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Tax Cuts and Spending Caps to Make Brazil Grow 5% a Year

Brazilian President Luiz Inácio Lula da Silva ordered his top advisers yesterday to craft a bold plan to spur South America’s largest economy, which he has said can grow at least 5% annually.

Silva has come under withering criticism for Brazil’s economic growth that has lagged behind the rest of Latin America, but repeatedly said during his re-election campaign that he believes the economy can grow 5% to 6% in the coming years.

Yesterday, November 14, after a cabinet meeting with Lula, Finance Minister Guido Mantega said that the economic plan would likely include tax reductions, spending caps and increased government investment in infrastructure.

"The president received our recommendations well," Mantega told reporters in the capital of Brasí­lia. "He requested bold action because he doesn’t want to run the risk that the country grows with less vitality than he has been seeking."

No final decisions were made, but Mantega said some elements of the package could be put into place before the year’s end so that they can have an effect on next year’s growth.

Brazil’s economy is expected to be slightly less than 3% for 2006, following 2.3% gross domestic product growth last year. Predictions call for the measure of all goods and services produced in Brazil to reach 3.5% next year and in 2008.

But the government-run IPEA Economic Research Institute suggested this week that Brazilian growth is likely to stay stuck at 4% annually from 2008 through 2010, partly due to high taxes and lax energy investment.

Silva was re-elected in a landslide during an October 29 runoff after a tough challenge from Geraldo Alckmin, the business-friendly former governor of Sao Paulo state, the country’s industry and finance center.

Alckmin, who surprised analysts by denying Silva a first-round win on October 1st, repeatedly attacked Silva for sky-high interest rates that crimped Brazilian growth during Silva’s first term and left Latin America’s largest nation trailing the region.

GDP growth in Chile and Mexico for 2006 is expected to reach about 5% this year.

Leading economists and business executives also insist that pension reform to trim growing Brazilian debt is needed to put the nation on a more secure economic path.

Mantega said that pension reforms are being reviewed.



  • Show Comments (3)

  • marcio

    Look on the brith side
    If you just take one word out of each of these sentences, you can see that this can be looked on the bright side.
    He reached close to some of his goals and tell me if other presidents did this:

    He created 6 millions jobs out of his promised 10 millions.
    He settled 250’000 MST families out of his promised 400’000.
    2005 econmy growth ended at 2,3 %
    2006 economy growth will end at 3 %,

    Just look at the records for other previous presidents in the same categories and you will that Lula is actually doing great.
    Brazil is clearly on an upswing and everyone recognizes that around the world and respects Brazil more now than 10 years
    ago. This article is very biased and obvisouly the writer is a Lula hater who doesn’t want to look at the positive things
    our president has done for our country. Wake up buddy.

  • Michael

    as usual ch.c
    your comments or moronic and useless.

  • ch.c.

    Fun fun fun…..this government!
    At the end of 2004, Lula promised that 2005 economy growth will be a repeat for the 5 % growth of2004.Wrong, it was 2,3 %
    At the end of 2005, Lula promised and even guaranteed a special vintage (his own words) for 2006, for a growth of 5 % or more. Wrong. Looks like it will be 3 % at best.
    Mantega estimates, the genius finance minister, even until right before and after the elections said 2006 Will (not should) be 4 % ! Wrong.

    Therefore are the 2007 estimates from this people, just as good as their previous estimates ? Meaning worth….ZERO, just as the promises of Lula at the start of his first mandate that 10 millions new jobs will be created until 2006 or the 400 ‘000 MST families that will be settled.

    The reality is whatever Lula and his gang promises, should be cut almost by 40 % minimum!
    He created less than 6 millions jobs out of his promised 10 millions.
    He settled less than 250’000 MST families out of his promised 400’000.
    2005 econmy growth ended at 2,3 % instead of his promised 5 %
    2006 economy growth will end at 3 %, at best, instead of his guaranteed 5 % +

    Therefore their 5 % estimates for 2007 should be taken with a lot of doubts.
    For the time being, the economists and International agencies estimates for 2007 are 3,5 % ! NOT 5 %.
    And until now, this government has always delivered LESS that the first estimates made and NOT MORE !
    Thus even the 3,5 % for 2007 could be on the high side ! Time will tell, just as time told us the previous promises and guarantees were innacurate……on purpose !

    What is certain, however, is that for a second year in a row, Brazil growth rate will be the lowest of ALL developing nations and the lowest of ALL LATAM and Caribean countries….just better than….HAÀƒÂTI….which is not even a developing country but the poorest of the whole Western Hemisphere !

    Conclusion : are Lula and his gang stupid…or liars ? Why dont they deliver what they promised and guaranteed ?
    AND BE proud to be at the queue of the rankings….ONCE MORE…..AS USUAL !!!!!!
    The populists explanations of his poor achievements, will be diluted and mixed once more in lies that most Brazilians will swallow….like a sweet mango juice !
    Afterall that is exactly what Lula and his gang expect from you !!!

    Everyone knows or should know that pensions reforms will not be changed. This is one
    of their main theme to buy the votes of the civil servants ! And if there is a change it will be a minimal one, that wont change anything in the problem of the government budget.
    Now that the elections are over, the main cuts will come in the minimum wage that wont be increased as fast as they were increased….during the election year of 2006, in the infrastructure budget that was anyway never prioritized during his first mandate, except in 2006…for the election year, and in the education and health budget that were prioritized only…..also during the 2006 election year !

    Simply stated : Brazilians who are not already wealthy….fasten your seat belt !
    From 2007 until 2010 (next election year) you will lose more weight than you should gain ! Budgets austerity start January 1, 2007 !!!!!!!! You will realize it at your own expenses !

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