Package seeks US$ 176.5 billion in investments
Folha de S. Paulo
To try to get the R$ 300 billion (US$ 176.5 billion) in investments that will be required to support the growth of the economy with no inflation risk during the rule of Dilma Rousseff, the Government will immediately give up R$ 662 million (US$ 389.4 million) in tax collection and the BNDES (National Development Bank) will have to invest another R$ 10 billion (US$ 5.9 billion) by 2014. There should also be incentives for the banks to renegotiate the agricultural debts and those of individuals in arrears. The measures begin to be taken next week.
The tax waiver results from a package of measures to stimulate the long-term investments announced yesterday that essentially foresees the reduction of the IR (Income Tax), CSLL (another federal tax levied on corporations for the financing of social security) and IOF (Financial Operation Tax) for investors investing on private bonds (debentures) that will pay for the infrastructure works and other projects of interest for the country.
In some cases, the fall in the tax burden will be significant. For individuals, the IR rates will fall from the current maximum level of 22.5% to zero. For the companies, the reduction shall be from 34% (IR and CSLL added) to 15%, and foreigners will also benefit from the exemption of IR, currently at 15%.
The operation of the BNDES will be for its own benefit, since it currently funds 25% of the investments and it intends to reduce such participation to something around 10%, according to the President of the bank, Luciano Coutinho. The resources of the BNDES will be used to buy securities of non-financial private companies (debentures) released to bear the cost of the infrastructure projects. According to the calculations of Coutinho, the total volume of investments in the next administration will be of R$ 600 billion (US$ 353 billion). But it is estimated that half of the value comes from the use of the profit of the very companies in new projects. The rest will have to be financed by raising funds abroad, issues of shares on the stock exchange, credit provided by banks and the BNDES and by the issue of debentures.
A fund - which will initially have R$ 2.2 billion (US$ 1.3 billion), cash that is currently stopped at the Central Bank as compulsory deposit - will be created with the purpose of buying and selling debentures to give a reference of prices and stimulate negotiations. To attract foreign cash, the Government will reduce, from 6% to 2%, the IOF paid by foreigners investing in funds focused on long-term investments. To stimulate the renegotiation of debt, banks may dilute the IR they must pay when recovering the overdue credits. The measure will be good for individuals up to the limit of R$ 30 thousand (US$ 17.7 thousand) and for agricultural debts.