MercoPress. South Atlantic News Agency

Brazil: Guedes favors tax cuts to keep fuel affordable

Guedes also hinted he would stay alongside Bolsonaro if the latter is reelected

Brazil's Economy Minister Paulo Guedes Tuesday said it was “easier to eradicate poverty than to make gasoline cheaper.” He also raised the possibility of cutting diesel taxes but was against creating a buffer fund.

During a virtual appearance at the Latin America Investment Conference, organized by Credit Suisse, Guedes spoke against the convenience of a fund to alleviate the increase in the price of fuel and said he would rather endorse recent proposals to cut taxes in order to achieve the same goal.

Guedes also explained that federal revenues had grown by more than R$ 300 billion, of which a third came from the permanent collection. Regarding diesel fuel alone, it would amount up to between R$ 17 billion and R$ 18 billion per year.

“We could reduce that”, suggested Guedes, stating that the government is studying a PEC (Proposed Amendment to the Constitution) to authorize states to reduce taxes “for Brazil to run better on diesel.”

The diesel tax cut would benefit the transport sector and make the government pay R$ 20 billion annually.

On the other hand, a reduction in the price of gasoline at pumps was nowhere near. Guedes said he was against the creation of a buffer fund, which, according to the economist's calculations, could cost up to R$ 130 billion. “This is three times the value of [social aid] Bolsa Família [program].”

“There are a lot of people circulating with foolish ideas”, Guedes went on. “More than 80% of the funds created in other countries went wrong” and “the ones that are working today are expensive,” the minister stressed.

Guedes also raised the possibility of making adjustments to the IPI (Tax on Industrialized Products) to boost consumption and insisted reducing taxes was the best approach to lower prices and curb inflation.

“As long as we do not release, unlink and de-index the budget, the fiscal rules will continue as containment barriers, which is regrettable,” Guedes explained. He also hinted he would stay alongside President Jair Bolsonaro if he is reelected in October: “In a second term of ours, we would redo this logic.”

Guedes also highlighted the Bolsonaro administration for its efforts to control public spending. “All expenses that grow wildly are being attacked head on, with transparency.” One way to achieve that was to scrap state jobs deemed unnecessary, of which around 40,000 have been terminated under Bolsonaro. The minister did not mention, however,

Bolsonaro’s electoral nod regarding a pay rise for Federal Police, Federal Highway Police and the National Penitentiary Department officers.