Reuters: US Dollar Report: Brazil's Rousseff to cut business taxes - report

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Brazil's Rousseff to cut business taxes - report Mar 24th 2012, 16:51 Sat Mar 24, 2012 12:51pm EDT * Says best defense against a strong real vs dollar * Plays down recent tensions among coalition parties * Blames money from rich countries for currency war SAO PAULO, March 24 (Reuters) - Brazilian President Dilma Rousseff has pledged to reduce 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 shortly after a meeting with industry leaders, Rousseff told the weekly magazine in a two-hour interview conducted 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 paralyzing (economic) distortions," Rousseff said, just shy of 15 months into her first term. She said she advised the business leaders that the best defense 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," 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 a strong currency is having on the loss of local manufacturing jobs. ANIMAL SPIRIT "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 Rousseff, an economist by training. 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 Rousseff has filled with technocrats or her own 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." "WE DON'T WANT THEIR MONEY" 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 headline-grabbing statements by 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 Merkel. "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. Brazil has imposed several taxes over the past year on foreign capital entering Brazil's fixed income and exchange markets, in an attempt to keep the real from strengthening against the dollar. Brazil has some of the highest interest rates of any major economy, which have been a magnet for capital in the developed world seeking better returns than the near-zero rates available at home. Link this Share this Digg this Email Reprints

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