Brazil will cut returns on new deposits to savings accounts, thereby paving the way for the central bank to further cut its benchmark lending rate, Finance Minister Guido Mantega announced.
Major emerging powers stood ready on Friday to pledge money to bolster the International Monetary Fund's crisis-fighting war chest, though Brazil was holding out for promises that their voting power at the global lender would increase.
Brazilian Finance minister Guido Mantega said on Friday that IMF Managing Director Christine Lagarde makes a mistake in recommending emerging countries not to intervene in the money exchange markets to counter the strong devaluation of currencies from the rich countries.
Brazil announced on Tuesday tax cuts and other stimulus measures worth about 65 billion Reais (35 billion dollars) to protect the country’s struggling industry from what she said were “predatory” trade practices by rich nations.
Brazil announced extended tax cuts on appliances such as refrigerators and washing machines, and reduced levies on other goods, as it seeks to help manufacturers hurt by a slowdown in economic growth and a surge in imports.
“As of this year Brazil will follow the US example giving a 25% margin of preference to local goods in government procurement”, said Fernando Pimentel, Minister for Development, Industry and Foreign Trade.
Brazil extended on Monday a 6% tax on foreign loans and bonds issued abroad by local companies to include lending with duration of as long as five years, the third measure taken this month to weaken the Real. Since March 1, the currency has weakened 5.6%.
The Brazilian government that this week promised an ‘arsenal’ of measures to counter the effects of the international crisis and prop the economy will reduce the tax burden for several industries, revealed a Sao Paulo newspaper close to the current administration.
Brazil has become the sixth-biggest economy in the world, the country's finance minister announced. The National Institute of Economic and Social Research (NIESR) and other economic forecasters also said that Brazil had now overtaken the UK.
The Brazilian economy last year registered its second-worst performance since 2003 as higher borrowing costs and a currency that rallied to a 12-year high led it to under-perform emerging-market peers China and India.