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Brazil’s Lula Unveils Today His 5%-a-Year Growth Package

After weeks of delay, Brazilian President Luiz Inácio Lula da Silva announces today his Growth Acceleration Package (PAC), a plan that according to him will unlock Brazil's growth.

The four-year, 500 billion-reais (US$ 235 billion) program intends to push Brazil ahead at a 5% yearly growth clip, double the rate of the past 15 years.

The PAC anticipates investments of about US$ 60 billion a year in several areas including energy and fuel, housing, basic sanitation and transportation.

The whole PAC will contain 50 measures divided into three areas: tax impact for consumers, infrastructure and tax relief for businesses.

The government plans to cut taxes from businesses in order to draw capital from the private sector and reach an investment rate of 25% of the GDP, the minimum rate required for emerging economies. Today this rate is below 21%.

Another government measure will allow businesses to delay the payment of federal taxes like the worker-related INSS and PIS/Cofins contributions.

The initial plan anticipated by the General Law of Micro and Small Businesses envisioned US$ 12 billion reais (US$ 5.6 billion) in private investment. This number has already been downgraded to US$ 8 billion reais (US$ 3.8 billion) though.

After arriving from São Bernardo, in the Greater São Paulo, his political hometown, Lula met for over three hours on Sunday with eight ministers to finalize his plan before announcing it today.

"The resources will come from the federal budget, from state-owned companies and from a  series of creative and administrative measures that are going to stimulate private investment," announced House representative and former minister Ciro Gomes, who is expected to be invited to a cabinet post in Lula's second term of office.

Finance Minister, Guido Mantega, who also took part in the meeting didn't want to talk about numbers, but admitted that the government would be investing over 300 billion reais (US$ 140 billion).

"This is a robust program," said Mantega,  "with sound measures, measures that are going to accelerate the country's economic growth. They are measures that were well conceived, thought, matured and that will have the effect of stimulating the country's growth."

Minister of Cities, Márcio Fontes, announced that among the measures will be 5 billion reais (US$ 2.3 billion) for basic sanitation projects, an amount that has already been approved.

Not everyone is happy with the new PAC, however. Luiz Fernando Furlan, the minister of Development, Industry and Foreign Trade, for example, believes that his ministry is not getting the attention and the money he was expecting.

Furlan didn't get what he wanted to stimulate exports. He tries to find a positive spin, however: "These other measures will be taken care later on."

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  • Show Comments (11)

  • andy murphy

    JoÀƒ£o Carlos,

    You are right and wise beyond your age.What bothers about your country is the corruption in all levels (including in private companies). I wish you all the best and hope that the other 500 bis do not go into the pockets of some suave polticos.

  • João Carlos

    We can invest 500 bilion reais in 4 years:
    _ Rainsing the check tax
    _ Taking loans abroad
    _ And also and more important: Alocating another 500 bilions to compensate the corruption.

  • ch.c.

    continued……
    A Brazilian law….UNKNOWN to most Brazilians is there own Budget Laws, quite strange and curious, a law that would not be accepted elsewhere…except in Brazil.

    I know….I know…if if write it….some will accuse me of ranting again.

    Unfortunately…..NOT SO ! Source :
    http://www.v-brazil.com/government/laws/budget.html

    “BUDGETARY EXECUTION

    Brazilian budgets are authorizative, not mandatory.
    If the law assigns R$ 1,000 to an item of the budget, all it means is that no more than R$ 1,000 may be spent on such item; it does not mean that the R$ 1,000 will be spent; it does not mean that even R$ 1 will be spent.
    The process by which money is disemboursed to realize the budget is called budgetary execution (in Portuguese, “execuÀƒ§Àƒ£o orÀƒ§amentÀƒ¡ria”).
    ItÀ‚´s up to the Executive to coordinate the budgetary execution. The Executive controls how much revenue is being collected, and chooses which projects of the Budget will be carried out first. Obviously, some expenditures like personnel and debt service must follow a rigid schedule.

    The Executive, however, can use the discretion to choose which amendments will be priorized. And itÀ‚´s a well known fact that the Deputies and Senators who are allies of the government have their amendments easierly approved, notably when the government needs votes to approve some controversial matters. This happened in government FHC, and still happens in government Lula.”

    Furthermore the announced plan must be approved by Congress….after negotiations….which has not been done YET !!!!!! Laugh……

    Thus the “negotiations” will most probably ALSO include the obscenes salaries increases…..requested by the Senators, deputies and so many others !!!!!!!

    Yesssss……Brazilians will be surprised again, that Lula’s program is not a done deal !
    But just a program announced with big fanfare…that will die anmd evaporate with much less fanfare…just as during his first mandate.

    The 2005 FMD cattle disease was due because the government did not free the voted
    sanitation budget.
    Same for the MST settlements.
    Same for the 2005 Infrastructure budget that effectively freed less than 40 % of the voted budget.
    Same for the PPP Infrastructure plan, announced with big fanfare in 2005, but NOT ONE DEAL signed….since then yet ! Same promises again just announced and even bigger than in 2005.
    Same for the OLD 2005 rail rehabilitation program….again announced !

    Yesss….quite sad…..but this ” new program” will most probably go….NOWHERE JUST AS ALL l THE PREVIOUS ONES !!!!!!! Afterall all this was already promised…a while ago !!!!

    Laugh….laugh…laugh

  • ch.c.

    To Andreas and Silva !
    Yesss but full of lies…if you read many other articles.

    55 % will come from energy companies (Petrobras…mostly), electricity companies.
    Nothing new here….these companies already announced their investments intentions
    months ago.Therefore these investments are NOT ON TOP OF…..

