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Brazil Expecting GDP Growth of 6% at Least in 2010

Commercial activity in Brazil Brazil’s Central Bank reports that at the moment economic activity in Brazil is running at one of the highest rates in the world. Its most recent Regional Activity Report (IBCR) found that growth in the North region was 4.3% for the three-month period ending in February, compared to the prior three-month period ending in November.

“A strong, dynamic rise in economic activity now accompanied by inflation pressure,” says the report.

In the Northeast region, growth of 2.2%, with strong retail sales and expansion of credit.

In the Central West region, in spite of a downturn in farm produce prices, there was overall growth of 2.8%.

In the Southeast, growth of 3.2%, and rising inflation pressure. This is the country’s most industrialized region.

In the South region, wages and credit expanded strongly boosting growth of 3.5% during the three-month period.

All in all, the Central Bank regional economic activity report showed average GDP growth of 2.2% for the whole country during the three-month period. Annualized that works out to well over 8%.

The government has now raised its estimate for GDP growth from 5.2%  to 5.5%, but analysts say it will be at least 6%. There are also reports that the government may increase the primary surplus above the target of 3.3% of GDP – something that will be possible with more tax revenue from more economic activity.

No-Tax Gas

On May 22, Saturday, drivers in Rio were able to buy twenty liters (5.3 gallons) of gasoline without paying any taxes. But only at one gas station, the Posto Ale, on Rua General Goes Monteiro, in Botafogo.

The promotion was the idea of the Instituto Millenium and they called it “A Day Free of Taxes.” Has the Tea Party embarked in Brazil? No, not exactly. The tax burden is usually measured as a percentage of GDP. In Brazil it is close to 40%, in the US less than 20%.

In the case of Brazilian gasoline, the tax is 53.03% of the price. And a recent report by the Brazilian Institute of Tax Planning (IBPT) says that Brazilians now work 145 days each year just to pay taxes. This is a situation that has gotten much worse over time.

The IBPT reports that in the 1970s, a wage earner worked 76 days to pay his taxes. In the 1980s, 77 days. In the 1990s, 102 days. However, because taxes are embedded in Brazil, not presented to the consumer separately, as they are in the US, most Brazilians have no idea of how much they pay.

And the Brazilian tax system punishes the poor. The Applied Economic Studies Institute (Ipea) says that it has found that someone who earns two minimum wages (around US$ 500 a month) pays about 54% of his income in taxes. Someone who made ten times that (US$ 5,000 per month) would actually pay much less, as a percentage of his salary.

ABr

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