The publication of MP 1,157, which extended the exemption for all fuels without tax compensation for 60 days, caused discomfort among ethanol producers. Yesterday, organizations representing the segment released notes with attacks on the Lula government's decision, although the majority 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 take decisions with fiscal impact for the new management. Lula's change of mind about fuel taxation came at the end of last Friday.
The Sugar Cane Industries Union (Unica) and the National Sugarcane Forum (FNS), which represent most of the country's sugarcane plants, issued a joint note in which they named the "Lula government" as "an accomplice of a 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) released a note stating that, with the extension, the federal government generates “damage to the corn ethanol production chain”, in addition to weakening “the national policy to encourage biofuels, the transition energy and the decarbonisation of mobility energy sources”.
The extension affects corn ethanol plants more directly – which, unlike sugarcane ethanol plants, are not in the off-season and have to produce continuously.
Last year, Bolsonaro took several decisions that negatively impacted domestic hydrous ethanol. The hydrated product ended last year with a drop in market share in the Otto cycle.
The first measure, in March, was the removal of the ethanol import tax until the end of the year. Another, in May, was the reduction of ICMS tax rates in the states on fuel, which reduced the differential that gasoline and ethanol had in several federative units. On both occasions, only Unem published criticisms of the decisions.
Last June, Bolsonaro exempted all PIS/Cofins and Cide fuels on a linear basis, on the eve of the election, which eliminated the tax differential that gave an advantage to hydrous ethanol. At the time, no sector organization released a comment.
To avoid further losses, parliamentarians linked to the mills proposed a constitutional amendment to guarantee the tax differential for 20 years, and a presumed ICMS credit as compensation for the duration of the linear exemption of 2022.
A segment leader who preferred not to be identified said that there was no public criticism when the exemption was adopted because the proposal was attached to the PEC on social benefits, which “deviated the discussion”, and also because the tax credit generated compensation equivalent to the loss that the plants had with the price of ethanol, of R$ 0.45 a liter.
However, industry executives say that the credit has been of little use so far, as mills have begun to prioritize the production and export of sugar, which already enjoy tax exemption. Now, with the publication of the MP by Lula, the leaders of the mill owners claim the constitutional provision approved last year, which obliges gasoline to have a higher taxation than ethanol.
BTG Pactual released a report stating that it plans to revise its recommendation for the shares of sugar and alcohol companies. In recent months, the bank maintained a buy recommendation for Raízen, São Martinho and Jalles Machado, despite the tax changes. Between May, when Bolsonaro started tax reductions, and the end of 2022, the shares of the three companies had a sharp drop in B3. Yesterday, Raízen dropped 5.35%, São Martinho, 11.39%, and Jalles, 7.07%.