Governor of AM, Wilson Lima exposes concern with IPI reduction: ‘I will fight to revoke it’

Marcela Leiros – Cenarium Magazine

MANAUS – The governor of the Amazon, Wilson Lima, released a note on the night of Friday, 25, expressing concern about the reduction, by the federal government, up to 25% in the rates of the Tax on Industrialized Products (IPI). Lima confirmed that he has already scheduled “a meeting with the Minister of Economy, Paulo Guedes, to personally address the issue”, which directly affects imported products and those produced in the Industrial Pole of Manaus (PIM).

The federal government published on Friday, 25, in the Official Journal of the Union (DOU), the decree that allows the reduction. The act is signed by the President of the Republic, Jair Bolsonaro (PL) and the Minister of Economy Paulo Guedes.

“I understand the need that Brazil has to promote a deep tax reform. However, as governor of Amazonas, it causes me great concern the linear reduction of 25% of the Tax on Industrialized Products (IPI) that reaches the products manufactured in the Manaus Free Trade Zone”, reiterated the governor in the note.

The IPI reduction had already been announced by Minister Paulo Guedes last Tuesday, 22. According to him, this would be a measure to contain the widespread price increase and boost the growth of industry.

“On behalf of the nearly 500 companies installed in the Industrial Pole of Manaus and the more than 100 thousand people who work in the industries installed here and depend on these jobs to support their families, I will fight until the end so that the measure, so harmful to the people of Amazonas, is revoked by the federal government,” concluded Wilson Lima.

“Hard Knock Out”

Like governor Wilson Lima, after the publication of the decree, parliamentarians and industry representatives in Amazonas also spoke out against the IPI reduction.

The president of the Amazonas State Industry Center (Cieam), Wilson Périco, recalled that the Special Productivity, Employment, and Competitiveness Secretary of the Ministry of Economy, Daniela Lima, had promised to exempt products leaving the MFTz, during a meeting of the Suframa Administrative Council (CAS), but it was not fulfilled. Daniela Lima is Guedes’ right-hand man in the Ministry of Economy.

“It happens that the products produced in the Industrial Pole already do not have the IPI, that is, it no longer takes this cost to the consumer, and we generated, last year, on average by 2021, more than 103 thousand jobs. If he doesn’t consider, within this proposal, exceptionalizing those products produced in the Manaus Free Trade Zone, these products will not have their rates reduced; the products that are not produced in Brazil are imported, also not having their rates reduced. The risk that we have is very big, both with the reduction of our comparative advantage and, consequently, jobs generated here, today. And we have an increase in the import of the product, that is, we export jobs. So, this was put to the minister”, emphasized Wilson Périco.

In a note, the Federation of Industries of the State of Amazonas (Fieam) repudiates the publication of the decree that reduces by 18.5% the Tax on Industrialized Products (IPI) for passenger cars, and by 25% the IPI rate levied on other products, exclusive of tobacco and its manufactured substitutes.

“The government used sophisms to enact a measure that, in general lines, reduces the appeal of local production and makes it more advantageous to produce in other Units of the Federation that do not have the logistical difficulties and peculiarities of the Amazon.”

Amazonian bench

Federal lawmaker José Ricardo (PT) said that the decree published by President Bolsonaro is a death blow against the Free Trade Zone model.

“Death blow against FTZ. Bolsonaro issues decree reducing IPI, but does not guarantee the incentive of the FTZ. It will reduce the advantages of companies in Manaus. There may be the exit of companies generating unemployment and less public revenue. It is the contempt of the federal government with Amazonas”, pointed out the congressman from PT.

The vice-president of the House of Representatives, federal lawmaker Marcelo Ramos (PSD), said that the Manaus Free Trade Zone suffers the most serious attack in its history with the publication of President Bolsonaro’s Decree 10,979. It is as if the federal government was Russia and the Amazon was Ukraine. The attack perpetrated, which reduces the IPI on all industrialized products in Brazil, ends with the ZFM, if it is not reversed.

