Brazil's new tax policy! Exports of coffee and other agricultural products will slow down and prices will continue to rise

Earlier this week, the Brazilian government submitted a new executive order to Congress, including a day of new measures to tighten the use of tax credits, according to local media reports.

According to Brazil's finance ministry, it will tighten the use of federal PIS-Cofins tax credits, which it believes is a loophole and needs to be tightened to close tax loopholes in a number of industries and to support the Brazilian government's plan to close the deficit this year.

At the same time, however, the measure was strongly opposed by the agro-industrial sector, including pharmaceuticals, meat, fruit, coffee, cereals and biodiesel (vegetable or animal oil). And these exporters are expected to reduce revenue by 26.3 billion reais (US $4.91 billion).

In response, the executive secretary of the Ministry of Finance said at a press conference that the measure does not mean raising taxes and interest rates, but correcting "distortions that need to be resolved sooner or later". At the same time, it was pointed out that the move is expected to increase government revenue by up to 30 billion reais (US $5.66 billion) to eliminate the government budget deficit.

At present, the new tax rules will take effect immediately, but will need to be approved by Congress within four months to remain in effect. As a result, a number of Brazilian agricultural exporters have organized lobbying groups to attack the government for introducing new rules on tax credits. At present, exporters' associations such as soybeans, coffee and cotton have joined lobbying groups, increasing the likelihood that Congress will veto the government's proposal.

In addition, the Brazilian Council of Coffee exporters (PIS-Cofins) recently issued a statement saying that the purpose of the Cecafe tax credit rule is to provide promotion credit for coffee exports, which will affect the cash flow of coffee exporters and costs, and that the government's new tax measures will force companies to rely more on banks for credit, thereby increasing spending and increasing operating burden, a move that could lead to food inflation and unemployment in Brazil. It eventually reduces the international competitiveness of Brazil, the world's largest coffee exporter, which runs counter to the vision of bringing foreign exchange earnings, economic and social development to the Brazilian country.

In addition, some analysts said that because the measure has already taken effect and needs to wait for Congress to approve the new policy, some growers such as soybeans and coffee have stopped selling their agricultural products recently, and a long-term slowdown in export sales may prompt international buyers to seek alternative sources, which may lead to higher prices.

In addition, some people in the coffee industry believe that due to the recent drought and other bad weather in Vietnam, whether Robusta or Arabica coffee futures prices continue to rise, but at present, the Brazilian side may tighten coffee exports, which will undoubtedly increase the possibility of coffee futures prices rising.

However, there has also been some good news in recent days, when Brazilian Vice President and Minister of Development, Industry, Trade and Services Gerardo Geraldo Alckmin visited the SOHO store on Luckin Coffee's Guanghua Road in Beijing. In addition, Luckin Coffee signed a memorandum of cooperation with representatives of the Brazilian Export and Investment Promotion Agency and signed a cooperation intention with partners to purchase about 120000 tons of coffee beans from Brazil in the next two years. This cooperation is conducive to the development of Brazilian coffee exports.