Brazil’s Industrial Modernization Program Targets 23 Sectors

The Brazilian government has launched an ambitious initiative to modernize the nation’s industrial infrastructure, focusing on enhancing productivity, competitiveness, sustainability, and overall business security. This industrial modernization program, centered around accelerated depreciation, prioritizes the industrial sector and is designed to stimulate private investment in machinery and equipment.

Accelerated Depreciation: How It Works

Accelerated depreciation is a mechanism that allows companies to expedite the write-off of capital goods, offering significant tax benefits. Normally, the value of assets like machinery and equipment is depreciated gradually over up to 20 years, but this program enables businesses to claim 50% of the asset’s value in the first year and the remaining 50% in the second. This policy is particularly beneficial for companies seeking immediate relief in cash flow, as it accelerates deductions in their Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) filings.

The program, overseen by the Ministry of Development, Industry, Commerce, and Services (MDIC) in collaboration with the Ministry of Finance, is part of a broader strategy to stimulate investment in Brazil’s industrial base. The government has allocated R$ 3.4 billion in financial credits over two years (R$ 1.7 billion in 2024 and another R$ 1.7 billion in 2025) for the purchase of new machinery, equipment, and instruments.

Sectors Benefiting from the Program

The initial phase of the industrial modernization program will focus on 23 sectors, which represent a diverse range of industries within the country’s transformation industry. The sectors include:

  1. Food production
  2. Leather goods and footwear
  3. Textiles
  4. Apparel and accessories
  5. Wood products
  6. Pulp and paper
  7. Printing and recording
  8. Biofuels
  9. Chemicals (excluding those benefiting from REIQ)
  10. Pharmaceuticals
  11. Rubber and plastic products
  12. Non-metallic minerals
  13. Metallurgy
  14. Metal products
  15. IT equipment, electronics, and optics
  16. Electrical materials
  17. Machinery and equipment
  18. Vehicle parts and accessories
  19. Transportation equipment (trains, ships, aircraft)
  20. Construction
  21. Furniture
  22. Infrastructure
  23. Miscellaneous products (such as office materials, jewelry, musical instruments, and sporting goods)

Each sector will receive funding proportional to its size within the Brazilian economy, with a cap of 12% of the total budget allocated to any one sector. This measure is designed to prevent larger sectors from monopolizing the available resources and ensures equitable distribution across all participants.

Economic and Environmental Benefits

The program not only supports the modernization of Brazilian industry but also advances goals related to sustainability. As part of the eligibility requirements, companies must meet criteria set by the MDIC, such as promoting national industry, ensuring sustainability, and adding value within the country.

By accelerating the depreciation process, the program is expected to contribute significantly to the formation of fixed capital in Brazil, an essential indicator of future productive capacity. In fact, studies from private banks and the Institute of Applied Economic Research (IPEA) estimate that the program could spur up to R$ 20 billion in new investments, boosting GDP growth and creating jobs across the country.

The MDIC has plans to expand the program in the coming years, increasing the volume of resources and incorporating additional sectors. This first phase marks a significant step toward revitalizing Brazil’s industrial base, positioning the country to be more competitive on the global stage.

Conclusion

Brazil’s new accelerated depreciation program is poised to be a game-changer for the industrial sector, offering immediate financial incentives for businesses to modernize their operations. With the backing of R$ 3.4 billion in credits and a focus on 23 diverse sectors, the program aims to increase both productivity and sustainability, while encouraging private investment. The expected economic ripple effects, including higher employment and GDP growth, highlight the transformative potential of this initiative for Brazil’s industrial future.