Brazil prepares new stimuli measures geared to infrastructure and manufacturing
Brazil's government may ease its primary surplus target next year to create room to carry out additional tax cuts to boost growth, Folha de S. Paulo newspaper reported Monday.
Brazil has set a primary surplus target of 3.1% of GDP but may reduce that target in 2013 to make room for a possible switch from taxes charged on payrolls to a tax on revenue, Folha reported.
The government, which already is transitioning to a tax on revenues for 15 industries in Brazil, is seeking to expand the new tax regime to all industries, Folha said.
According to the paper, some in the Finance Ministry see the possible reduction as justified because the lower surplus would be a result of a cut in taxes, not because of an increase in spending.
Brazil's primary surplus this year has been narrowing as tax revenue declines during Brazil's economic slowdown. Last month, the central bank said Brazil's public-sector 12-month primary budget surplus narrowed to 127 billion Reais (62.2 billion dollars) in May, or the equivalent of 2.97% of GDP. The government goal for 2012 is a primary surplus of 139.8 billion Reais.
In a report last week, the International Monetary Fund praised Brazil's stated commitment to its primary surplus target, saying the established fiscal target is welcome and meeting it is important in order to reduce government debt levels and make room for future investments.
The government has said that it won't lower the surplus this year, and budget guidelines for 2013 approved last week included a 3.1% target. The government is expected to submit its 2013 budget proposal in August.
However it wouldn’t come as a surprise if further announcements are made in the coming weeks such as a consolidation of some overlapping federal taxes; a new round of concessions that would allow the private sector to manage more of the country's congested airports and seaports and even a more aggressive effort to reduce electricity costs for manufacturers.
The package of latest measures should be ready before early August not only because of the budget proposal but also because of the twice-yearly meeting of the President with about 30 leading chief executive officers in Brasilia.
Investors will be eyeing the new round of concessions. Airports and seaports are routinely cited as some of Brazil’s most crippling bottlenecks, slowing everything from commodities exports to business travel, as public investment failed to keep up with the boom in the economy over the past decade.
Shortly after taking office in January 2011 President Rousseff announced that she would allow private capital to partly operate three strategic airports: two near Sao Paulo, and one in Brasilia. Concessions for those airports were awarded earlier this year. Bets are that the next candidate is Rio’s air terminal since in 2016 the “marvellous city” will be hosting the 2016 Olympics.