The Chamber of Deputies approved a bill granting up to R$ 10 billion in subsidies over five years to fertilizer factories for new production plants in Brazil or the expansion and modernization of existing ones, using federal tax credits, according to a note from "Agência Câmara". Authored by the Senate, Bill 699/23 returns to that House due to changes approved in the form of the substitute text by the rapporteur, Deputy Junior Ferrari (PSD-PA). According to the text, the Executive Branch will define which projects will be approved to benefit from the tax incentives of the Fertilizer Industry Development Program (Profert). This total amount will be limited to R$ 2 billion annually, which may be carried over to the following year, up to 2031, if not used in the previous year. The Profert period will be from 2027 to 2031. The substitute bill also provides for the exemption from the Additional Freight for the Renewal of the Merchant Marine (AFRMM) charge between 2027 and 2031 when the transported goods are destined for approved Profert projects. The annual limit for this exemption will be R$ 200 million and R$ 1 billion for the period (2027 to 2031). The granting of credits will be done through a competitive procedure, and companies that produce synthetic or mineral fertilizers, their raw materials, bio-inputs, biofertilizers, and remineralizers can apply. Participation in the procedure will depend on prior qualification of the project by the Ministry of Agriculture, and obtaining the credit will be proportional to meeting the established criteria, especially regarding the adoption of technologies to reduce or neutralize greenhouse gas emissions. Other analysis criteria include: support for local development and social inclusion initiatives; maintenance of continuous and transparent dialogue with the affected communities; and the adoption of procedures and technologies to increase energy efficiency. The granting of credits will be limited to 20% of the company's expenses on fertilizer production activities and their raw materials in Brazil. Credits obtained in this way will be considered as credits for the Social Contribution on Net Profit (CSLL) and may be used to offset tax debts due or to become due with the Federal Revenue Service or even to request reimbursement in cash.
Sanctions
If the project is not implemented, the company will be subject to a fine of 20% of the released amount and the return of any credits used improperly.
Specific fund
To enable investments in Profert projects, Bill 699/23 authorizes the Union to create the Fund to Stimulate National Fertilizer Production (FPNF), which will house the resources foreseen in the budget. The fund's support may be provided through guarantees to cover loans, investment in derivatives linked to the products, investment in structured debt with partial interest rate equalization, and support for research projects. Several of its operating rules and governance structure will be defined in its statutes, ensuring the participation of representatives from the sector. Criteria for project selection should include: cost competitiveness; carbon intensity; technical maturity; execution capacity; regional impact; and level of integration between supply chains. Due to the increase in prices of certain types of fertilizers whose main supplier is Iran, the bill allows the use of up to R$ 1 billion in 2026 to avoid price increases in commercialization. These financial credits may be directed to producers or importers of fertilizers if they deduct the credits received from the sale price, as indicated on the invoice. Furthermore, they must maintain a workforce equal to or greater than the average number of employees in the three months prior to the month in which the law derived from the project comes into effect. A joint act of the Ministries of Finance and Development, Industry and Commerce will define the limit of credits to be granted based on the import or domestic market sale value. Similar to the Profert tax credit, the beneficiary company may use the credits to pay taxes or request reimbursement according to legal rules. The credit will be considered as relating to Corporate Income Tax (IRPJ), CSLL, and AFRMM.
Mixing targets
The approved text stipulates that the National Council for Fertilizers and Plant Nutrition (Confert) will define the mandatory blending percentage, by volume, of national, synthetic, and mineral fertilizers in fertilizers marketed, distributed, and sold in Brazil. The target will start at 2%, gradually increasing to 10% in 2037. However, if there is public interest or if it is impossible to meet the target, the council may reduce it to less than 2% until viable conditions are restored. Provided that the annual volumetric percentage of mandatory blending is maintained, Confert may establish disaggregated percentages for each fertilizer component. Furthermore, it will have to conduct a regulatory impact analysis to determine the annual mandatory blending percentage based on the current or future availability of synthetic and mineral fertilizers; the capacity of infrastructure and production facilities over time; the protection of consumer interests regarding price, quality, and a firm supply of products; and the impact of the blending price on the competitiveness of the agricultural value chain.
Results
Confert will also be responsible for periodically monitoring and evaluating the results of Profert, publishing an annual report containing, at a minimum: the volume of investments authorized and effectively executed; installed and expanded production capacity; impact on reducing external dependence on fertilizers and raw materials; volume of additional national production resulting from the program; and indicators of competitiveness and security of supply.
BNDES
Another new feature in Ferrari's report is the allocation of federal funds to the National Bank for Economic and Social Development (BNDES) to offer credit lines for projects of companies qualified under Profert. These lines must meet environmental, social, and economic sustainability criteria aligned with the program's objectives, whether for modernization, reactivation, and expansion of industrial plants, for research, development, and innovation activities in the production chain, or for infrastructure to integrate logistics hubs and enable new ventures. Both BNDES and qualified banks will assume all loan risks. Financial charges, terms, and other regulations will be established by the National Monetary Council (CMN).
Food safety
Junior Ferrari stated that the approval of the proposal is strategic and necessary for strengthening the Brazilian agricultural inputs sector. "Its implementation is fundamental to reducing the tax burden that currently weighs down and compromises the economic viability of structuring projects aimed at the development and consolidation of the national fertilizer industry," he said. According to Ferrari, the measures proposed in Profert are the result of studies from the National Fertilizer Plan 2022-2050, to strengthen policies to increase the competitiveness of fertilizer production in the country and reduce external dependence on these inputs from the current 85% to 45% by 2050. "Brazil is one of the world's largest food producers, and we import about 85% to 90% of our fertilizers. We run a risk of food shortages in Brazil and the world. It's an economic issue, but much more so, a matter of food security," said Ferrari. According to Ferrari, the strong external dependence leaves Brazilian agriculture vulnerable, posing risks to the population's food security, which requires measures to enable an increase in national fertilizer production. Although Brazil is one of the world's largest producers and exporters of food, its fertilizer industry is not competitive due to a lack of incentives and a favorable environment for the sector. While the country accounts for 8% of the global market, approximately 85% of the fertilizers used in Brazilian crops are imported.
Reviews
The leader of the Novo party, Deputy Gilson Marques (SC), criticized some points of the text, such as the mandatory blending of fertilizers. "This makes no sense, neither because it's mandatory, nor nationally. It has to be done in the best way, freely and cheaply," he said. For Deputy Chico Alencar (Psol-RJ), vice-leader of the Psol-Rede federation, the project's response is structured on the "old solution" of tax breaks. "The bottlenecks to domestic fertilizer production are, in fact, the low availability of natural gas and our low logistical capacity," he stated.
This text was translated by machine from Brazilian Portuguese.