Brazil: State of São Paulo Sets Up "IncentivAuto"

State of São Paulo Sets Up IncentivAuto, financing Programme for the Automotive Industry

On October 21, 2019, the State of São Paulo enacted State Law 17185, authorizing a State fund to grant financing to automotive manufacturers with projects approved by a government programme called “IncentivAuto”. In a nutshell, companies investing a billion Reais and creating 400 jobs may have projects approved and will be granted financing and favorable conditions for loan payback.

IncentivAuto was set up by Governor’s Decree 64130, on March 8, 2019, and aims at attracting new investments by vehicle manufacturers established in the State of São Paulo. To benefit from the financing, companies must fulfil the following requirements:

• Manufacture, in the State of São Paulo, vehicles falling under chapter 87 of the Harmonized System;
• Apply for the program by filing a project for expansion of industrial plants, building of new ones, or development of new products, indicating amount and term of the investment;
• Cumulatively, investments must be of at least one billion Reais, create at least 400 jobs, and be fully made in the State of São Paulo; and
• Once approved by a commission of the State Secretariat for Economic Development, companies will be granted funding to implement the project and increment their working capital.

Further regulations on the matter will still be issued by the State government bodies, addressing, for instance: (i) discount for payment in advance of the money lent; (ii) scaled discount, reaching up to 25% of the balance due, depending upon the total amount invested; and (iii) collaterals to be provided by the borrowers.

The state Government’s Investment Agency — Investe São Paulo — must periodically monitor all projects. Beneficiaries must submit a report about the goals of the investment every six months and a final report at the end of the project.

Companies that had investment projects being implemented before the edition of State Decree 64130/19 may also request their accession to the program and relevant financing. Nevertheless, only the amount to be invested after the request will be considered as investment for the purposes of the program.

Actions such as IncentivAuto are part of the efforts of the São Paulo Government to foster the local automotive industry and boost the state’s economy.