Grilled for 9 Hours in Congress, Brazil’s Finance Czar Denies Any Wrongdoing

During nine hours of testimony before the Brazilian Senate’s Commission on Economic Affairs, Wednesday, November 16, Brazil’s Minister of Finance, Antonio Palocci, commented on a wide range of topics.

But his emphasis was on the government’s consistency and progress in the economic area. "We are moving into a prolonged cycle of growth. It is now possible for Brazil to go through a long and consistent period of expansion," said the Minister.

Palocci was questioned on charges in the media regarding malfeasance in the city government of Ribeirão Preto, in the interior of São Paulo state, when he was mayor. Asked about the 2002 presidential campaign, he denied that any money came from abroad.

However most of the questions were on economic matters, such as interest rates and long-term fiscal policy. He said the primary surplus target of 4.25% of GDP for this year remained in place.

He said he favored a reduction in interest rates but warned, "The right conditions must exist before the rate can come down any faster."

Palocci said he was "saddened" by the charges of scandal in the PT and the government, but that he was not going to let that get him down. "I am doing my part, even if some errors have been made," he said.

Palocci said that the way to reduce taxes and lower interest rates was through spending cuts by the government.

"The fact is that the tendency over the last ten years has been for spending to rise as a percentage of GDP which has to be financed through higher taxes."

Palocci showed the commission a graph where it could be seen that payroll expenditures by the federal government have risen from 14.4% of GDP in 1996, to 17.2% in 2004.

"If we can control these expenditures we will have money for investments and tax cuts. It will also stimulate domestic savings."

Finally, Palocci said progress was strong in social assistance. There had been growth in harvest assistance, income transfer, health, security and revenue sharing with states and municipalities.

Agência Brasil

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