Taxes and High Interests Are the Main Bad Guys in Brazilian Economy

The Getúlio Vargas Foundation’s (FGV) Brazilian Economics Institute (IBRE) announced the results this Tuesday, February 14, of its Conjunctural Survey of Manufacturing Industries.

The study reveals that, for business owners, taxes are the prime hindrance to economic growth in Brazil. Interest rates appear in second place on the villains list.

In the survey, conducted for the third consecutive year, 43% of the 1003 companies interviewed named taxes as the prime factor limiting economic growth.

However, when compared with 2005, there was a decrease of 12 percentage points in the percentage of firms that ranked this item first.

Interest rates were ranked first by 33% of the companies interviewed, 14 percentage points more than gave it first ranking last year. The third most important factor limiting economic growth, in the eyes of the entrepreneurs, was domestic politics, which also received a larger percentage of first-place mentions this year than last: 7%, compared with 2%.

There was a big reduction, on the other hand, in the percentage ranking deficient infrastructure first: 5% this year, as against 17% in 2005.

The survey also included items related to what industries plan to invest in 2006 and over the three-year period 2006-2008 in increased production capacity.

The results show that the average growth in production capacity projected for this year is 8%, more than the 7% projected at the beginning of 2005.

For the 2006-2008 period, the average projected expansion was 17%, less than the 19% projected in January, 2005, for the three-year period covering 2005-2007.

Nevertheless, the study judges that "the current result is comparable to that of recent periods of economic growth, with the implicit expectation that installed capacity will increase at an annual rate superior to 5%."

Agência Brasil

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