Entrepreneurship Front sees ‘new old policy’ for industry in Lula’s plan – 01/21/2024 – Market

The FPE (Parliamentary Entrepreneurship Front) criticized the new industrial policy of the Luiz Inácio Lula da Silva (PT) government, arguing that it is based on the repetition of a PT model from the past that did not bring good results.

The president of the front, deputy Joaquim Passarinho (PL-PA), called it a “new old policy”.

The federal government, in turn, came out in defense of the plan and stated that the new policy was developed after constant dialogue with the productive sector and that it follows the most modern experiences to boost national industries, citing the example of the United States and the Union European. He also says that the implementation of the new policy will result in an improvement in the lives of the population, more jobs and greater competitiveness of the national industry.

Report from Sheet anticipated this Saturday (20) the content of Nova Indústria Brasil, the government’s plan to boost the industrial sector for the next ten years that will be officially presented next Monday (22), at an event at Palácio do Planalto.

The text outlines goals and guidelines until 2033 based on six missions, linked to the following sectors: agroindustry; health industrial complex; infrastructure, sanitation, housing and mobility; digital transformation; bioeconomy; and defense technology.

The 102-page document places public authorities as the central driver of industry development, with the use of credit lines, subsidies and local content requirements to promote national companies.

These policies had already been used in other PT governments, being the target of criticism from economists.

The criticism now takes on a new tone, considering the efforts of Finance Minister Fernando Haddad’s team to avoid budget deficits and keep accounts within fiscal rules. Furthermore, the economic team launches new fronts to seek to increase revenue.

Passarinho stated that the plan presents a “major contradiction”, considering the positions of the economic team in the direction of increasing federal revenue.

“It’s a new old industrial policy or an old new industrial policy. All of this has already been tried in the past, and it didn’t work,” stated the president of the parliamentary front.

“Everything in this policy is public support, it is public financing, be it BNDES or other public banks. In my personal opinion, there is a contradiction, because the government says it needs money, it wants to collect, collect, collect, it wants to charge more taxes from industries and at the same time want to provide financing for them. It’s better to remove the tax burden, and then you don’t need to provide incentives for anything”, he said.

On the other hand, Passarinho highlighted the measures to promote Brazilian companies, particularly on the issue of exports, but rejects another point, which seeks to finance Brazilian companies to operate abroad — the Lula government sent a bill to Congress in this regard. The deputy stated that, in these cases, jobs and taxes will be taken abroad, with few internal benefits.

The Lula government, in turn, said that the new industrial policy meets internal guidelines and is the result of dialogue with representatives of the productive sector, workers and federal administration agents.

The Ministry of Development, Industry, Commerce and Services said the objective is to implement a neo-industrialization project with a “sustainable, strong and innovative” industry.

“Based on international practices, the new industrial policy will represent an improvement in people’s lives, increased competitiveness and productivity, more jobs, innovation and presence in the international market”, stated the ministry, in a note.

In the same vein, the director of productive development, innovation and foreign trade at BNDES, José Luís Gordon, stated that the new industrial policy is “anchored in what is most modern” to stimulate and support the business sector.

He also refuted criticism about the central role of public authorities in the new industrial policy, stating that this model is the one adopted by other developed countries.

“The role of the State is fundamental to this process, as has been done in the USA with the inflationary reduction act with more than 390 billion dollars or the next generation of the European Union with more than 800 billion euros”, he states.

“Finally, the policy has innovation, digital and green agendas as priorities that seek to encourage the industrial sector to become more competitive and gain global scale,” he said.

According to the new industrial policy document, national companies will be provided with two initiatives, lines of credit with favorable conditions, so that they can take on services and works under the New PAC (Growth Acceleration Program), and also contracts with government purchases.

Among the public procurement instruments to boost the country’s industrial development, the document points out that the Interministerial Commission for Innovations and Acquisitions of the New PAC will define the sectors in which the acquisition of manufactured products and national services may be required.

The plan states that the requirement for local content under the New PAC will be implemented in stages, “progressively expanding the list of products and services subject to the requirements”, but the document does not detail the starting levels or the pace of increase in these requirements.

The government may also use preference margins for manufactured products and national services. This means that certain local goods and services will be preferred by public authorities, even if their price exceeds that of competing imported items by a previously defined percentage.

Economist Lucas Borges, member of the Insper committee, stated that the plan is right in offering credit and subsidies to national companies, particularly with a view to the foreign market. He added that Brazil has a competitive advantage in several areas, especially in relation to its neighbors in Latin America, which deserve to be explored.

“If we stop to think about industrial policy, there is this issue of trying to make the most of things here, flirting with neighboring countries. We have a lot of competitive advantage and in this sense I welcome you to try [fomentar as empresas exportadoras]”, stated the economist, adding that this would reverse a trend, considering that the Bolsonaro government made credit lines difficult to strengthen companies internationally.

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NEW INDÚSTRIA BRAZIL PLAN INITIATIVES

Main instruments:

Loans, grants, tax credits, equity participation, local content requirements, foreign trade, margin of preference, technology transfer, intellectual property, regulation, technology orders, government procurement and public investment.

Mission 1

Agro-industrial chains

Goals for 2033: Increase the share of the agro-industrial sector in agricultural GDP to 50%.

Financing priorities (examples): fertilizers and pesticides, as well as products with nanotechnology and biotechnology.

Regulation: Rationalize port fees and improve the guarantee system.

Mission 2

Health

Goal for 2033: Produce, in the country, 70% of the national needs for medicines, vaccines, equipment and other health inputs and technologies.

Financing priorities (examples): innovative medicines and Active Pharmaceutical Ingredients (APIs).

Regulation (examples): tax equality in government purchases, establishing rules to rationalize regulatory costs, reform of the Lei do Bem and health regulation.

Public procurement: New PAC Health – R$30 billion by 2026.

Mission 3

Infrastructure, sanitation, housing and mobility

Goal for 2033: Reduce travel time from home to work by 20%.

Financing priorities (examples): technologies to reduce carbon emissions in transport, aviation of the future and development of biofuel, electric, hybrid and other alternative fuel propulsion systems.

Regulation (examples): rationalize sectoral charges on electricity, resumption of service exports, improvement of incentives in the capital market; reduce the cost of financing infrastructure and state support for exports.

Public procurement: carbon footprint calculator for public works.

Mission 4

Digital transformation of the industry

Goal for 2023: Digitally transform 90% of Brazilian industrial companies, ensuring that the share of national production triples in the new technology segments.

Funding priorities: semiconductors, generative AI, advanced robotics, generative AI.

Mission 5

Bioeconomy, decarbonization and energy transition

Goals for 2033 (examples): Promote green industry, reducing carbon dioxide emissions in industry by 30% and increasing the share of biofuels in the transport energy matrix by 50%.

Financing priorities: technological solutions to reduce emissions, development of future biofuels and generation of renewable energy.

Regulation: improvement of reverse logistics regulation and harmonization between the laws of the federative entities.

Public contracts: Solar energy in Minha Casa Minha Vida works; photovoltaic panels and wind turbines with local content and margin of preference in the New PAC.

Mission 6

National sovereignty and defense

Goal for 2033: Obtain autonomy in the production of 50% of critical defense technologies.

Financing priorities: technological content projects forwarded by Strategic Defense Companies.

Regulation: Reform of the Lei do Bem, implementation of the new Official Export Support System.