President Temer Freezes Incentives for Automakers, Prioritizing Free Trade Pact with Europe

11/17/2017 - 12h27

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JULIO WIZIACK

MAELI PRADO

FROM BRASÍLIA

The Federal Government will not be authorizing the implementation of Rota 2030 - an industrial program that had been designed to replace Inovar Auto from 2018 onward - until a commercial agreement is reached between Mercosur and the European Union.

Sources close to the negotiations considered that the new incentives for automakers included benefits that could have gotten in the way of a commercial agreement with Europe, an agreement which president Temer has no intention of jeopardizing.

The president views the agreement as an important milestone for his administration - negotiations, which have been going on for 17 years, may finally be concluded in December. The Inovar Auto program ends on the last day of 2017, and automakers would like to see Rota 2030 approved before then.

The new program would include a discount of up to ten years on the Tax on Industrialized Products (IPI) for companies that achieve their goals in terms of energy efficiency, car safety and investments in research.

However, there are still outstanding disputes surrounding the preservation of differentiated treatment between national and foreign automakers, which even led the World Trade Organization (WTO) to penalize Brazil.

The Ministry of Development believes that Rota 2030 would not disrupt negotiations with the Europeans. On Tuesday (the 14th) automaker representatives met with president Temer, Finance Minister Henrique Meirelles and Industry Minister Marcos Pereira, but no resolution was reached.

Translated by THOMAS MATHEWSON

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