Brazil's vice-president advocates for trade with Latin America

Acting President Geraldo Alckmin, speaking at the opening of an event hosted by the Brazilian Association of Infrastructure and Basic Industries on Wednesday (April 12) in Brasilia, emphasized the need for greater expansion of trade between Brazil and other Latin American countries. He noted that currently only 26% of transactions occur within the region. Alckmin pointed out that in the globalized world, trade is largely intra-regional.

He noted that in North America, 50% of trade occurs between the United States, Canada, and Mexico. In the European Union and Asia, those figures rise to 60% and 70%, respectively. Alckmin stressed the need for Brazil to prioritize its regional neighbors and make an effort to increase trade in the region, especially given the significant volume of products, such as trucks, cars, buses, auto parts, and value-added goods, that are sold within Latin America.

The acting president further pointed out that President Luiz Inácio Lula da Silva recognized the importance of regional trade ties and prioritized them during his international agenda in his third term. His first stops were in Argentina and Uruguay, followed by the United States, Brazil's largest investor. Currently, President Lula is in China, where he is expected to sign over 20 agreements with the Asian country. 

Economic reforms

Alckmin stated that the government is optimistic about the recent approval of the fiscal framework and the future tax reform that shall leverage investments in the country. For the vice-president, who also serves as the Minister of Development, Industry, Commerce and Services, Brazil has experienced concerning deindustrialization trends. However, he believes that new measures and policies can help to reverse this trend and stimulate competitiveness.

The government's proposed package of fiscal measures, which is currently awaiting submission to Congress, aims to promote credibility and predictability for Brazil's economy, as well as ensure sustainable financing for public services such as health, education, and public safety. 

“The new fiscal anchorage is a smart solution that combines rigorous controls on public spending with anti-cyclical measures to support economic growth. By setting a spending ceiling during times of strong economic growth, and a spending floor during weaker periods, the government can boost economic activity. This approach ensures that the debt curve will fall over time,” he explained.

In this scenario, the role of credit is extremely important, and it should be boosted with the reduction of interest rates as a consequence of the improvement of expectations towards the country's fiscal policy, he noted.

“Three things have an impact: interest rates, taxes and the exchange rate. The exchange rate is currently competitive, it just needs to stay stable. The tax system is expected to improve with the upcoming tax reform. The taxes will not fall, but they will simplify and stimulate productive activity. And I’m confident that fiscal anchoring measures will lead to a gradual reduction of the Selic benchmark interest rate, resulting in better credit conditions”, Alckmin said. He also stressed the importance of seeking other ways to support credit, including the use of guarantee funds.

The acting president pointed out that the deceleration of inflation will impact the Central Bank's decisions regarding monetary policy and the Selic interest rate. He noted that Brazil´s Broad Consumer Price Index (IPCA), which gauges the country's official inflation, recorded a rate of 0.71% in March, a slight decrease from February's rate of 0.84%. This marks the lowest level of inflation since January 2021.

"We want an inclusive development with sustainability and stability. Inflation is not socially neutral. It affects the poor and benefits the rich. So, the drop in inflation is very important to help monetary policy. The reduction of the cost of credit is a crucial factor for promoting economic activity," he said.