Nearshore Americas

As Applause Dies Down, Brazil Examines Fine Print in “Plano Brasil Maior”

Even though the heralded  Plano Brasil Maior is seen as a huge step forward for Brazil’s globally ambitious IT industry , important details related to the new measures are still not completely understood. The fact that a few senior government officials have appeared to struggle to explain finer points is leaving many advocates wondering if key provisions – include tax relief – will be applied properly.

Taxes? What Taxes?

There’s still some confusion surrounding one of the main points celebrated last week: the tax reduction on INSS, a sort of social security tax collected by the government on payroll. Instead of paying 20%, the shoe, clothing, furniture, and IT industries will play a flat rate over their income: 1.5% for the shoe, clothing, and furniture sectors, and 2.5% for IT companies. The INSS tax will not exist for them anymore.

But during an event the day after the plan was announced in Brasília, minister Aloízio Mercadante, of the Ministry of Science and Technology, did not know how to answer business leaders at the Confederação Nacional da Indústria whether that percentage was over net or gross income. “I do not know,” Mercadante said.

Another minister at the meeting, Fernando Pimental, of Development, Industry and Commerce, who played a big role in coordinating the new plan, said, “I think it is over gross income.”

The well-received change to tax policy should start to be applied within 60 days of the publication of the decree of new regulations, dated August 3rd. But the doubts regarding the details of the new industrial initiative could be heard all week after the announcement of the plan.

Increased Funds for R&D and Small Business Loans

Small and midsize companies will benefit from special credit financing lines provided by BNDES, the state-owned national development bank. Before the announcement of the plan, the institution expected to provide a total of R$140 billion in credits by the end of 2011 — but after the announcements in Brasília on August 2, that number jumped to R$147 billion for the year.

The new program also aims to boost the investments by the private sector in research and development from 0.59% of the GDP to 0.9%, and to raise the amount of Brazilian exports from 1.3% to 1.6% of worldwide exported goods.

The government has also raised the amount of capital available to certain businesses. Companies qualified to apply for financing under Plano Brasil Maior will also be able to benefit until December 31 2012 from a funding line of US$10.4 billion called Progeren (Programa de Apoio ao Fortalecimento da Capacidade de Geração de Emprego e Renda, or roughly “the program to strengthen the capacity to generate jobs and income”).

Progeren, which is maintained by BDNES, will offer loans with annual interest rates ranging between 10% and 13%. The program is focused mainly on small and mid-size companies. This funding could benefit many software companies, which tend to be small players that have difficulty accessing credit. The period of time companies will have to repay these loans has been extended from 24 to 36 months.

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BNDES will also destine R$3.5 billion to support the expansion of private institutions that offer courses in technical skills, but the details of how that will be done have not yet been disclosed.

Another goal of the “Greater Brazil” initiative is to expand the access of urban homes to broadband, as a joint commitment with Plano Nacional de Banda Larga, which intends to bring broadband services to most parts of the country. In 2010, Brazil had 13.8 million homes with access to Internet broadband, and the aim is to multiply that by more than three by 2014, to 40 million homes.

This story originally appeared in Sourcing Brazil

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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