BRASILIA: Brazil’s government is unwinding tax breaks as it strives to boost confidence and stop gross debt from expanding, Finance Minister Joaquim Levy said.
“A rolling back of some of these tax breaks is kind of overdue,” he said in a presentation to investors in New York. It’s what we’re working to achieve in the next 10 months. That’s the commitment of the president and that’s our responsibility.”
The government also will simplify some levies while revamping the profit participation contribution and social security taxes known as PIS and Cofins, respectively, he said, without providing details.
Levy’s predecessor, cut or froze tax rates on products from computers to beverages in a bid to stimulate consumption in Latin America’s largest economy. Levy, who assumed office last month, is reversing those measures after they failed to boost growth and contributed to Brazil’s first credit downgrade in more than a decade. Gross debt last year surged to 63 percent of GDP from 57 percent in 2013.
Swap rates on the contract due in January 2017, the most traded in Sao Paulo Wednesday, rose three basis points, or 0.03 percentage point, to 13.08 percent at 4:05 p.m. local time. The real fell 0.2 percent to 2.8412 per U.S. dollar before the release of Federal Reserve meeting minutes.
Analysts surveyed weekly by Brazil’s central bank forecast gross domestic product will contract this year before growing 1.5 percent in 2016. Inflation will accelerate to 7.27 percent in 2015, slowing to 5.6 percent next year, according to the survey. Levy said inflation expectations are starting to converge closer to the official target of 4.5 percent.
“I’m confident 2015 will be a year with some challenges,” he said. “We have to work so that 2016 is a year of growth and optimism. I’m absolutely confident that once we get the house in order, the private sector will find new opportunities, new markets, and we’re going to get back to a path of growth.”