The governments of Brazil and Argentina reached an agreement worth US$600mn to finance bilateral trade.
Under the accord, Brazilian Banco do Brasil and development bank BNDES, along with Latin American development bank CAF, will provide guarantees for exports from Brazil to Argentina.
The deal needs approval from CAF’s board, in a meeting slated for September 14.
“The [Brazilian] treasury team had structured an operation of less than US$600mn, something around US$140mn, which was based on guaranteeing Brazil’s exports in yuan. When Argentina has reserves in yuan to guarantee Brazilian exports, its reserves decrease. Now, with the support of CAF, it doesn’t need to use these reserves to guarantee exports,” said Brazilian finance minister Fernando Haddad after a meeting with Argentine economy minister Sergio Massa.
Argentina’s deep economic crisis and its recent decision to devalue the peso’s official exchange rate have had a negative impact on Brazilian exports to the country. Argentina is one of Brazil’s main trading partners from which it buys high-value products such as cars and spare parts.
LULA TAX PUSH
The administration of Brazilian President Luiz Inácio Lula da Silva issued a decree with a new 15% tax on closed-end investments funds.
The measure, which is pending approval from congress, could generate 3.21bn reais (US$655mn) in tax revenue this year and 13.3bn in 2024, according to the finance ministry.
Open-end investment funds are taxed in Brazil, but high-income individuals with a net worth above 10mn reais (US$2mn) invest in closed-end funds that are only subject to taxation at the full redemption of the investment. Many wealthy families use these funds to avoid paying inheritance taxes.
The government also submitted a bill to congress to tax money that Brazilians have in tax havens.
“More than 1tn reais in assets belonging to individuals are placed abroad. In practice, these assets do not pay taxes on their passive income, such as interests and other financial income,” said the finance ministry.
The new tax could bring in around 7.05bn reais next year, 6.75bn in 2025 and 7.13bn in 2026, according to the ministry.
Both measures will compensate for the recent increase in the minimum wage to 1,320 reais (US$270) from 1,302, and the hike of the individual income tax threshold from 1,903 to 2,640.
Those taxation changes were aimed at the low-income segments, which make up a key group of support for the Lula administration.
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