Brazil: Another day, another industrial stimulus package.

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.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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