Plano Brasil Maior is a federal program created to increase the competitiveness of the domestic industry. It was launched in 2011 with the slogan “Inovar para Competir. Competir para Crescer”, which is Portuguese for “Innovating to Compete. Competing to Grow”. This plan aims to connect industrial, technological and foreign trade policy sectors.
The plan has an emphasis on sectoral measures, which characterize a classic industrial policy. Nineteen sectors were chosen to receive special incentives with a total of 287 measures, of which a quarter are directed at agribusiness. It is one of the most competitive economy sectors due to the high demand for exports. After agribusiness comes the automotive sector, with 10% of the measures and the health sector also with 10%. The defense, aeronautics and space sector is also considered important, with 9.76% of the measures.
The technological policies involve diversification strategies of national companies and creation of new ones. The National Strategy for Science, Technology and Innovation is a program of the Ministry of Science and Technology created to form the basis of the Brasil Maior incentives for innovation.
As for the foreign trade policy, the plan includes short, medium and long term goals as improvement in financial and tax instruments to boost exports, incentives to internationalization of national companies aiming to expand to foreign markets and access to new technologies from foreign companies to Brazil.
This program focuses on the innovation and the production consolidation of Brazilian industry by adopting exemption measures of investment and exports. Among these measures are the discount of taxes paid in the purchase of machinery and equipment from the domestic market or from abroad. The investment incentive policies aimed at reducing the cost of investment by offering better terms and interest on international financing. These policies also aim to eliminate or reduce the tax burdens on investment and promote the simplification of companies registration procedures.
The program also established strategies and actions focused on sustainability to improve Brazilian industrial production. Among them are the inclusion of sustainability criteria for buildings, incentives for the development and adoption of renewable energy by factories and support to the development of recycling programs.
The program also focuses on payroll exemptions to the sectors that employ large amounts of labor such as clothing, shoes, furniture and software development. In the first two years of the program one of the main measures adopted was the reduction of production costs, aiming to eliminate the problems associated with labor and capital costs. The solutions found for this, were the reduction of social security charges on the payroll and the exemption of federal taxes on investment goods. In addition, other measures were the reduction of interest on investments and more funding offers.
Reduction of Labor Costs
Aiming to reduce labor costs while preserving wages and workers’ rights, the plan applied measures to eliminate 20% of the employer contribution on the payroll for 42 economy sectors, with partial compensation of the tax rate on gross sales of the company, excluding gross revenue from exports.
These 42 sectors represent 22% of all Brazilians exports, 59% of manufactured exports and 19% of total gross revenues of the economy. In addition, they employ 32% of registered workers and represent 24% of total wages.
The demand for skilled labour is growing at faster rates than the growth of the economy and the profile of professional training must fit the growing needs based on innovation. The plan get supports from three federal programs for technical education and incentive of engineering as a profession: the National Program for Access Technical School, known as the PRONATEC, the national Plan Pro-Engineering and the Science Without Borders program.
These programs offer scholarships which are funded by the Federal Government, the last program, Science Without Borders, gives scholarships to study abroad.
Tax Exemption for Investments
Reducing taxes on production investments is another goal of the Plano Brasil Maior. Through the complete exemption of federal taxes like IPI, PIS and COFINS on investment goods, it is possible to reduce the taxation of capital goods by 4.3% of the investment cost.
The sector of machinery and equipment had a tax burden reduction of 1.68%, while the estimated cost reduction is approximately 0.45%. For the manufacturing sector of trucks and buses, which also showed a significant result reaching a reduction of 1.19%, 1.25% and 0.46% respectively.
Buy Brazilian Act
The Plano Brasil Maior also implemented the law 12.34, known as Buy Brazilian Act. Its main purpose is to use the State’s power of purchase as a way to charter the innovation process performed by national companies. From 2010, when this law was created, national development has become a public bidding matter.
This measure aims to protect the Brazilian market, generate jobs and provide technological improvement. The law gives preference, on public bidding, to companies that offer products and services that comply with Brazilian technical regulations and are produced in Brazil.
The margin of preference can not exceed 25% above the price of foreign manufactured products and services. It will consider studies that establish criteria based on jobs and income generation, as well as development and technological innovations that take place in Brazil. In other words, it focuses on products and services made or provided by Brazilian companies, or made or provided by companies that invest in research and technological development in the country.
It is important to highlight that this margin of preference does not apply to goods and services whose capability in the country is inferior to the quantity to be acquired or hired abroad.