“The most serious thing is that there was a commitment by Minister Paulo Guedes at the meeting with industry signed by Secretary Daniela, here at the meeting of the Board of Directors with Suframa, this week, to exceptionalize the products produced in the Manaus Free Trade Zone. This commitment was not fulfilled and the jobs of the Amazonians are at risk. However, it is more than this, because the entire encouraged industry in Brazil is at risk, as industries such as IT, semiconductors and displays will also lose competitiveness to Chinese industry,” warned Ramos.

Marcelo Ramos also recalled that President Bolsonaro is committing an electoral crime with the edition of the decree.

“There is still the electoral crime, since Law 9.504, article 23, paragraph 10, prevents the granting of benefits in an election year. We will denounce this measure and take action so that the jobs of Amazonians and the jobs of Brazilians are not victims of the electoral demagoguery of President Bolsonaro,” notes Ramos.

Senator Plinio Valério (PSDB) advanced to CENARIUM that the Amazon bench should present an alternative to the federal government, after hearing the Federation of Industries of Amazonas (Fieam), Cieam and the State Department of Finance (Sefaz).

The leader of the Amazonas bench, Senator Omar Aziz (PSD), He told CENARIUM that the measure signed by Bolsonaro impacts directly on job creation, in Amazonas, and that it harms in full the Amazon. Omar also advanced that the Amazonian bench should meet this Saturday to draw strategies to reduce the impacts of this decree in the Industrial Pole of Manaus.

“This is very harmful to the Free Trade Zone, because we stop generating jobs in Brazil in order to generate jobs in other countries. This will not improve our economy. In an election year, when there may be a change of government, discussing such a serious issue as the Tax Reform and putting at stake the North and Northeast region is something that harms not only Amazonas, but the entire Amazon. What is at stake is the future of Amazonas and Manaus. I am sure that the bench will be united in this matter”, affirmed Aziz.

The PSD senator also said that at this moment it is necessary the union of the Amazon bench, the businessmen and the Manaus City Hall and the Amazonas Government to keep the jobs of the Amazonians.

“We will have to unite the Amazon bench, the senators, the deputies, the mayor of Manaus, the governor of the state, the entities of workers and businessmen, because these are issues that can end the Free Trade Zone with a pen stroke. And, when I say this, it is not to do ‘terrorism’, but only what is written in practice in the text of the Tax Reform”, concluded Aziz.

IPI reduction

The goal of the measure is to stimulate the economy, but it will require a tax waiver, i.e., the government will not collect, according to the Planalto Palace, R$ 19.5 billion this year alone.

The IPI tax is levied on industrialized products, and the value is usually passed on to the consumer in the final price of the goods. The tax has several rates, which range, for the most part, from zero to 30%, but can reach 300% in the case of products harmful to health.

Positioning

In a statement, the Ministry of Economy said that the Brazilian industrial sector has lost competitiveness, and the reduction of the tax burden and the lower variability of the rates among sectors help in the “correction of the misallocation of productive resources and the increase of the production level in the long term”.

“Thus, the IPI reduction is added to the incentive measures, the recovery of the economy and the expansion of productivity that are underway in the country, contributing to the dynamization of production and, consequently, the generation of jobs and income,” said the ministry.

As it is a regulatory tax, the IPI can be changed by presidential decree, without needing the approval of Congress.

Rules

The rules established by the decree come into effect this Friday, the 25th. The IPI reduction applies to domestic and imported products and does not apply to products harmful to health, such as tobacco cigarettes.

The decree establishes two reduction percentages:

18.5%: for some vehicles;
25%: for domestic and imported industrialized products, with the exception of products harmful to health, such as tobacco cigarettes.

In the case of automobiles, as they already count on a rate reduction due to incentive policies in effect, the total reduction will also reach 25%, according to members of the economic team. Therefore, the government has been talking about a linear 25% tax cut, although the decree brings two categories of cuts.