Brazilian producers warn that a decision by Lula can “destroy the agricultural chain like in Argentina”
A measure taken by Lula Da Silva’s government generated concern among Brazilian producers, who compared it to Argentine withholdings. This is Provisional Measure 1227 (MP), which modifies the use made of tax credits generated by the payment of taxes. The Government’s justification is that the resolution seeks to correct distortions in the national tax system without increasing taxes. But the Aprosoja producers association stated that “it brings new restrictions to taxpayers, hitting hard not only the producers, but the entire Brazilian agribusiness, causing legal uncertainty and generating unpredictability in the market“.
According to statements from the soybean sector, that industry will stop receiving credits worth around 6.5 billion reais, which is equivalent to around 1.2 billion dollars. “As the market does not levy export taxes, the rural producer will lose this income in the acquisition contracts. The estimated direct consequence will be between 4% and 5% in the price of a bag of soybeans sold, deeply harming soybean and corn producers,” they stated.
The market reaction was not long in coming. Last week soybean deals in the Brazilian market were around 500,000 tonss, when normally at this time they reach 1.5-2 million tons.
“What we see is the lack of an adjustment in public spending. On the contrary, public spending is always increasing. And now, actions are emerging that resemble Argentine withholdings, a country that destroyed its agricultural chain in recent decades and generated exchange rate instability and uncontrolled inflation as a consequence of this type of distorted policies,” Aprosoja warned.
Then they added: “In the medium and long term, the MP discourages production, reduces processing and exports, harming the entire economy. Dollars from exports stop arriving and cause exchange rate losses. Inflation also increases with the cooling of the country’s economic activity, since the sector is the basis of the Brazilian economy.
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