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Brazil Fights Crisis with US$ 3.6 Bi in Tax Cuts

Brazilian withdraws from ATM In order to prop the slowing Brazilian economy and meet a 4% growth target in 2009, Brazil's government will cut taxes by 8.4 billion reais (approximately US$ 3.6 billion), Finance Minister Guido Mantega and Central Bank president Henrique Meirelles announced Thursday, December 11, in Brazilian capital BrasÀ­lia.

The stimulus plan will also allow the Central bank to use international reserves to help Brazilian corporations access to credit thus easing pressure on the weakening local currency.

The tax cuts on personal income, consumer loans and automobiles will help sustain economic growth as demand for commodity exports dries up, Mantega said.

"If companies have the courage to keep investments and avoid layoffs, we'll be able to meet our growth target," Mantega told reporters in Brasilia.

Brazil's economic expansion may slow by more than half next year to the lowest level since 2003 as the first crisis since World War II to affect the US, Europe, Japan and China at the same time looms over Latin America's biggest economy.

Analysts expect Brazil's economic growth to fall to 2.5% in 2009 from 5.2% this year, according to a Central bank survey published earlier this week.

Demand for loans made through the banking system may total US$ 10 billion and be limited to 125% of the amount of debt maturing through the end of 2009, Central Bank President Henrique Meirelles said.

"The measure takes pressure from the credit market in real and increases the availability of US dollars in the Brazilian currency market" Meirelles said at the press conference with Mantega.

The Real jumped 3.4% on Thursday, the most in two weeks, to 2.3659 per US dollar. The Brazilian currency since September has lost 32% of its value against the greenback.



  • Show Comments (6)

  • falupa

    Cut taxes?
    By cutting taxes, I think that Brazil is going to boost the buying power of consumers, but they will have to make up for it elsewhere. I think they should raise taxes on oil. This is because the economy is fighting a deeper recession than most have planned on and foreign exports would be the most viable solution to get more money.

  • João da Silva

    [quote]I still have flashbacks of my “reeducation” stint in Paraquay under Stoessner in the ’80’s!![/quote]

    I am sorry to hear about it, Jon. But you are entitled to sue the Republic of Paraguay for the “Trauma” Stroessner caused you . 😉

  • jon

    No thanks Joao, I still have flashbacks of my “reeducation” stint in Paraquay under Stoessner in the ’80’s!!

  • João da Silva

    [quote]How about 3.6 Bil for public security in Rio[/quote]

    For a guy who is about to be sent to a Gulag for his Un Canadian activities, he still has some steam left to interfere in the domestic affairs of Brasil. Since he insists, let me answer his questions:

    1) The 16,000 are classified as “Collateral Damages”. Period
    2) 3.6 Bil is to be financed by the Bank of Canada.

    If the distinguished commentator is unhappy with my explanations, I suggest he surrenders at the nearest Swiss Diplomatic Mission. He will be treated prim and proper according to Geneva Conventions . His imprisonment in Geneva will not be very pleasant for he will be indoctrinated into Geo Political Economics, by the Camp Kommandant who will conduct a test. If the Junkie passes the test, he will be presented with a pack of detergent. If not, with a 6 roll pack of toilet tissues.

    The choice is yours ,sir. 😀

  • jon

    How about 3.6 Bil for public security in Rio
    Where is the administrations’s focus on the thousands ( up to 16,000 now) of people killed in Rio in two years

  • ch.c.

    By cutting taxes, I think that Brazil is going to boost the buying power of consumers,
    Ohhhhh yesssssss !
    What about your mortgage rates at 13-15 %, your car rates at 35 %, you consumer goods at 55 %, and your overdrafts at 200 % ?????
    US$ 3,6 billion represents not even US$ 20.- yearly…per Brazilian Capita !!!!! Or around US$ 1,50 per month…per capita….TAX CUT !!!

    I let you appreciate the size of it.
    Enjoy your tax cut ! You will barely buy a few more bones…with very little meat ! The real meat will stay at the administrations levels ! And with LULA guarantees !

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