Brazil ag industry opposes new tax rules

New tax credit rules in Brazil have rallied opposition among the South American country’s powerful agricultural lobbies, including soybean and cotton companies that recently joined critics of the measure.

The growing backlash may tip the scales in Congress, which is heavily influenced by the farming sector, and can still reject the new rules, Reuters reported.

The new measure on tightening the use of tax credits was included in an executive order sent by President Luiz Inacio Lula da Silva to Congress on June 4. It takes effect immediately but needs congressional approval within four months to remain valid.

Abiove, which represents soybean processors including Bunge BG.N and Cargill ABNO.UL, claims the move will make them less competitive, penalizing soybean farmers and putting investment plans at risk. According to Abiove, the measure will force down prices paid to soybean growers and depress the current value of soy.

National soy lobby Aprosoja said it is concerned about receiving less money for crops as the industry risks losing estimated tax credits of 6.5 billion reais ($1.24 billion) from the measure.

Arlan Suderman, chief economist at US financial services company StoneX, told Reuters that Brazilian soybean processors and biofuel producers essentially will have higher tax costs and lower margins, adding “that loss of revenue is expected to shift some crush and biofuel activity to Argentina and to the United States, although the scope of that shift is not yet known.”

Anec and Anea, which speaks for grains and cotton exporters, dubbed the measure “a grave institutional setback” in a joint statement. They called on Congress to reject the rule immediately and debate its potential impact with the companies. Anec members alone account for 74% of Brazilian corn and soybean exports worth $66.86 billion.

Tags: Brazil, taxes