BRAZIL FACTOR

A look on Brazil issues

News on Brazil GNP

Posted by Nadiva Olivier on September 9, 2009

sao paulo buildingsThe Brazilian Government will announce the GNP results for 2nd quarter next week. Our economy grew something around 1.8 and 2.0. Brazil has hired the P.R. consultant Fleischman Hillard (NY) – one of the most expensive in the world – to invite national and international journalists, analysts and other VIPs to discuss our perspectives with Brazilian Minister, Guido Mantega. The meeting will be on Monday.

The figures on our GNP indicate the economy is healthy and can grow, although it will be a slow growth, for several reasons:

1 – Despite 2nd quarter figures are higher than last quarter, when compared to same period in 2008 shows negative performance.

2 – Investments (factories, infrastructure, and so on) that had been very high for last 3 years, fell dramatically since the 2nd half of 2008. Brazil is supposed to have lost something like 150 billion reais in investments that did not come here. It means less capacity for growth.

3 – The Government plans heavy investment in infrastructure that includes:

a) 34 billion reais for “trem bala” – a straight railroad line between Sao Paulo and Rio, with tunnels, bridges and so on, to be built in less than 4 years (a world record), which environmental licenses have not been obtained at present;

b) oil – about 100 billion reais are planned to buy equipment to the Petrobras project,

and so on

When talking about infrastructure investments we are talking about trillions of dollars that the Government does not have.

Of course it will be paid by us, with taxes increase.

3 – Central Bank kept interest rate to 8.75 (interest rate among banks). It is the smallest last years. The rate – less expected inflation – is around 4.8 – a record in Brazilian standards despite very high when you compare with other countries (around zero or 1%). The new level indicates that Brazil is on the road to lower levels, following international trends. Brazil has come a long way toward stability but there is still much to do.

The good news is that Sao Paulo industry (almost half of Brazilian industry) begins to show recovery.

The bad news is that the Government has increased the public debt that now amounts to almost 40% of GNP. All the figures are growing in the Government expenditures – salaries, etc.

It means that we can expect new taxes. This is bad because our tax burden is very high – 36/37% and tax on wages is also high – 50% – while in other countries is 10% / 15%.

Last Worldwide bank ranking listed Brazil in 145th position among 181 countries in the tax field. And last but not least, we have the worst tax system you can imagine. Companies go crazy hiring people and investing in IT to face the strong demand of control and routines in the tax system.

In the balance, you can see that we are not competitive and we can expect low growth… but Brazil can always surprise you! Fleischman Hillard is working very hard on that. You can expect good news on Brazil this week, starting with the launch of Forum Mundial Report, today, indicating that our competitiveness is much better: in a sample of 133 countries we are now in the 56th position!

One Response to “News on Brazil GNP”

  1. brazil said

    brazil is cool

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