Brazil’s economy minister wants to set industry tax to zero and expects an unemployment rate of 8%

Brazilian Economy Minister Paulo Guedes said Friday (26) that he intends to set the IPI (industrial products tax) to zero. He said the government would reduce and simplify taxes to improve the business environment.

Guedes also said the unemployment rate should drop to nearly 8% by the end of the year. He was speaking at an event organized by Aclame (Association of the Middle Class).

The minister said he wanted to open the economy to the outside world. He said he had reduced the Mercosur tariff by 10%. The measure increases Brazil’s competitiveness and pressures the industry to become more productive.

“We turn to the Brazilian industrialist and say, ‘It’s fine to watch Netflix, sit on the couch and eat popcorn, but get up a little bit and walk on the treadmill.’ So that you don’t lose your shape, it will do you good,” he said.

About the IPI, the minister said he sent a decree on Wednesday (24) to reduce the tax. “The IPI is a mass de-industrialization tax. We must set the IPI to zero,” he said to applause from the audience.

“If we can reduce it by 35%, that’s a good start. What will happen in the future? Another 35%. We are only 30% short,” he added.

UNEMPLOYMENT

The unemployment rate in Brazil fell to 9.3% in the second quarter of 2022. This is the lowest percentage since December 2015.

“It was 12% before the disease came. It went up to 12.9% [14.9% at its peak in March 2021], went down to 12%, to 11%, to 10%, and 9.3%. Before the end of the year, we will get to almost 8%. It will be the lowest rate before the beginning of the century,” he said.

The minister questioned the discourse of economists who say that Jair Bolsonaro’s (PL, right) government has populist measures. He said the consolidated public sector has the first surplus on the balance sheet since 2013.

The federal government had a deficit of R$35.9 (US$7) billion, while states and municipalities had a positive balance of R$97.7 (US$19) billion.

Guedes said the federal government is expected to have a surplus in 2022. He said budgets are prepared with transparency, unlike in the past under previous governments.

He said that during the Covid 19 pandemic, the government provided spending for health care and froze spending for adjustments for civil servants.

Without mentioning the name of the leftist PT (Workers Party), Guedes said there was R$220 billion in spending to build a port in Cuba and investments in other countries, such as Angola.

Guedes also said that BNDES (National Bank for Economic and Social Development) owes the government R$90 billion. He stated that he wanted to “fire” the bank but praised the institution’s president, Gustavo Montezano.

Guedes stated that the funds would be enough to reduce 1% of the government’s gross debt.

LATIN AMERICA AND INTERNATIONAL POLITICS

Paulo Guedes stated that the world is seeing the “gradual dismantling” of Latin America. He said Venezuela and Argentina were on the road to misery.

He spoke of how the country ruled by Alberto Fernández is rapidly heading toward hyperinflation. In the cumulative 12 months through July, it has reached 71%.

“In addition to the disease, we now have inflation of 70 to 80%. There are shortages of food and supplies, and people are starting to freeze prices. Brazil already experienced this at the time of the Cruzado. Venezuela is experiencing it today. Argentina is heading for hyperinflation and Brazil in the other direction,” he said.