BR do Mar: What to Expect

SÃO PAULO – After much negotiation, the Senate approved the coastal shipping stimulus program (BR do Mar), which now returns to the Chamber of Deputies for further discussions. It returns with an addition, which is the extension of the special tax regime that exempts investments in port terminals and railways (Reporto), which, created in 2004, had been successively renewed until it expired at the end of 2020 by executive initiative. Now, the proposal is to renew Reporto from January 2022 until December 2023. Not too bad. As is known, Reporto guarantees exemptions from the Industrialized Products Tax (IPI), the Social Integration Program (PIS), and the Contribution to the Financing of Social Security (Cofins) for the purchase of machinery and equipment, such as containers and locomotives, as well as the suspension of the Import Tax on products without a national equivalent and the Tax on Circulation of Goods and Services (ICMS) charged by the States. According to recent calculations, these taxes can burden investments by 52%, often making them unfeasible. The project that came out of the Senate reduced the requirement for national labor on foreign chartered ships operating in the country to one-third, contrary to the government’s proposal, which provided for at least two-thirds. The argument was that labor costs with Brazilian employees are higher compared to foreigners, which, according to shipping companies, would compromise competitiveness. Since the Chamber, in a decision made before sending the project to the Senate, maintained the proportion suggested by the executive, it is not known what the understanding will be this time. The project, in addition to extending the transition period for Brazilian shipping companies to charter without their own equipment, also eases the chartering of foreign vessels when both the flag of the country of origin is maintained and when the ship starts operating under the Brazilian flag. In this case, it also meets the demands of shipping companies that consider the current rules excessively strict. Finally, the project extends the deadline for shipping companies to charter without their own vessels as “ballast” from four years to six years, partly meeting the demands of Brazilian companies that had been requesting up to 15 years of transition, arguing that the domestic market could be left unattended during periods of strong overseas demand. With the program, the government hopes to increase coastal shipping supply, as new routes would initially emerge, and costs would be reduced. The intention is to increase the capacity of the coastal shipping fleet by 40% in three years. With this, it would increase the volume of containers transported per year from 1.2 million to 1.5 million TEUs (twenty-foot equivalent unit). For truck drivers, BR do Mar will not only reduce mileage in overland transportation but also restrict the bargaining power of freight rates with the cargo owner, as the coastal shipping company would become the sole negotiator with the producer or buyer. As is known, the idea of ​​betting on coastal shipping gained strength in the government after May 2018, still in the Temer government, when Brazil came to a standstill due to a truckers’ strike that lasted more than a week. The impact on the economy was so severe that business sectors demanded a program to minimize the effects of future stoppages. Either way, the truth is that there is a strong distortion in the transportation matrix, since, according to a study by the National Confederation of Transport (CNT), 61% of all transported cargo goes through the road modal. Reducing this percentage would be advisable for the future of the Brazilian economy.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is Manager of Institutional Relations at the Fiorde Group, composed of Fiorde International Logistics, FTA Transport and General Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: fiorde.com.br

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