Brazil to grow 3% to 4% in coming years, economy minister says

Guedes unveiled measures aimed at slashing taxes on industry

Published in 28/06/2022 - 15:49 By Pedro Peduzzi - Brasília

Brazil’s Economy Minister Paulo Guedes said today (Jun 28) that, faced with a global scenario marked by slow activity and recession, Brazil should move in the opposite direction, with a growth near two percent in 2022 and three to four percent in the following years. He spoke at the opening of the Painel Telebrasil Summit 2022, in Brasília.

Measures are being planned to slash taxes on industrial sectors, he declared, which should offset the loss in people’s purchasing power and stimulate a new cycle of investments in the country.

In his speech, Guedes described extremely pessimistic scenarios abroad and optimistic ones in Brazil. “Inflation has started to rise in the US, and we’re going to have to live with this. The US went through a long cycle of growth that has come to an end, while we in Brazil are coming out of the rehab center as we start a cycle with an annual growth of three to four percent which should last for several years, if we continue at this pace,” he argued.

“Now, don’t let the problems out there scare you. We will have rising inflation in the US and we will have recession. The noise will be deafening—but not for the Brazilian economy, which is among the world’s most closed economies. We’ll now re-industrialize Brazil,” he added.

Brazil’s response to the crisis, Guedes went on to say, was “fierce.” “We’re going to grow 1.7 percent and should almost reach two percent [in 2022].” “They said the world was going to grow five percent, and they have revised it. They’re already saying there’s going to be recession. They are just beginning to face the problems. We have already managed to get through the wave and we’re going to grow, as unemployment and inflation sink,” he added.

Transport and taxing

Brazil boasts a large amount of ore, which is exported to China, Guedes said, adding that the nation imports steel 40 percent cheaper than the one produced domestically. According to the minister, the high cost of domestic production partly derives from the high cost of cabotage, “with six companies exploiting 200 million people” and high taxes in the industrial sector.

“The answer is to open up the market. Our idea is also to end the IPI [Tax on Industrialized Products], because the IPI has de-industrialized Brazil,” he added, noting that the Brazilian government has cut this tax by 35 percent. “We want to bring it down to zero,” he added.

Guedes used examples from the telecom sector to illustrate the effects of a high tax burden for investment and technological development.

“Today, nearly 40 percent of the costs in telecom stems from taxes. That’s the case in a sector where technology is key, because the norm in Brazil to tax whatever is easy to tax, like fuel, electricity, and telecom. This destroys Brazil’s productive apparatus. That’s why we’re going to abolish the taxes on industry,” the minister declared. He pointed out that all investments are deductible for those bringing in machines and equipment.

Investment

In view of the present landscape, Guedes predicts Brazil should begin “a long investment cycle, unlike what’s taking place across the world, where a long cycle in being brought to an end.” “Our talks in Europe and the US, and with the OECD as well as the G-20, have convinced us that an avalanche of investment may be headed for Brazil if we continue on the path we’re on. The US secretary of state has said that, from now on, a requirement for investments in countries is to have close logistics and be friendly. It’s the so-called near shore and friend shore,” he said.

Therefore, he added, “there’s no point in making semiconductors in Taiwan.” “As a result of the disruption of production chains, the vulnerability of the economic system has become evident, as production has stopped, and sources are far away. You have to be close and friendly. And which economy is this, close to both the US and Europe? It’s Brazil.”

The minister described the situation as “inescapable,” as Brazil is destined to become Europe’s source of energy security and the world’s source of food security. “The world has realized that Brazil is an energy power and has a vast consumer market.”

Digital revolution

Brazil should not miss out on the digital revolution the world is going through, Guedes argued. “The COVID-19 was an acceleration into the future. That’s where the importance of telecommunications and agriculture stood out,” he said. “We can’t afford to be out of this revamped production chain. Semiconductors can be manufactured here, and we can enter a new phase in this digital revolution.”

Translation: Fabrício Ferreira -  Edition: Nádia Franco

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