct impact on the industry, the following can be mentioned:
• More Innovation Brazil, with a focus on accelerating innovation, deepening supply chains and ensuring the technological autonomy of the country;
• More Productive Brazil, whose objective is to promote increased productivity and digital transformation of MSMEs to ensure scale, continuity and sustainability to industrial businesses;
• Support Program for the Technological Development of the Semiconductor Industry (Novo PADIS), which in addition to continuing to promote the national manufacture of various electronic devices, such as smartphones, computers, televisions and industrial automation systems, was extended to the photovoltaic industry;
• National Hydrogen Program (PNH2), which aims to foster the development of domestic production of green and/or low-carbon hydrogen, making Brazil an important supplier of hydrogen for both domestic and international consumption;
• Fuel of the Future Program, which brings together initiatives to promote sustainable low-carbon mobility and help Brazil achieve international goals to reduce greenhouse gas (GHG) emissions;
• Green Mobility and Innovation (ex-Route 2030), whose objective is to stimulate investment and the strengthening of Brazilian companies in the automotive sector through the development and application of new technologies, such as electric vehicles. For this purpose, the collection of import tax on electric, hybrid and plug-in hybrid cars purchased abroad was reintroduced; these vehicles were exempted since 2015;
• Special Regime of the Chemical Industry (REIQ): renewal of the exemption from PIS and Cofins for purchases of the main products used in the chemical industry, associated with requirements to increase investments, acquire certificates of reductions of greenhouse gas emissions; implement environmental compensation measures; preserve jobs, etc.;
• National Energy Efficiency Plan in the Industrial Sector, whose objective is to decarbonize and increase the energy efficiency of industrial companies;
• Aim of adopting an Accelerated Depreciation program which, although still under negotiation with the Ministry of Finance, is an initiative of MDIC to stimulate investment and technological modernization of the Brazilian industrial sector;
• Gas for Industry: still in the proposal phase, this initiative aims to increase the supply and reduce the prices of natural gas, an important input used by several industrial sectors.
The federal government also adopted short-term actions, of a countercyclical nature, but articulated with the objectives of industrial policy in a long-term perspective. This was the case of the tax discount program for the purchase of new vehicles, incorporating criteria related to energy source, energy efficiency, price, and depth of the supply chain.
This was also the case with the bus and truck fleet renewal program, which included incentives for vehicles to transport cargo or passengers, subject to the counterpart of surrendering a vehicle of the same category with an original registration date of more than twenty years, with a view to reducing pollution and increasing the energy efficiency of the fleet.
In addition, there is also a set of systemic actions that indirectly contribute to industrial development. Many of these actions have the potential to boost national demand for industrial goods, while others improve the conditions of their supply, lowering costs, reducing bureaucracy and improving the regulatory environment. The following can be mentioned:
• Initiatives to reduce the Brazil Cost, one of the main agendas of MDIC;
• Ecological Transition Plan, which aims to provide structuring changes in the Brazilian economy and environment, going far beyond the energy transition or the replacement of fossil fuels with renewable energy;
• New Growth Acceleration Plan (New PAC), which plans for public and private investments of R$1.7 trillion over the next four years in the states of Brazil to accelerate economic growth, increase job and income creation, and reduce social and regional inequalities;
• Debureaucratization of exports/imports (Flex License), with the goal of simplifying the routine of companies and reducing costs with the issuance of documents for exports and imports;
• Creation of the Brazil Export platform (BRAEXP), designed to connect Brazilian companies, especially micro, small and medium-sized enterprises (MSMEs), to suppliers of export services, such as business training, commercial intelligence, trade promotion, financing, insurance and guarantees, logistics, customs clearance and documentation;
• Emergency program for the renegotiation of debts with discounts (Desenrola Brasil), whose objective is to help people who became indebted during the pandemic and who defaulted due to the impact of the steep increase in interest rates;
• National Strategy for Connected Schools, which aims to universalize high-speed internet access across the country's 138,000 public basic education schools by 2026, creating opportunities for industrial development, especially in the sectors of electronics and information and telecommunication technologies;
• More Food Program, which aims to promote the mechanization of family farms for sustainable food production;
• Qualifies–PAC and Knowledge Brazil, which share the objective of stimulating the qualification and retention of higher education professionals and postgraduate students in industrial companies;
• National Intellectual Property Strategy (ENPI) 2023–2025 Action Plan, which aims to ensure progress towards an effective and balanced intellectual property system.