After steel, plastics sector opposes tax increase

Another tug-of-war within the industry regarding a potential hike in the import tax on raw materials has reached the government. Following the sectors that utilize steel, the Brazilian plastics industry, along with others that consume their products—such as the food industry (for packaging) and the construction industry (for pipes and fittings)—have rallied against the tax increase on 76 products. This list includes resins such as polyethylene, polypropylene, and PVC, a move advocated by the chemical and petrochemical sector.

The request has been submitted to the Chamber of Foreign Trade (CAMEX) of the Ministry of Development, Industry, Trade and Services (MDIC) by the Brazilian Chemical Industry Association (ABIQUIM), and the list is open for public consultation until April 25. If approved, it would lead to an increase in the rate on the Common External Tariff Exception List (LETEC) for this group of products from 12.6% to 20%.

According to José Ricardo Roriz Coelho, chairman of the board of the Brazilian Plastics Industry Association (ABIPLAST), the increase in the tax rate will jeopardize the competitiveness of various industries. It will also escalate the cost of a more comprehensive array of inputs, affecting the price of the basic food basket and government programs such as “Minha Casa, Minha Vida” and “Farmácia Popular”—programs designed to provide affordable housing to lower-income families and enhance access to essential medicines at reduced prices or for free for the population. “Plastics serve as raw materials across numerous sectors,” Mr. Coelho noted.

The chart below digs into Brazilian imports of plastics between January 2022 and January 2024. The data used below comes from DataLiner.

Brazilian Plastic Imports | Jan 2022 – Jan 2024 | TEU

Source: DataLiner (click here to request a demo)

Similar to the steel sector, the chemical industry claims it is dealing with a surge in imports of resins and other petrochemical products, chiefly from Asia, under conditions of unfair competition. The ABIQUIM reports that in 2023, imports of plasticizers increased by 57.3%, while those of thermosetting resins rose by 44.2% and thermoplastic resins by 17.1%. With local demand declining, imports now represent a record 47% of the Brazilian market for industrial chemicals.

The ABIPLAST argues that imports play a crucial role in competition against domestically produced resin, which is dominated by a limited number of manufacturers, notably Braskem. Additionally, since local producers adhere to price parity and incorporate shipping costs into their prices, any rise in the import rate will also lead to higher local prices.

Source: Valor International; translation by Melissa Harkin

Click here to view the original article: https://valorinternational.globo.com/business/news/2024/03/21/after-steel-plastics-sector-opposes-tax-increase.ghtml

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