BRASILIA/SAO PAULO (Reuters) – President Dilma Rousseff is pessimistic about Brazil’s chances for a meaningful economic recovery this year and is pushing ahead with new measures aimed at lowering taxes and increasing investments, hoping they might give the economy a lift by 2013, government officials told Reuters.
The measures include a consolidation of some overlapping federal taxes; a new round of concessions that would allow the private sector to manage more of the country’s congested airports and seaports; and a more aggressive effort to reduce electricity costs for manufacturers and others, the officials said on condition of anonymity.
Brazil’s economy has been spinning its wheels since mid-2011 as weak manufacturing activity, financial contagion from the euro zone and souring investor sentiment take the shine off what had been one of the world’s most dynamic emerging markets.
Rousseff, a trained economist, has reacted with several targeted tax cuts and more than half a dozen packages aimed at stimulating consumption and investment. However, many business leaders and foreign investors have complained that her policies have been too ad hoc and narrow in scope, citing forecasts that now see growth as low as 1.5 per cent this year.
While senior members of Rousseff’s economic team have publicly held out hope for a strong rebound in late 2012, the mood in private is more bearish — in part because data on manufacturing and retail sales remains flat, the sources said.
“There’s a feeling that we can’t do much about 2012,” one of the sources said. “She’s very worried.”
Rousseff’s office declined to comment.
The slower growth has come as a shock after Brazil grew at a better than 5 per cent pace in recent years, including a torrid 7.5 per cent expansion in 2010. After just 2.7 per cent growth in 2011, some worry that Brazil’s labour and infrastructure bottlenecks will keep growth in the 3 percent neighbourhood for years to come unless more drastic steps are taken.
The source said Rousseff hoped to push through the latest measures before early August, when a twice-yearly meeting of about 30 leading chief executive officers will occur in Brasilia, as a gesture to the private sector.
The move most likely to stir investors, for both practical and symbolic reasons, is the new round of port concessions. Airports and seaports are routinely cited as some of the country’s most crippling bottlenecks, slowing everything from commodities exports to business travel, as public investment failed to keep up with the boom in the economy over the past decade.
Rousseff announced shortly after taking office in January 2011 that she would allow private capital to partly operate three strategic airports: two near Sao Paulo, and one in Brasilia. Concessions for those airports were awarded earlier this year.
