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backLATINtalk April, 2012

Brazil offers tax cuts, finance to help industry

Brazil's government announced a new package of tax cuts, low-cost credits and other relief for ailing industries on Tuesday, as Latin America's biggest economy struggles to regain momentum.

The measures came as fresh data showed signs of life in Brazilian industry after a prolonged slump, but some analysts cautioned that the latest policies would fail to tackle the root causes which have made domestic manufacturing less competitive abroad.Finance Minister Guido Mantega said the government will cut payroll taxes in efforts to spur hiring in sectors ranging from textiles and plastics to the automotive industry.

Together, the tax cuts represent about 10 billion reais ($5.5 billion) annually in foregone public revenue.The government will also stimulate domestic industry through government purchases and inject 45 billion reais (about $24.5 billion) into the coffers of a state development bank that provides subsidised loans for Brazilian companies.

The moves are the second such stimulus package for ailing Brazilian industries since the country's previously booming economy began to slow in mid-2011, hit by the worsening fears in Europe and slower growth in China."Given the international outlook, we must continue to take measures to stimulate public and private investment," said Finance Minister Guido Mantega, in a speech to business leaders in Brasilia, Brazil's capital.

Brazil's real currency firmed after Mantega's comments, in which he said the recent retreat by the currency had put the real back at a "reasonable" level.

The real climbed 0.3 percent in Tuesday trade to 1.8250 to the dollar.

Source: Business Recorder - GAI

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