Lula's reaction to Trump includes expanding the Reintegra program and postponing taxes

Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.

In this edition, I bring a summary of what the Lula administration is doing to compensate for the tariffs increase decreed by Donald Trump.

The measure establishes the Reintegra program (Special Regime for the Reintegration of Tax Values) for companies. The proposal grants tax credits for part of the indirect taxes paid along the production chain, reports journalist Gabriel Benevides.

The measure introduces a special tax rebate program known as Reintegra (Special Regime for the Reintegration of Tax Values) for qualifying companies. The program grants tax credits equivalent to part of the indirect taxes paid along the production chain.

Under the plan:

• Large and medium-sized exporters can receive rebates of up to 3.1% of applicable tax rates.

• Small exporters are eligible for up to 6%.

These incentives will remain in effect until December 2026.

According to Brazil’s Ministry of Finance, the expected fiscal impact is approximately R$ 5 billion (USD 1 billion) during the program’s duration. The measures apply exclusively to sectors directly impacted by the U.S. tariff hike — industries exempt from the tariffs are not eligible.

The initiative, branded by the Brazilian government as the “Sovereign Brazil Plan”, is intended as a symbolic show of strength against Trump’s trade measures. The decree was co-signed by:

• Fernando Haddad, Minister of Finance

• Geraldo Alckmin, Vice President and Minister of Development, Industry, Trade, and Services

Drawback extension

President Lula also extended, by one year, the export deadlines for goods covered under Brazil’s drawback regime for contracts involving sales to the United States through the end of 2025.

The drawback program is a customs mechanism allowing suspension or reimbursement of taxes on imported inputs used in the production of goods for export.

Tax payment deferrals

Brazil’s Federal Revenue Service may allow companies impacted by the tariff hike to defer tax payments for up to two months.

Additional measures in the anti-tariff package

1. Credit Line – Up to R$ 30 billion (USD 6 billion) in financing, offered at “affordable rates,” will prioritize the most affected sectors and smaller firms. Access will be contingent on job retention.

2. Public Procurement – Simplified procedures for federal, state, and municipal purchases of food products originally destined for U.S. export, with potential redirection to programs such as school meals.

3. Modernized Export Protection – Enhanced risk-mitigation tools for exporters, covering risks like buyer default or contract cancellations. The plan encourages banks and insurers to adopt these guarantees for a broader range of transactions, with partial risk-sharing by the federal government.

4. Guarantee Funds – Additional funding for trade and investment guarantee programs, including:

   • R$ 1.5 billion to FGCE (Foreign Trade Guarantee Fund)

   • R$ 2 billion to FGI (Investment Guarantee Fund, managed by BNDES)

   • R$ 1 billion to FGO (Operations Guarantee Fund, managed by Banco do Brasil)

     These resources aim to expand financing access for small and mid-sized exporters.

Fiscal rules and waiver

The R$ 5 billion in Reintegra rebates plus R$ 4.5 billion in guarantee fund injections — a total of R$ 9.5 billion — will be excluded from Brazil’s new fiscal framework calculations. Finance Minister Haddad had previously indicated such exclusions would not be necessary, but the administration now plans to submit legislation to formalize the exemption.

Dario Durigan, the Ministry’s Executive Secretary, confirmed the approach during the Plan’s launch at the presidential palace, noting that the government would work with Congress and Brazil’s Federal Court of Accounts (TCU) on the matter.

Brazil’s fiscal target for 2025 is a balanced budget (zero deficit), with a 2026 goal of a 0.25% of GDP surplus.

Employment and industry monitoring

Beyond direct business support, the government created the National Employment Monitoring Chamber to track unemployment trends in production chains affected by U.S. tariffs.

While some expected the plan to include direct wage subsidies — similar to pandemic-era measures — no such program has been announced yet.

According to the government’s text, the Chamber’s role will be to:

Diversifying export markets

The “Sovereign Brazil Plan” also includes directives to expand trade negotiations beyond the United States, mentioning countries such as the United Arab Emirates and Canada as potential priority markets.

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