    From other sources…looks like that :
    – 10 billions Reais…..in tax reductions OVER 4 years. Peanuts, that makes less than 0,5 % of the overall Government budget ….in a country with an overall tax rate of 39 % !
    – The Government WILL not invest 300 billion Reais. HOW CAN/COULD THEY….EVEN DURING 4 YEARS ?
    – The 5 billion Reais…over 4 years for basic sanitation….is also NOT ON TOP OF…but the overall budget….which they already allocate anyway. Nothing new either.
    I could continue for hours but not worth it.

    Ohhhh and by the way….Lula already announced and acknowledged…that this goal of 5 % of economic growth rate wont be reachable…for 2007 !!!!! Laugh…..

    Here is some Brazilian comments about the announcement :
    – À¢€œThe mere fact of saying there is more public money available will create a voracity effect in Congress,À¢€Â says Marcelo Salomon, chief economist at Unibanco, a big local bank, arguing that pressure to release money for legislatorsÀ¢€™ pet projects would further reduce the governmentÀ¢€™s ability to invest” ! Laugh…laugh
    – The measures come less than a fortnight after the governmentÀ¢€™s controversial announcement À¢€“ subsequently partially retracted À¢€“ that concessions to run 2,600km of federal highways would not be offered to the private sector as previously planned. Confusion over such policies has rattled investors at a time when the government was thought to be courting their help in renovating BrazilÀ¢€™s decaying infrastructure.
    – À¢€œOnce again we are being given palliative measures instead of action where it really matters, to cut public spending and improve the business environment,À¢€Â says SÀƒ©rgio Vale, economist at MB Associados, a SÀƒ£o Paulo consultancy”

    And to Silva, yess you are dead right, you should read the latest article at :
    http://www.infobrazil.com
    Interesting site, with around 2 new articles per month, sometimes pro and sometimes con Lula !

    No doubt that it is a cosmetic program and that as usual Lula wont deliver what he promises, promises full of lies ! No doubt either that he will find a Good Bad Explanation….in due time…..next year and the followings !
    Quite Sad that so many Brazilians swallow every of his lie….as a guarantee !
    The only guarantees being his tricks.

  • João CarlosR Silva

    I believe in Brazil above all…
    Always in BrazilÀ‚´s recent history, we always heard Brazil was going to get the “bottom of the well”… But the Brazilian people is an outstanding one, besides many hard time on economicÀ‚´s failures we were capable of overcomings.
    Either LulaÀ‚´s PAC or not, Brazil is such a robust resistent country and we will always be taking the next upper step, believe it or not!

  • Andreas

    To ch.c
    The correct amount is in billions not millions. I noticed the mistake but didnt bother with it cause i thought it was a mistake cause i first read the article in estadao.com.br So it is in fact BILLIONS which are going to be invested and that is going to be 60bn usd a year which is quite a lot.

  • andy murphy

    I am still digesting the new economic package. What surprises me is that the dollar went up against the Real.Besides, I hear that the Government wants to sell off the Banco do Brasil stock. I remember 1998 when the Brazilian government sold off Telebras for peanuts. Besides it looks that the beneficiaries of this package are the industries with lots of lobbying power.

    What is disappointing is that the PAC does not mention about 2 reforms that Brazil badly needs a) Social security b) Labor laws. Without them, I think that Brazil can not expect to attract external investments.

    Maybe I am wrong. Would appreciate the comments from others

  • ch.c.

    funny……
    right after my above PREVIOUS comment…the numbers of 500 millions -reais (US$ 235 millions)….have been changed to…… BILLIONS !

    Still, let me have my doubts about Lula’s “program(s)” and his promises that never materialize anyway.

  • ch.c.

    Sorry but…Doubtful……
    ….that a government “investment” of ONLY US$ 235 millions….OVER 4 years….namely
    US$ 60 millions per year…..will generate even 0,1 % additional growth.

    May be a typing mistake ?
    And if not, why was it not done during the first mandate……if it cost only US$ 60 million annually but generating so many more tens of billions of US$ ?

    And were plans not already made but failed miserably …every year…during the last 4 years ?

    Let me me have my doubts. Numbers simply dont match !

    Has Lula not freed around Reais 500 millions at the end of 2005 and promised to fill your millions of potholes …by MID 2006 ?
    No more potholes by now ….in Brazil ? Smile…..
    Or much less potholes since then ? Smile…..
    How could have anyone believed him at that time that 500 millions reais were enough for repairing thousands and thousands kms of roads….in very bad state ?????

    Only idiots….trusted his lies.

    Well…wellll…..you face the same problem now…with his US$ 60 millions annual “PROGRAM “….to DOUBLE the Brazilian economic growth rate !!!!!

    Even in his “new program” it also downgraded ….. the initial plan anticipated by the General Law of Micro and Small Businesses envisioned US$ 12 billion reais (US$ 5.6 billion) in PRIVATE investments. This number has already been downgraded to US$ 8 billion reais (US$ 3.8 billion) though.

    In a high economic growth rate, the group usually growing the most is…..the Micro and Small businesses…..not theLlarge Businesses !

    Sorry

  • Andreas

    The fact that a plan has been drawn is more than positive for the Brazilian economy. Tax cutes for both consumers and business along with falling interest rates and rising government investment in sanitation and infrastructure will most surely stimulate the Brazilian economy. But if it grows for 5% no one knows. Hopefully it will.

    But if Furlan isnt getting exactly what he wants is casts a shadow over this plan. Nevertheless it is nice to see Brazil finally taking the right steps for an economic boom and going back on track and hopefully it will achieve the long awaited economic boom. Consumer expenditure rose by nearly 9.6% and this is definately a good sign. Keep your fingers crossed.

  • Stephen

    Luis Furlan
    This is not a good sign if Lula is not giving Furlan what he needs. This is the man that has driven the country out of debt through his export programs as the national consumer market has been flat for years.

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