Brazil needs to change policies for economic recovery

Brazil needs to change policies for economic recovery

The current stagnant state of economy is still ongoing with the equities and bonds beaten in the country. The economic policy in Brazil with high interest rates, high taxes together with a weak currency, having lost more than 30% value in 2002 is seen quite unsuccessful, and the regulations such as subsidies, import quotas are other obstacles against growth. The economists and analysts state that Brazil urgently needs to change its economic course otherwise it might go the way of Argentina in near future. In order to realise such change, the path that Central Bank currently follows, which is basically applying high interest in order to strengthen the Real's value, must definitely be turned vice versa, as it will be no real solution for a stronger currency, according to most analysts. The stable solution can only be reached if Central Bank reduces the supply of Real in the market until it appreciates certain amount against the US Dollars, and to release same back into economy, right after its value is increased. However, the question is whether such transaction can be applied under the IMF obligations. Furthermore, in order to obtain growth in the economy, the necessity that the government increases incentives while supporting the enterprises, is seen. This would bring in more tax revenue to the government, and at the same time draw the foreign investor's attention, both of which would be to the benefit of the Brazilian economy. It is hoped that the new president Lula Da Silva will be able to achieve these requirements. For the month of October, Brazil's tax receipts amounted to Real 23.92 billion ($6.6 billion) from Real 23.72 billion in September, according to the federal tax office's announcement last week. Tax collection in the first 10 months of the 2002, amount to Real 219.86 billion, compared with Real 198.83 billion in same period of 2001. Brazilian tax collection for the whole year was Real 205.9 billion in 2001, rising from Real 204.1 billion total of 2000.