Maranhão’s investment drive focuses on Port of Itaqui expansion

In a new urge to attract investment, the government of Maranhão is banking on the expansion of the Port of Itaqui, now connected to the south by the North-South Railway, advancing dialogue with Panama to integrate the port into the canal, and establishing new industries in the region to shed its reputation as the poorest state in Brazil. In the last two years, nearly 2 million residents of Maranhão have lived in poverty and extreme poverty.

Silvio Costa Filho, Minister of Ports and Airports, told press agency Valor that President Luiz Inácio Lula da Silva will announce the renewal of the terminal’s concession to the state government for another 25 years on August 10 in a ceremony in Brasília.

However, Governor Carlos Brandão (PSB) sees tax reform as a hindrance to development. “This hinders competitiveness,” he told Valor. Brandão attracts investment by offering tax incentives to industries interested in establishing themselves in the state. He stated that his administration gives up R$2 billion a year in revenue. In some cases, agreements with businesses allow payment of a maximum of 25% of ICMS, the state excise tax.

The end of the so-called “tax war” is a key component of the consumption tax reform, deemed a modernization of Brazil’s system. The new model foresees that, at the end of the transition period, taxation will be levied at the destination, not at the origin. To compensate for potential state revenue losses, the new legislation includes a regional development fund. Brandão acknowledged the historical importance of the tax reform but lamented the end of the tax war between states. “It leveled the playing field for everyone,” he said. “Now we will explore how we can remain more attractive than other states.”

Regarding the Port of Itaqui, the federal government decided to bring forward the renewal of the contract, originally set to expire in 2026. “This brings legal certainty and stability to businesses, who need around R$15 billion to invest in the port,” Brandão said.

The governor is working to make the integration between the Port of Itaqui and the Panama Canal viable. During an official visit to Panama 20 days ago, he met with Panamanian authorities to discuss reducing customs fees and creating a more favorable environment aimed at establishing Itaqui as a hub of the Americas. The next step involves Panamanian technicians visiting the port, though dates have not been scheduled.

In the same week, Governor Brandão met with Panamanian ministers, and President Lula had a bilateral meeting with the President of Panama, José Mulino, during the Mercosur Summit in Paraguay. Panama aims to become an “associate member” of Mercosur, a status held by Chile, Colombia, Peru, Ecuador, and Guyana.

“The most competitive state to use the Panama Canal is Maranhão, which is closer to the United States and Europe; if a container passes through the canal, it reduces lead times up to six days,” argued the governor.

With the planned expansion, the port will start operating containers through companies like Susano and Alumar (Consórcio de Alumínio do Maranhão, formed by Alcoa, South 32, and Rio Tinto). “What is the strategy? The ship takes commodities to Asia, and from there, it brings products such as electronics,” he explained.

Claudio Frischtak, president of Inter B. Consultoria, supported the governor’s optimism about the Port of Itaqui’s potential. He cited its “competitive advantage” of having the largest natural draft in the country, which attracts ships with cargoes exceeding 300,000 tons. He expects port activity to increase when the Central-West Integration Railway (FICO) begins operations.

However, Frischtak expressed skepticism about negotiations with Panama. “It’s the big question mark,” he said, citing pressure on the canal from excess demand and climate change-related water volume reduction. He noted that long ship queues could negate the time savings from Itaqui’s strategic location.

Governor Brandão also mentioned other large-scale projects in different parts of the state. In Balsas, part of the “Matopiba” farming belt (Maranhão, Tocantins, Piauí, and Bahia), the new Inpasa factory will produce corn ethanol, aligning with energy transition efforts. The R$2.5 billion investment created 2,500 construction jobs and will maintain at least 1,500 operational jobs starting next year.

Another significant project is the power transmission line developed by Chinese company State Grid Brazil Holding, a R$1.9 billion investment connecting Graça Aranha, Maranhão, and Silvânia, Goiás, to incorporate renewable energy sources in the Northeast to the national grid. The 1,468-kilometer route crosses Maranhão, Tocantins, and Goiás, expected to generate over 1,200 jobs.

Brandão also anticipates increased tourism following the Lençóis Maranhenses’ designation as a UNESCO Natural World Heritage Site, which will boost international visibility.

One challenge remains the lack of qualified labor. “I will not give up on creating more employment opportunities, so I have to qualify these people,” the governor said, relying on expanded agreements with S System entities and professional training courses offered by Federal Institutes.

The 2022 IBGE Census identified Maranhão as the state with the highest proportion of people living in extreme poverty in Brazil. Of the 6.7 million inhabitants, 8.4% live on less than R$209 per month, and another 57.9% are in poverty, with an income of up to R$667 per month.

However, between 2021 and 2023, at least 919,000 people left the extreme poverty bracket, and around 740,000 exited poverty, according to a study by the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre) based on IBGE’s National Household Sample Survey (Pnad).

The most recent GDP data from IBGE is from 2021, showing Maranhão’s wealth grew by 6.2%, surpassing the Northeast average of 4.3% that year.

Source: Valor Econômico

Click here to read this story’s original post in Portuguese: https://valor.globo.com/brasil/noticia/2024/07/30/porto-e-saida-para-ma-impulsionar-economia.ghtml

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