Brazilian industry lists 7 economic proposals for next government

Brazilian industry has listed 7 proposals that can help the next government increase the economy’s growth.

The industry of the country has hardly developed in the last decades. Every three or four years of growth, there is a recession.

From 1980 to 2019, Brazil’s GDP (gross domestic product) per capita increased by an average of only 0.93% per year.

The material was produced by the CNI (National Confederation of Industry).

The organization’s president, Robson Braga de Andrade, explained that poor countries are poor not because they grow more slowly, but because they have more negative growth periods.

“This is a task of great magnitude that must be addressed with great determination, political leadership, and negotiating skills,” he said.

A report by management consulting firm McKinsey on 18 economies that have achieved exceptional economic performance in recent decades shows that between 1990 and 2013, 1 billion people were lifted out of extreme poverty.

In China, the figure was 731 million; in India, 168 million; and in other countries, 158 million.

The studies are part of the industry’s proposals for the 2022 elections, which the CNI submitted to the candidates for the presidency of the Republic.

Tax reform: adoption of the proposal to amend the Constitution 110

The PEC proposes to replace the main taxes levied on consumption with a value-added tax, a tax model used in more than 170 countries. A study by the Federal University of Minas Gerais projects a 7.5% increase in jobs in the years following the reform.

Balance between public spending and inflation control

The CNI believes that the government should control the budget, without interventions jeopardizing its stability.

Maintaining and strengthening the expenditure ceiling

The Fiscal Responsibility Law, the primary result, the golden rule, and the spending cap must be maintained to control the evolution of public debt and make government spending more efficient.

“Backtracking on fiscal rules would lead to a devaluation of the real and consequently an increase in inflation and interest rates. The effects are harmful to the economy, especially Brazilians,” he says.

Extension of tax incentives for less developed regions until 2028

For the CNI, Provisional Measure 2.199-14/2001 promoted the increase of investments in the areas where Sudene (Superintendence for the Development of the Northeast) and Sudam (Superintendence for the Development of the Amazon) operate, with tax incentives in the form of a 75% reduction in IRPJ (corporate income tax).

The term expires on December 31, 2023. CNI proposes to extend the term until 2028 to develop a dynamic industry in the region.

Reduce corporate income tax from 35% to below the OECD (Organization for Economic Cooperation and Development) average of 23%

“Brazil needs to improve its corporate tax rules and harmonize with international standards and OECD and G7 tax practices. Convergence is not only recommended and necessary for the Brazilian economy but also became necessary before applying to join the OECD,” he says.

Expanding and reducing the cost of bank credit

According to the industry, it is essential to reduce the tax and administrative costs of financial intermediation, promote competition among financial institutions, reduce information asymmetries between lenders and borrowers, facilitate companies’ access to the guarantee system and increase the legal certainty of financing contracts.

Micro and small enterprises accounted for only 18% of financial institutions’ loan portfolios, while medium-sized enterprises accounted for 24%.

Large companies, on the other hand, accounted for 58% of loans taken out, according to the central bank.

Increasing financing by non-banks

Update and improve regulation by simplifying rules and procedures, developing a specific regulatory framework for IPOs of smaller companies, encouraging the development of fintechs, and ensuring the role of the state in capital markets, either as coordinator for the creation of financial assets or through the National Bank for Economic and Social Development (BNDES).

With information from Poder360