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Brazilian Food Exporter Lobbyists Condemn New Government Tax Credit Rule

Brazilian Food Exporter

Brazilian food exporter lobbies have sharply criticized the government's recent executive order that imposes new rules on the use of tax credits. They argue the regulation is unconstitutional and will diminish the competitiveness of Brazilian companies in the global market, as reported by Reuters.

The measure, announced on Tuesday, represents a significant challenge to President Luiz Inácio Lula da Silva’s already fragile relationship with Brazil's powerful agribusiness sector, which largely supported his predecessor, Jair Bolsonaro. Brazil stands as the world's largest exporter of commodities such as coffee, beef, chicken, sugar, and soybeans.

Leading industry groups, including the Brazilian Animal Protein Association (ABPA) and the Brazilian Meat Exporters Association (ABIEC), which represent major meat producers like JBS and BRF, have voiced their concerns. They claim the new rule will force companies to depend more heavily on banks for credit, increasing their expenses and operational burdens.

"The effect on production costs is direct and immediate," the associations stated, warning that the move could lead to food inflation and job losses across Brazil.

The government, however, defends the measure as a necessary step to close existing loopholes that favor several industries. This initiative is part of a broader effort to raise nearly 30 billion reais ($5.66 billion) aimed at eliminating the primary budget deficit this year.

The executive order particularly affects sectors including pharmaceuticals, meat, fruit, coffee, cereals, and biodiesel. Cecafe, the lobby for coffee exporters, accused the government of violating constitutional tax exemptions for exports. "In addition to making Brazil a major exporter of tax residues, [the executive order is] in total breach of the Constitution regarding tax exemption for exports," Cecafe stated.

Anec, representing grain and cereal exporters, and Abiove, which speaks for soy crushers like Bunge and Cargill, have not yet commented on the new regulations. Meanwhile, APROBIO, the biodiesel lobby that relies on soy as a raw material, announced plans to persuade the government to reconsider the measure. They emphasize the importance of protecting investments and supporting the country's transition to cleaner energy sources.

This latest controversy underscores the ongoing tension between President Lula's administration and Brazil’s agribusiness sector, which is crucial to the nation's economy. The outcome of this conflict may significantly impact Brazil's position in the global market and its economic stability.

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