Brazil’s Ancine agency, its foremost public-sector source of film funding, has frozen all of its incentive programs, potentially near paralyzing new production in Latin America’s biggest film-TV industry.

The dramatic decision, which has left Brazil’s industry is a state of shock and intense fear for its future, comes as it has taken further hits.

In one, the governmental Brazilian Trade and Investment Promotion Agency (Apex), is discontinuing financing for Cinema do Brasil, the prominent international promotion and financing agency run by Sao Paulo’s Siesp audiovisual industry assn., which has helped turn the Brazilian industry, once narrowly focused on its huge domestic market, into an international force.

In another, Petrobras, the semi state-owned Brazilian oil company, has pulled financing of Brazilian film productions and festivals, including its top events, the Rio de Janeiro and Sao Paulo Festivals. Petrobras figured for two decades as the industry’s biggest corporate sponsor.

Ancine’s suspension of support program includes, crucially, new incentives after April 18 from its key Audiovisual Sector Fund (FSA), which.operates a swathe of financing lines covering the development, production and distribution of movies, as well as TV shows. Ancine administers nearly $300 million in direct ad tax incentives, according to a press release made by industry representatives.

Announced by Ancine late Thursday night, the subsidy freeze comes after Ancine has come under long-term scrutiny from Brazil’s Tribunal de Contas da Uniao (TCU), its government accountability office, for allegedly inadequate accounting procedures, which has left 3,000 applications for financing still to be processed. This March, the TCU instructed Ancine to halt new incentive adjudications.

The TCU is run by technocrats, and the investigation dates back to at least 2017. So its origins cannot be attributed to Jair Bolsonoro’s new government, in power from the beginning of the year.

The incentive freeze comes in a context of undisguised animosity between Brazil’s film and TV industry and many parts of Bolsonoro’s government which regard Brazil’s entertainment industry as a drain on its government budget.

In a near totally united front, the industry has hit backed arguing the importance of the film-TV industry to Brazil’s economy.

Generating $11 billion in annual turnover, and with labor force of more than 300,000, the sector pays $500 million in taxes, according to the Brazilian Institute of Geography and Statistics, an industry press release claimed.

Ancine is now examining how to restructure its accounting procedures, it said on Thursday night. The large question for the industry is whether its incentive freeze is a temporary moratorium or part of an ongoing dismantlement of crucial government support for Brazil’s film-TV industry. The current lack of visibility on any answer to that question is in itself a crippling factor for new production.

The Ancine incentive freeze will dominate discussions at the Rio Content Market trade fare and conference, which begins Tuesday, and where Ancine president Christian de Castro, a well-respected former banker, is due to speak Friday.

Tensions between the government and its industry are likely to spill over into open protest at next month’s Cannes Festival where Kleber Mendonça Filho’s “Bacurau,” co-directed with Juliano Dornelles and described by Thierry Fremaux as “highly political,” plays in competition, and Karim Aïnouz’s “Invisible Life,” in Un Certain Regard. Both directors are highly vocal critics of Brazil’s far right.

Cinema do Brasil will attend the Cannes Festival. Its future beyond that is up in the air.