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Brazil aims to reduce business taxes

Brazilian President Dilma Rousseff has pledged to reduce business taxes on local businesses to help them invest and compete in a world awash with cheap money that is hurting Brazil’s economy, Veja magazine reported on Saturday.

Speaking after a meeting with industry leaders, Ms Rousseff told the weekly magazine in an interview on Thursday that the way out of Brazil’s struggle with inflation and slow growth was lower taxes to spur private investment.

“Today … I met with some of the most important Brazilian businessmen and had a frank exchange of ideas of how to attack our most paralysing (economic) distortions,” Ms Rousseff said, just shy of 15 months into her first term.

She said she advised the business leaders that the best defence against a strong real versus the dollar, which has made imports more competitive and exports less so, was to raise the level of private investments.

“They complained that taxes in Brazil foiled the best initiatives and impeded their competing equally on the global playing field,” Ms Rousseff said. “I agree. We have to lower our tax burden. And we are going to lower it.”

The government has been concerned with the effects that a strong currency is having on the loss of local manufacturing jobs. “The business leaders must do their part, seize opportunities, take risks and let flourish that ‘animal spirit’ that (economist John Maynard) Keynes spoke of,” said Ms Rousseff, who is an economist by training.

Ms Rousseff played down recent tensions among the parties that make up her ruling coalition that have led to gridlock in Congress and held up passage of important legislation such as the World Cup Bill and the new Forestry Code.

The freezing of discretionary spending that often goes to ruling bloc parties’ pork-barrel projects has been one point of contention. Another has been the loss by coalition parties of key administrative posts in ministries and state-run companies, some over corruption allegations, which Ms Rousseff has filled with technocrats or Workers Party members.

“There is no crisis of any kind. To win and lose votes is part of the democratic process,” she said. “A crisis exists when you lose legitimacy.”

Ms Rousseff also spoke of her encounter this month with German Chancellor Angela Merkel.

The meeting between the leaders of the sixth-and fourth-largest economies came after statements by Ms Rousseff blaming a “tsunami” of cheap money from rich economies for a “currency war” that has hurt the emerging markets.

“Brazil is in a situation now in which we can say to rich countries that we don’t want their money,” she said she told the German chancellor.

“When the European Central Bank throws 1-trillion euros suddenly on the market, it can’t expect countries to sit quietly while these resources simply stroll through Brazil and return fatter to Europe without leaving any benefit here,” she said.

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