February 11, 2009

Brazil government to issue tax benefits as meat exports fall

Effective February 20, the government of Brazil will exempt federal taxes and purchase of inputs for exportable products in an attempt to ease meatpackers' continual lower revenues due to shrinking exports and tighter credit, Brazil's Minister of Development, Industry and Foreign Trade Miguel Jorge said. 

He said the government is also mulling of applying protectionist measures from other countries that are foreseen as antidumping under the legislation of the World Trade Organization.

Jorge added that Brazil is currently studying measures of antidumping against some Asian countries.

Ariel Mendes, president of the Brazilian Poultry Association, however said the move will be favoured by many companies some enterprises may not join the programme because they prefer to pay the tax and obtain a tax credit.

He said that the 9.5 percent tax drop will help increase companies' cash funds that could be used as working capital. Federal taxes are not levied on some inputs such as corn, but are levied on others such as soy meal, vitamins and mineral salts. Mendes noted that the exporter must pay close attention because he has to prove that all the input purchases were exported or there would be a 75 percent fine.

After the trade deficit of US$ 518 million in the agribusiness trade balance, Brazil should recover in February, said Jorge as "agribusiness exports should weigh more on the trade balance sheets in March and April when the grains come on the market, with higher prices."