Braskem sees Brazil adopting more industrial stimulus for chems

09 May 2013 23:06  [Source: ICIS news]

HOUSTON (ICIS)--Braskem expects the Brazilian government to announce new measures to strengthen the nation's chemical industrial, the plastics producer said on Thursday.

"The outlook for the global scenario remains challenging, which reinforces the need for a more comprehensive industrial policy that continues to strengthen Brazilian industry," the company said in its Q1 earnings statement. "In this context, the government is expected to announce new measures."

Already, the Brazilian government has reduced the taxes that domestic chemical producers pay on feedstock purchases, Braskem said. The companies affected are what Braskem calls first- and second-generation chemical producers.

Specifically, the PIS (social integration) and COFINS (social contribution) tax rates will fall to 1%, and they will remain at that level until 2016, Braskem said. The rate will then gradually increase until 2018.

Braskem said the reduction is essential to restore growth and increase utilisation rates among domestic producers, which have been operating with idled capacity.

Ultimately, profits should rise, allowing domestic producers to increase capacity and reverse Brazil's chemical trade deficit, Braskem said.

For Brazil's economy as a whole, it is expected to grow by 3% this year, up from 0.9% in 2012.

Earlier this month, Guido Mantega, Brazil's finance minister, said the nation's economy should grow gradually this year.

Despite the challenges faced by the global economy, Brazil's domestic market is stronger as salaries continue to rise while loan defaults are falling, Mantega said.

Overall, inflation is under control, and it should fall in the upcoming months, he said.

However, prices for food are going through inflation, Mantega said. The government is taking measures to prevent the sector's inflation from spreading to other parts of the economy.

By: Al Greenwood
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