Will tax breaks bring only short-lived benefits to Brazil?

Bob Moser
PLASTICS NEWS CORRESPONDENT

Published: July 2, 2013 11:16 am ET
Updated: July 2, 2013 11:18 am ET

Related to this story

Topics Public Policy, Materials, Materials Suppliers

Tax incentives for local chemical and petrochemical industries should improve plastics producers' ability to invest this year and next, but further cost-cutting methods should be sought for machine makers, and Brazil's import tariffs on foreign raw materials should be reconsidered, industry sources said during the Feiplastic trade show.

The Brazilian federal government expanded tax credits in late April for purchases of petrochemical raw materials such as naphtha, ethane, propane, butane and first-generation products like ethylene, propylene, butene, butadiene, ortho xylene, benzene, toluene, paraxylene and isoprene.

The tax savings should prompt local chemical and petrochemical companies to increase their use of spare operating capacity this year. Braskem SA officials said the incentives will improve the industry's competitiveness by boosting utilization rates, and should strengthen its own capacity to invest, though the company didn't detail any possible new projects or contributions.

Braskem should benefit the most of any Brazilian resins producer this year from the tax incentives. Analysts with JP Morgan wrote in late April that the incentives would help Braskem achieve a higher operating margin this year, with earnings before interest, taxes, depreciation and amortization estimated at 4.45 billion Brazilian reais ($2.1 billion) for this year, up 13 percent from their previous forecast for the company, and at 4.97 billion reais in 2014, up 21 percent from a prior projection.

Brazil needs to consider more incentives to improve its global competitiveness, and further tax cuts for industrial raw materials could be a start, Luciano Coutinho, president of Brazil's National Economic and Social Development Bank (BNDES), said during Feiplastic, held May 20-24 in São Paulo.

Low-interest lines of credit and tax cuts on raw materials like steel and plastics for Brazil's machinery sector have been proposed by the Brazilian Association of Machinery and Equipment (Abimaq). Lowering manufacturers' costs for steel alone, which represents about 30 percent of a Brazilian machine's final cost, could help make domestic producers more competitive.

Following the plastics trade show, Coutinho and BNDES announced June 3 the bank will prioritize loans for new machinery and equipment purchases through the rest of this year for a variety of industries.

While tax cuts on chemicals will help local producers and processors compete, industry must press the government to reconsider its import tariffs on foreign raw materials, which will continue to stress the entire domestic production chain, according to Sergio Correa, president of Belsul, a Brazilian raw materials import-export consultancy specializing in plastics.

"This tax relief doesn't help enough to compensate for the tariffs on raw materials we have to import here," Correa said. "Our global competitiveness across the industry is poor at this time. Brazil's petrochemical industry is capable of competing worldwide, but this closed market vision is not good for us now, or in the future."


Comments

Will tax breaks bring only short-lived benefits to Brazil?

Bob Moser
PLASTICS NEWS CORRESPONDENT

Published: July 2, 2013 11:16 am ET
Updated: July 2, 2013 11:18 am ET

Post Your Comments


Back to story


More stories

Proposed Shell project draws more than 1,000 to informational meetings

April 17, 2014 2:03 pm ET

More than 1,000 people attended a pair of public meetings hosted by Shell Chemical LP on April 16 to discuss the possibility of building a major...    More

Image

Hedging can slow the resin rollercoaster

April 17, 2014 3:00 pm ET

The good old days — if they even ever existed — are gone, and.Andy VanPutte thinks volatility in the resin market is here to stay and...    More

Texas consumer group urges more science in advocacy campaigns

April 17, 2014 1:35 pm ET

WASHINGTON—The Texas Consumer Association (TCA) is raising concerns about consumer advocacy campaigns against certain chemicals and plastic...    More

Spain's Cristian Lay Group buys two materials units of bankrupt LSB

April 17, 2014 11:11 am ET

Spanish industrial conglomerate Cristian Lay Group has purchased two of the bankrupt Spanish PET packaging group La Seda de Barcelona.    More

Image

Using social media to answer consumer questions about plastics

April 17, 2014 10:59 am ET

Plastic packaging was stoutly defended on a recent Q&A session on social media site Twitter, run jointly by the British Plastics Federation and scienc...    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Automotive Market Review and Outlook 2014 The Americas

This 75-page report features in-depth analysis of the automotive industry for the Americas. It includes discussions of market trends, legislative/regulatory activity impacting production and threats as well as design strategies being implemented by the major automakers. Detailed charts and data tables outline North American automotive production over the last five years.

Learn more

Plastics Building & Construction Market Review and Outlook 2014 with MS Excel chart data

This report provides in-depth analysis of the plastic building and construction market for North America, including discussions of trends, opportunities, threats and the latest developments in construction trends that impact plastics processors.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events