Brazil can be privileged by international investments at the end of the world financial crisis, which should last two more years

On Thursday (11/27), during a debate at the Committee on Finances and Taxation, this opinion was shared by two investment consultants: the economist Luís Paulo Rosenberg, and the Professor of Economics at Fundação Getúlio Vargas (FGV), Paulo Rabello de Castro, who also works at SR Rating, the first Brazilian risk classification agency.

The Deputy Rodrigo Rocha Loures (PMDB-PR), who proposed the debate, believes that the crisis has not been discussed enough, and that the participation of the Congress has not been decisive.
Therefore, the Committee for Finances will start a series of public hearings on the subject, in order to answer the demands of the Parliament.

According to both consultants´ forecasts, there is good news for Brazil in the midst of the crisis: inflation will drop, such as interest rates, but the drop in exports is certain, be it because of lack of demand or because of lack of credit for production, and agriculture will be the most affected sector. “It is not the end of the world for us, because we have already been through much worse in Brazil”, highlighted Rosenberg.

Forecast: growth in Brazilian economy will be smaller than what the government assessed
However, while it lasts, the crisis will have negative consequences to Brazilian economy. Although Rosenberg considers the possibility of a maximum increase in Gross National Product of Brazil (GNP) from 2% to 2.5%, in 2009, he alerted that this projection is surely too optimistic. Both consultants preview that this number should be around 1%, dropping to 0.5% if the crisis gets worse, which will strongly influence the demand for commodities.

"Our level of agreement is very high, because we work on the same facts and numbers”, explained
Rabello de Castro. According to their understanding, one of the problems in the government’s assessment is that the budget reviewed by the financial team – being now discussed at the Congress – works with a growth of 4%, which they consider as unreal.

Who will pay the bill
The economists highlighted the fact that, despite the negative effects of the crisis in Brazil, Brazilian economy is not in crisis and Brazilian institutions do not need to be saved.

Rabello de Castro defended that the Brazilian taxpayer affords to pay for the risks “of those who wanted to assume these risky investments which caused the crisis”. That concern was also expressed by Deputy Ivan Valente (Psol-SP). "Who will pay for the crisis? Will we, taxpayers, pay for mistakes committed in the US?” asked the congressman.

Valente reminded that federal government announced loans amounting to R$ 4 billion for Brazilian car assembly plants, which is the same amount offered to the industry by the government of São Paulo. “But, in the same period, these car assemblers announced the remittance of profits amounting to R$11 billion to their headquarters abroad”, criticized the deputy.

Tax Reform
Rabello de Castro also harshly criticized the tax reform (PECs 233/08, 31/07 and 45/07), currently being processed at the Chamber, in which he was supported by the Deputy Luiz Carlos Hauly (PSDB-PR). Both defended a model that would decrease the tax load and lamented that the proposed reform be timid.

"The Federal Government’s proposal about making a radical reorganization of taxes in the states, the Value Added Tax (ICMS), is a temerity. Either should they change everything or leave it as is, because it is working”, agreed Rosenberg.

Report - Marcello Larcher
Editing - Newton Araújo Jr./Rejane Xavier
Translation:Positive