* Brazil extends payroll tax cuts to 25 industries
* Finmin says to lower GDP growth view to 2 pct from 3 pct
* Gov't continues with measures to bolster slow recovery
By Tiago Pariz
BRASILIA, Sept 13 Brazil rolled out additional
stimulus measures to bolster its sluggish economy on Thursday,
extending tax breaks to more than two dozen industries and
reducing the cost of acquiring capital goods in a bid to help
struggling local businesses.
The measures were announced immediately after the U.S.
Federal Reserve launched another aggressive stimulus program to
help support a weak economic recovery, which has cast a shadow
over the health of the global economy.
Global financial headwinds continue to affect the Brazilian
economy, Finance Minister Guido Mantega said, forcing him to
again slash this year's economic growth estimate to 2 percent
from a previous 3 percent.
A painfully slow recovery in the world's No. 6 economy
underscores the challenges policymakers face in returning to the
type of red-hot growth that made Brazil a star among
The Brazilian economy has remained practically stagnant
since 2011 despite a slew of government stimulus measures
including targeted tax cuts and cheap credit. At the heart of
Brazil's economic ills lies an industry struggling under a
strong currency, high taxes and infrastructure bottlenecks--a
mix of crippling output costs that has been dubbed the "Brazil
Mantega said the government was extending payroll tax breaks
for 25 industries including poultry and pork producers, wood
pulp and freight and passenger transportation companies. The tax
breaks will take effect in January of 2013 and cost the
government 13 billion reais ($6.41 billion) in tax revenue.
"These measures reduce labor costs for a series of companies
and makes them more competitive at a time when we have an
international crisis," Mantega told reporters in Brasilia.
He added that the measures also include mechanisms to lower
the cost of acquiring capital goods like machinery.
President Dilma Rousseff's government earlier this year
announced payroll tax breaks for more than a dozen sectors
including textiles, furniture, auto pieces, buses and plastics
FOCUSED ON SUPPLY
The latest measures highlight Rousseff's efforts to move
away from consumption-focused actions toward policies that
reduce some of the world's highest output costs.
"These measures complement recent ones to attack the problem
from the supply side instead of continuing with the old focus on
consumption," said Luis Otavio de Souza Leal, chief economist
with Banco ABC Brasil in Sao Paulo.
"I think this is the right approach... and we are most
likely to see the effects next year," he added.
Most economists see the Brazilian economy growing a meager
1.6 percent this year, a far cry from the 7.5 percent expansion
seen in 2010. They agree the economy should rebound next year to
about 4 percent, the latest central bank poll shows.
Companies that extended gains after the announcement
included meatpackers JBS and Brasil Foods,
and wood pulp producers Suzano, Fibria and
Brazil, the world's top chicken meat exporter, has scaled
back poultry output as the spike in grain prices crimped margins
and hurt producers' cash flow, the head of the country's poultry
association said on Aug. 20.
Mantega said the latest tax incentives will help lower
domestic inflation next year as companies promised to pass the
reduction in labor costs on to consumers.
Still, some analysts doubt industries will keep their word
to lower prices as they scramble to make up for losses.