Tax Reform: Alckmin works to support automakers – 11/10/2023 – Market

Vice President Geraldo Alckmin (PSB) entered the field during the vote on Tax Reform in the Senate to avoid the risk of a setback in the vote on tax benefits for automakers in the North, Northeast and Central-West regions.

The PSB bench, led by senator Jorge Kajuru (GO), presented a highlight to vote separately on an excerpt from the PEC (proposed amendment to the Constitution) that ensures the extension of incentives for projects involving flex cars (powered by ethanol and gasoline) .

The senator was responding to a request from senator Flávio Arns (PSB-PR). The Paraná bench was one of those against the device, reflecting the complaint about the lack of equality voiced by car manufacturers located in the South and Southeast.

An initial version of the report by the rapporteur, senator Eduardo Braga (MDB-AM), included only electric vehicles in the extension of benefits, but the government managed to enact the expansion of the scope — which displeased automakers in the South and Southeast.

According to reports from members of the Executive and Congress, Alckmin —who is also Minister of Development, Industry, Commerce and Services— spoke with Kajuru to try to reverse the situation.

Government members claim that the vice president also maintained dialogue with Arns.

A separate vote on the section would oblige the government to cast a minimum of 49 votes (quorum for constitutional changes) to approve the device. The PEC was approved on Wednesday (8).

The score for the reform’s basic text was already tight: 53 to 24, with only four votes in favor above the minimum necessary. Taking an even more controversial matter to a vote, with benches from the South and Southeast against the text, would risk defeat.

In the Chamber, the government was defeated precisely in the voting on the highlights, when the allied base failed to place the 308 votes necessary to maintain the automotive benefit in the text. At the time, the defeat was due to a single vote.

To avoid the risk of repeating this outcome, Alckmin, according to reports, asked the PSB leader to try to convince Arns to give up the change. Arns, according to people close to him, backed down out of consideration for the vice president.

Afterwards, Kajuru returned the call to inform Alckmin about the decision and announced the withdrawal from the plenary session.

“There was an absolutely democratic dialogue, which I consider extraordinary, between me, as bench leader of the historic PSB, with Flávio Arns, Chico Rodrigues, Ana Paula Lobato, and I thank them all for their understanding”, said the PSB leader in the plenary on Wednesday night.

“I, representing the state of Goiás, thought about the cities of Catalão and Anápolis, in relation to the companies Mitsubishi and Caoa, but my decision is exclusively in honor of the state of Pernambuco […]. Therefore, I am withdrawing the highlight,” he added.

One of the PSB’s concerns was the political impact of approving a change that would harm Pernambuco, the party’s base.

The extension of benefits serves Stellantis, which has a Jeep factory in Goiana (PE) — whose incentives are only valid until the end of 2025. But Kajuru was also personally involved in the conversation because of the two automakers located in Goiás, his state.

The extension of tax incentives for automakers became known as the “Lula amendment”, as it was a request from President Luiz Inácio Lula da Silva (PT).

The device extends the benefits until 2032, with a gradual reduction expected from 2029.

Projects approved by the end of 2024 and that are already eligible for the incentive will be considered. The deadline is extended until December 31, 2025 for those who expand or restart production in an industrial plant previously eligible for subsidies.

In addition to the factory in Pernambuco, the measure seeks to ensure benefits for the Chinese automaker BYD (Beyond Your Dreams), which will install itself where the Ford factory in Camaçari, Bahia, used to be located.

In June, Lula received BYD’s executive vice-president and president for the Americas, Stella Li, at the Palácio do Planalto, alongside Rui Costa and the governor of Bahia, Jerônimo Rodrigues (PT). Therefore, the topic is considered important for the government.

Representatives of the Executive had already worked with the rapporteur to expand the scope of the extension of benefits, since not all automakers that benefit from the incentives currently produce electric cars.

The rapporteur agreed to extend the benefit to projects that involve vehicles powered exclusively by biofuels or combined with petroleum derivatives (flex), but stipulated conditions, such as the start of production by January 1, 2028 for new factories, minimum volume of investments and production, in addition to maintaining production for a minimum period, including after the end of the tax incentive.

The excerpt was accepted during the discussion at the Senate’s CCJ (Constitution and Justice Committee), on Tuesday (7), to the frustration of automakers in the South and Southeast.

Three of them — General Motors, Toyota and Volkswagen — spoke out in an advertisement calling for the rejection of the device that benefits competitors, on the grounds that it is necessary to ensure equality for the automotive industry, which is not located in a single state.

On Tuesday, while the CCJ was analyzing the text of the reform, representatives of these automakers also went to the field to talk to senators in an attempt to convince them to reject the article.