Brazil Likely To Be Unaffected By US Crisis, Says President

by Mike Godfrey, Tax-News.com, Washington

28 February 2008

Speaking on Monday, Brazilian President Luiz Inacio Lula da Silva suggested that the country was well-positioned to weather the economic consequences of a possible US recession.

Brazil is likely to be cushioned from the impact of the US financial crisis by its position as the leading global exporter of ethanol, and iron ore, and by strong exports of agricultural products such as sugar, coffee, orange juice, beef and chicken.

GDP is predicted to continue rising, on the back of high domestic consumption levels.

According to a Business Week report, da Silva announced in his weekly radio program that:

"People are buying more, and exports are growing because we don't depend on the United States and Europe alone," Silva said. "We're exporting to many more countries around the world, and this leaves us calm in the face of an American crisis."

Meanwhile, recently released figures have revealed that federal revenue was up 26% in January, despite fears that the President's failure to push through an extension of the financial transactions tax would result in government finances falling short of required levels.

According to a Bloomberg report, 62.6 billion reais (USD37.2 billion) was collected, compared with 49.9 billion reais in January 2007.

However, in response to concerns from the business community with regard to the relatively high tax burden, the government will on Thursday send tax reform proposals to Congress, detailing planned changes to the regimes for investments and exports, and proposals for the unification of several federal taxes.

It also emerged this week that foreign direct investment (FDI) in the country climbed to a record USD4.8 billion in January, an increase of around USD2.4 billion on the same period the previous year, exceeding the Central Bank's estimated USD4.5 billion for the month.

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