BRAZIL’s economy is seen growing at just 2 % this year (↓), below the 2.7 % last year and below the 4 % target set by the government in January. For some economists Brazil has to return to a reform agenda.
They are complaining about the tax burden and infrastructure and a government that seems to argue that the big problem is a lack of demand. There is not a lack of demand, but more of an issue of supply to meet that demand. There is a frustrated growth.
Brazil’s Gov (President ROUSSEFF will launch the initiative personally) is set to launch the first in a series of measures that could inject up to $50bn into the economy over the next 5 years.
The first part of the plan includes:
- privatising about 14,000 Km of railways and roads.
- privatisation of ports, lower energy costs and incentives for industry will soon follow.
“The Gov realized that Privatizations are a way to boost investment”
says Felipe Salto, an economist at Tendencias, a leading consulting firm in Brazil.
The package is designed to boost what have been disappointing growth levels.
Prior to these measures, the Gov had been counting mainly on rising levels of domestic consumption – fuelled by credit growth and rising income among poor Brazilians – alongside investments by state companies. Although the previous strategy had helped BRAZIL become the 6th largest economy in the world in 2011, overtaking BRITAIN, the Gov has not been able to maintain high growth rates.
The recent weak growth has been attributed mainly to ↑ debt rates among the population and the global downturn, which reduced demand for Brazilian products:
- Expensive energy,
- poor infrastructure
- and increasing labour costs
Now the Gov will increase the role played by private investors, who were seen to have lost ground during the Gov of Luiz Inacio LULA da Silva, Brazil’s president from 2003-2010. Ms Matos (economist, professor at Getulio Vargas Foundation) believes the new package will tackle some key economic problems, but says Brazil faces other serious issues such as increased public spending and an inefficient tax system. Without reforms in these areas, she says, the country’s economy will remain vulnerable.