Yet more favours are being showered on the national development bank, BNDES. The bank is already the chief channel for granting subsidized credit (preferred companies only need apply). It is now becoming the central plank in the government’s bid to rebalance industry with an additional R$45bn to spend on top of the R$280bn it has received since 2009. Government money passed to the BNDES is not included in debt statistics, flattering Brazil’s national debt numbers and helping explain the government’s addiction for using the bank to dispense favours.
It’s all part of the government’s micro management of industry. Today, it announced fresh measures to help out Brazil’s embattled industrial base. Fifteen sectors will see social security contributions on salaries extinguished in favour of a tax on gross revenues of 1% for industry and 2% in the case of services. At the same time, Brazil will raise social security contributions for imports on the same 15 sectors.
The truth is that Brazil is unlikely to be able to save many parts of its industry because poor logistics, high taxes, and expensive and scarce labour make it uncompetitive. If those reforms are too painful to be contemplated, it might be time to learn a lesson from Australia, that other great commodity producer, and lighten up about the loss of the industrial base.