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Brazil extends cut breaks on home appliances to help boost consumption

Monday, July 2nd 2012 - 05:38 UTC
Full article 3 comments
Furniture, refrigerators, stoves and washing machines are cheaper Furniture, refrigerators, stoves and washing machines are cheaper

Brazilian government extended domestic tax breaks on home appliances and furniture, emphasizing efforts to help ailing Brazilian industries.

Tax cuts on refrigerators, washing machines and other household appliances known as white goods will be extended for two months and for furniture for three months beginning July first, Finance minister Guido Mantega told reporters in Sao Paulo.

“These measures have helped white goods sales increase 22% this year,” Mantega said. “We hope that in the second half these numbers will increase.”

The 22% white goods increase was for the January to May period and compared to a year earlier.

The measures should help the economy, which the central bank expects to expand 2.5% this year, to grow at an annualized rate of 3.5% to 4% in the second half of the year.

The announcement means the tax on furniture will remain at zero (from 5%); refrigerators, 5% (from 15%); stoves zero (from 4%) and on larger washing machines 10% (from 20% to 10%).

President Dilma Rousseff has made state-led efforts to revive the economy the top priority of her government. Be it through tax incentives for key industries or increased lending by state-controlled banks, Brazil's government plays a leading role in the country's economy, which surpassed Britain's last year to become the world's sixth-largest.

In December, the government slashed the so-called IPI tax on home appliances and in March extended the break to include furniture and other products. Brazilian industries in recent years have been crippled by appreciation of the Real, the country's currency, which raised costs for many manufacturers and hindered their ability to compete with a flood of cheap imports.

Meantime it was announced that President Rousseff is enjoying record approval ratings as Brazilians laud her efforts to lower interest rates and prop the country's stalled economy, a public opinion showed over the weekend.

The Rousseff administration's approval rating climbed to 59%, according to the poll by the National Industry Confederation (CNI) and the Ibope polling institute. That was a three-point increase from the previous survey in March.

 

Categories: Economy, Brazil.

Top Comments

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  • ChrisR

    Meddling with Mr. Market will end in tears sooner or later.

    You cannot expect these price manipulations to have any serious effect on growth: all that is happening is the forward buying of expected demand.

    This demand will stop dead when the prices do go up.

    Cash for clunkers, anybody remember that?

    Jul 02nd, 2012 - 05:32 pm 0
  • rnbgr

    It's a short term boost to consumption for sure, a large number of countries used These type of incentives in 2008/2009. Brazil will most likely try limit it to domestically produced items. When the US tried this in 2009 with the “cash for clunkers” they ran into WTO complaints from foriegn trade partners and had to open up to all car suppliers so domestic suppliers only got a partial benefit and the drop- off in demand was steep when the program ended. Russia was able to keep the program limited to domestic cars and it did definitely help Domestic suppliers keep afloat.

    Jul 03rd, 2012 - 12:22 am 0
  • Fido Dido

    Cash for clunkers in the US was indirect “sponsored” by the Chinese who are a major importer of scrap metal from the US. yes, you read that well, that's one of the major exports of the US. The good old Manufacturing base in the US is close to zero. Cash for clunkers was a joke and it totally failed as predicted by many critics. Anyone who believed that GM (include Ford who got saved indirectly bailout money by saving Delphi auto parts who are connected to GM) is out of the woods, should do it's homework again, because it isn't plus they never paid back the auto bailout of 2008.

    This is not a cash for clunkers in Brazil, though a similar scheme exist for the lower class ins some states (if you get and pay electricity through the legal channel, you can get for your old refridgerator a new one, to lower your electricity bill, all sponsored by state with local government). Though Brazil's has a rising middle class (from c to b) there are still to many people in class c and d who need and want to buy their first or new refrigerator(s), washing machine(s) and other household appliance. They are produced in Brazil and a tax cut for those industries who will be forced to pass it to consumers is a welcome gift for those people or for the people in class a and b who want a new one or second/third refrigerator, washing machine and other household appliances.

    Brazil> Stimulus packages to boost local industries.
    Europe,USA> stimulus packages to save the (zombie) banks (yes, they're dead, no what you do) while the rest gets austerity measures, plus being lectured through all business channels and magazines that it's good because if we don't save the (zombie) banks who gambled and lost, we're all going to die.

    Jul 03rd, 2012 - 04:44 am 0
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