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2005 November 2006 Now Come the Reforms in Brazil. Bankers Will Love Them
2005 November 2006 Now Come the Reforms in Brazil. Bankers Will Love Them
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Despite all the exposures of rampant corruption that characterized Brazilian President Luiz Inácio Lula da Silva's first term in office, despite several of his ministers being found guilty of the crime of forming a gang, despite the disarray in his Workers Party (PT), which has gone through four different presidents in the last year alone (José Genoíno, Tarso Genro, Ricardo Berzoini and now Marco Aurélio Garcia), despite the deep political crises that several times threatened to lead to the president's impeachment, despite all of this, Lula was reelected in a second round vote October 29.
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Brazil has now an inflation rate of below 4 %, a government borrowing rate of 13.75 %.
This represents a True rate of 10,2 %....after inflation ! Uneheard of...on this planet !
The country with the second highest after inflation rate is Turkey with around 6 % !
In September 2005, the real ex-post Brazilian interest rate (Selic minus IPCA inflation) was at 12.70% p.a., and now it is at around 10.2% p.a. ! Where is the Big change ???????
Worse, Why buy 1 and pay for 2 when you consider that :
Individual borrowers paid on average 53.8% p.a. in September, down all of 0.1 percentage point from August’s 53.9%, but despite this still absurdly high rate, the CB commemorated this as the lowest rate since Central Bank records on this data began in 1994. Corporate customers paid on average 27.3% p.a. in September, compared to 27.9% p.a. in August, a low since October 2002. And overdrafts are charged by well over 120 %....per year !
In a typical manner adopted by this cynical government, believing that everyone is ignorant, the CB said that the fall in rates was the direct consequence of its rate cutting policy started in September of 2005.....which is simply totally innacurate...as explained in the previous paragraph !
And this doesnt take in account yet the high taxes charged to goods ! Some identical cars models are sold at a higher price in Brazil than in Belgium or even the UK... !!!!!
Furthermore Lula was in favor to sharply increase the lending to small and medium companies as they are the ones that creates the most jobs but the BNDES LENDING statistics show how the Lula government has boosted its links with big business and big money, lending by the government’s development bank, BNDES to small and micro businesses, fell 18.7% in the first nine months of this year, to R$4.856b. Credit approved to big businesses meanwhile, those who can easily access credit albeit not subsidized by the taxpayer, anywhere, including abroad, rose a massive 46.9% from the same period last year, to R$37.713 billion. Lending to médium sized companies dropped 7% to R$3.042b !
That is another contradiction and betrayal from what he promised !
Finally on Corporate Taxation, according to a survey by consulting firm, KPMG, Brazil is now in 17th place in world rankings of countries who most tax companies (survey covered 86 nations). A company in Brazil was taxed 34% of its revenues in January of this year, identical to that of Venezuela and well above the world average of 27.1%. In Latin America, the average was 28.5% of revenue and in the region, only Argentina and Columbia taxed more, by 35%, whilst the region’s star, Chile only taxed its companies 17%.
The highest corporate taxation was in Japan (40.7%), the US (40%) and Germany (38.3%), the difference being in these countries, that taxpayers, corporate and individual actually get something in return for their taxes, whereas in Brazil, these taxes go to pay interest to wealthy investors, to support a bloated public sector and are pilfered.
The survey showed the obvious, that a low tax burden on companies gives countries a competitive edge, attracts in direct investment and produces above average growth, as Ireland in particular, a country which has no natural resources is testament to.
The survey showed that contrary to almost all the other nations, Brazil has not only NOT been cutting the tax burden but raising it in the past decade or more. Thus, whilst the world average fell from 38% in 1993 to 28.7% this year, Brazil’s average tax burden on companies rose from 25% in Jan. 1997 (when Brazil was first studied) to 33% in Jan.1999, rose to 36% in 2000, fell to 34% in 2001 and has stayed there since.
Brazil’s OVERALL l tax burden is at around 40%, with nothing to show for it in return.
Conclusion : WHO IS SURPRISED THAT IN 2005 BRAZIL HAS THE LOWEST ECONOMIC GROWTH RATE OF ALL LATAM AND CARIBEAN COUNTRIES....AFTER HAÃTI.....AND THE WORLD LOWEST GROWTH RATE OF THE DEVELOPING NATIONS ??????
From my various sources and readings it looks like that 2006 could be a repeat of....2005 !
Great Lula, Great Lula ! He deserve several gold medals !