Brasil: "Compre brasilero"

 

Brazil Moves to Boost Local Goods

By PAULO PRADA

SÃO PAULO—Brazil's government, grappling with the effect of a soaring currency on the country's beleaguered manufacturers, on Tuesday announced temporary tax cuts for select sectors, increased lending for industry and a government purchasing program that will favor Brazilian products over less-expensive imports.

Brazil's President Dilma Rousseff speaks in the capital Brasilia during the launching ceremony of 'Plano Brasil Maior', a governmental plan to strengthen the country's industrial sector.

The measures, which were outlined by President Dilma Rousseff in a speech in Brasília, the country's capital, come as Brazil posted a sharper-than-expected drop in industrial output during June.


Brazilian industries produced 1.6% less in June than in May, government data showed, burdened by high interest rates, a flood of inexpensive goods from China and a currency, the real, that has surged more than 40% against the dollar since early 2009.
"We must protect our economy, our productive forces and our jobs," Ms. Rousseff said.
She added that the new measures would improve tax, credit and hiring conditions for the sectors that have been most affected by the so-called currency war.
Since last year, Brazil has used that term to criticize monetary policies in the U.S. and other developed markets that have depressed the value of the dollar and other major currencies against those of many fast-growing emerging markets, including Brazil's real.
Among the new steps unveiled, the government extended up to $16 billion in payroll-tax cuts to manufacturers—including textile, footwear and software producers.
The cuts, which were cast as a pilot project through the end of next year, could be extended to include other sectors further into the future, the government said.
Ms. Rousseff also extended various subsidized loan programs made available through the country's national development bank and announced a program that will favor Brazilian products in government purchasing.
The new "Buy Brazil" policy will allow the government to pay as much as 25% more for local products than for similar foreign goods, in particular when purchasing health, defense, communications and high-tech equipment.

Industry leaders welcomed the steps.
However, they said that deeper and more-permanent reforms are necessary for Brazil to overcome hurdles that historically have kept the cost of business high—from towering interest rates to rickety infrastructure to corruption. Until the recent appreciation, Brazil's manufacturers counted on a cheap real to help them overcome such handicaps.
The measures "are positive, but not enough to rescue industry from its stranglehold," said Robson Andrade, president of Brazil's National Confederation of Industry.
The overall benefit from cutting the payroll tax, for example, could be limited, as the government moves to recoup the revenue through sales taxes in order to fund the recent massive run-up in government spending.
"They're not lowering the final tax burden," said Felipe Salto, an economist at Tendencias, a consultancy in São Paulo. "The government needs that money to finance the increased spending."
While the measures should provide short-term relief for some sectors, economists say they will do little to enhance Brazil's competitiveness as a whole.
"How am I helping Brazil by buying Brazilian products, even if they are inferior and more expensive than foreign goods?" asked Márcio Garcia, an economist at the Catholic University in Rio de Janeiro.
"That doesn't foster efficiency," he said.
—Matthew Cowley and Jeffrey T. Lewis contributed to this article