Since December last year, Brazilian companies have increasingly felt the impacts of the Federal Revenue auditors’ work-to-rule action. By April, 72% of the 163 foreign trade operators reported production disruptions.

Import Delays Affecting Businesses

For importers, delays in delivering goods to customers affected 23.9% of companies last month, up from 7% in January. The struggle to obtain essential inputs and raw materials led to nearly triple the number of companies halting production, rising from 7.8% to 21.2%.

Survey Insights from CNI

A survey conducted by the National Confederation of Industry (CNI) between March 29 and April 8 highlighted the primary issues. The slow customs clearance process is the top problem cited by companies, which also reported delays in client deliveries.

Exporter Challenges

For exporters, 40.2% of companies reported delays, a 16.8 percentage point increase from January. One such company, Samtronic, which deals in essential medical products for COVID-19 treatment, experiences customs clearance delays of 20 to 40 days. These delays impact hospitals awaiting vital supplies.

Broader Business Implications

Pedro Silveira, Administrative and Controllership Director at Samtronic, emphasized the repercussions on customers, especially hospitals. He highlighted issues in countries like Honduras and Paraguay. Silveira also pointed out the institutional damage to the company’s reputation and financial stability, as clients may not understand the delays are due to customs issues.

Risk of Losing Contracts

Samtronic fears losing contracts and market access due to these delays. According to CNI, the cancellation of export contracts increased from 1.8% to 7.6% from January to April this year.

Additional Challenges

The survey identified other difficulties such as lengthy cargo inspections, additional storage, logistics, and handling costs, increased inspection strictness, and more.

Federal Revenue Auditors’ Perspective

Isac Falcão, President of the National Union of Federal Revenue Auditors (Sindifisco Nacional), acknowledged the business community’s concerns but emphasized the auditors’ challenges. He noted that reduced resources and personnel hinder the ability to ensure both security and efficiency in trade control.

Operational Rigor

The union asserts that the current strict inspection procedures are necessary due to previously inadequate staffing. Falcão highlighted the importance of customs control in preventing unfair competition from foreign products.

Long-Term Business Impact

Constanza Negri Biasutti, CNI’s Foreign Trade Manager, warned of medium and long-term losses for Brazilian companies due to the continued auditors’ movement. She stressed the urgency of finding a viable solution to the ongoing disruptions.

Structural Issues at the Federal Revenue

Falcão pointed out the nearly 50% budget cut for 2022, the lack of public recruitment to offset the 40% reduction in staff in recent years, and the need to regulate Law 13.464/2017, which addresses performance bonuses.

Ongoing Auditor Mobilization

The mobilization includes the resignation of 1,498 leadership positions by May 3, with 479 officialized through exoneration orders. Additionally, around 5,000 auditors have pledged not to accept any commissioned positions until working conditions improve.

Falcão indicated that the mobilization would continue in the coming weeks, as the government has not committed to restoring the budget, conducting public recruitment, or regulating the law.