The publication of Provisional Measure 1,157, which extended the exemption of all fuels without tax compensation for 60 days, caused discomfort among ethanol producers. Yesterday, organizations representing the segment released statements attacking the decision of the Lula government, although most did not criticize the Bolsonaro government when the measure was adopted.
The extension took the mills by surprise, since the Minister of Finance, Fernando Haddad, said last week that he had asked the previous government not to make decisions with a fiscal impact on the new administration. Lula’s change of mind about fuel taxation came late last Friday. The Sugarcane Industry Union (Unica) and the National Sugarcane Energy Forum (FNS), which represent most of the country’s sugarcane plants, issued a joint statement in which they named the “Lula government” as “an accomplice in an economic, environmental, social and legal attack” for “maintaining the exemption from federal taxes on gasoline, inaugurated by the Bolsonaro government”. The National Corn Ethanol Union (Unem) issued a statement stating that, with the extension, the federal government is causing “harm to the corn ethanol production chain”, in addition to weakening “the national policy of encouraging biofuels, the energy transition and the decarbonization of mobility energy sources”. The extension most directly affects corn ethanol plants – which, unlike sugarcane ethanol plants, are not in the off-season and must produce continuously. Last year, Bolsonaro made several decisions that negatively impacted the country’s hydrous ethanol. Hydrous ethanol ended last year with a drop in market share in the Otto cycle.
The first measure, in March, was the removal of the import tax on ethanol until the end of the year. Another, in May, was the reduction of the ICMS rates on fuels by the states, which reduced the differential between gasoline and ethanol in several federative units. On both occasions, only Unem criticized the decisions.
Last June, Bolsonaro exempted all fuels from PIS/Cofins and Cide in a linear manner, on the eve of the election, which eliminated the tax differential that gave hydrous ethanol an advantage. At the time, no organization in the sector released a statement commenting. To avoid further losses, members of parliament linked to the mills proposed a constitutional amendment to guarantee the tax differential for 20 years, and a presumed ICMS credit as compensation while the linear tax exemption lasted in 2022.
A leader in the sector who preferred to remain anonymous said that there was no public criticism when the exemption was adopted because the PEC for social benefits was attached to the proposal, which “diverted the discussion”, and also because the tax credit generated compensation equivalent to the loss that the mills suffered with the price of ethanol, of R$0.45 per liter.
However, executives in the sector say that the credit has been of little use so far, since the mills have started to prioritize the production and export of sugar, which is already tax exempt. Now, with the publication of the MP by Lula, the leaders of the mills are demanding the constitutional provision approved last year, which requires gasoline to have a higher tax rate than ethanol.
BTG Pactual released a report stating that it plans to review its recommendation for the shares of sugar and ethanol companies. In recent months, the bank has maintained its buy recommendation for Raízen, São Martinho and Jalles Machado, despite the tax changes. Between May, when Bolsonaro began the tax cuts, and the end of 2022, the shares of the three companies fell sharply on the B3. Yesterday, Raízen fell 5.35%, São Martinho, 11.39%, and Jalles, 7.07%.
Source: Jornal – Valor Econômico