On March 20, Brazilian President Lula officially signed a bill to expand tax relief policies for domestic chemical and petrochemical producers, reducing the tax burden on key production raw materials by more than 60%, in response to the pressure of rising raw material costs triggered by the Middle East conflict.
The bill was published in the Official Gazette on March 20, expanding the Special Taxation Regime for the Chemical Industry (REIQ). The deduction rate for social security and industrial product taxes related to eligible raw materials increased from 0.73% to 5.8%. The fiscal budget for this policy will rise from BRL 1.1 billion in 2026 to BRL 3.1 billion. From 2026 to 2031, the combined benefits of the chemical industry's special tax incentives and the associated investment incentive program will total BRL 18 billion.
Brazil's Vice President and Minister of Development, Geraldo Alckmin, stated at the signing ceremony in São Paulo that the timing of this policy implementation was carefully considered. He pointed out that due to regional conflicts, the prices of natural gas and chemical raw materials have continued to rise. The federal government's decision to reduce the tax burden on chemical raw materials at this time aims to enhance the competitiveness of the industry, attract investment and innovation cooperation, and promote energy efficiency upgrades.
该政策迅速获得行业积极响应。墨西哥化工企业阿尔佩克巴西区经理Jorge
The policy quickly received a positive response from the industry. Jorge Villanueva, Regional Manager for Brazil at Mexican chemical enterprises Alpek,
stated that the bill signed this time is a historic initiative in support of chemical enterprises, but the key lies in its subsequent implementation. He noted that the tax incentives can reduce the tax burden on basic chemicals and petrochemical raw materials, boost local production, reactivate idle capacity, stabilize employment, and strengthen Brazil's position in the global industrial chain—particularly significant in the current context of geopolitical tensions, economic uncertainty, supply chain pressures, and fluctuations in energy and raw material markets.