Brazilian Finance minister Guido Mantega in an interview with daily newspaper Folha de S. Paulo announced that Brazil is preparing a package of incentive but this time to promote exports which suffered significantly last year because of the global slowdown.
The measures basically would extend fiscal benefits to the export companies and for this the concept of “exporter” has been redefined.
“Currently for a company to be considered ‘exporter’ and thus have access to benefits, it must sell overseas at least 60% of its production. We are going to lower this requisite to 40% thus helping to include more companies in the benefits,” said Mantega.
“We are interested in promoting credit lines for exports and fiscal incentives to benefit medium and small companies,” added Mantega since big corporations are more flexible in taking advantage of these measures.
Brazilian exports last year totaled US$ 153 billion, which represented a 21.8% contraction compared to 2008, and the first drop in a ten-year sustained export boom. Trade surplus reached US$ 25.3 billion (up 1.6%) which was the result of a strong contraction of imports, which added to US$ 127,6 billion, down 25%.
Meantime Central Bank president Henrique Meirelles anticipated that Brazil is likely to see around US$ 45 billion in foreign direct investment this year and faces a current-account deficit of US$ 50 billion.
With historically low interest rates and high investor demand for Brazilian assets, the economy has been walking the line between robust growth and heightened inflation.
After enacting a range of stimulus measures during the global economic crisis, Brazil has already started moving toward monetary tightening and last month statutory reserve requirements for banks were raised by two percentage points in a first step toward reducing “excess liquidity.”
Meirelles acknowledged that the move effects monetary policy but denied reserve requirements were being raised in place of higher interest rates.
With investor interest in Brazil still robust, Meirelles said that “strong flows of investment are expected,” even though “too much exuberance is not always good.”
