* Gov't to increase import taxes on 100 products
* Tax hike heightens concern over growing protectionism
* Move aims to help struggling local industries
* Rousseff scrambling to lower Brazil's high output costs
(Adds fresh Mantega comment, analyst comment, details and
By Luciana Otoni
BRASILIA, Sept 4 Brazil will raise import
tariffs on 100 foreign products to help struggling local
industries, Finance Minister Guido Mantega said on Tuesday, in a
move that could amplify concerns over growing protectionism in
the world's No. 6 economy.
This is the latest in a string of steps taken by President
Dilma Rousseff to fend off competition from foreign producers,
which has hit local industries and dragged down an economy that
until recently was the star among emerging market nations.
The temporary increase - initially for a year - in levies
will apply to products ranging from iron pipes to glass and bus
tires. The rate will reach 25 percent for most of those
products, an increase from the low teens.
"We live in a time when the world market is shrinking and
exporters flood Brazil, which is one of the few growing markets,
and our industry is being harmed by this," Mantega told
reporters in Brasilia.
Brazil has unapologetically raised barriers on foreign goods
it considers a threat to its local industry, angering trade
partners already struggling to sell their products amid the
Trade Minister Fernando Pimentel on Tuesday quickly denied
the move was protectionist, saying the tax hike was allowed
under World Trade Organization rules. The tariff ceiling for
most industrial products is 35 percent.
Over the last year Brazil hiked taxes on foreign vehicles,
reworked a long-standing car trade deal with Mexico and
tightened rules for the import of perishable goods from
Argentina to protect local businesses.
Yet industries have reacted slowly to the measures, which
also include a flurry of tax breaks and actions to weaken the
local currency, the real.
Industrial output had only a modest rise in July, government
data showed earlier on Tuesday, which raised doubts over the
effectiveness of government actions.
"While some sectors should benefit from the tariff hike and
could even avoid layoffs temporarily, the measure has the cost
of increasing prices, allocation distortions and even risking a
pickup in inflation driven by lower competition," Marcelo
Salomon, an economist with Barclays Capital, said in a note.
TACKLING BUSINESS COSTS
The move to help industry comes at a time when the Rousseff
administration is scrambling to lower some of the world's
highest production costs.
For years businesses operating in Brazil have struggled with
high taxes, lack of skilled labor and infrastructure bottlenecks
in what is known here as the "Brazil Cost."
Rousseff plans to announce in coming days a reduction in
electricity costs for industry and consumers, which is not
expected to have an immediate effect on an economy that is
expected to grow only 1.6 percent his year.
That is a far cry from the 7.5 percent expansion seen only a
few years ago, which confirmed Brazil's standing as one of the
world's most coveted investment destinations.
Aiming to spur long-term growth Rousseff unveiled measures
in August to lure $65 billion in private investment capital to
refurbish thousands of miles of decaying roads and railways.
The trained economist has received much praise from Wall
Street for her efforts to make life easier for businesses, but
cumbersome red tape and heavy state intervention could still
spoil her plans, analysts say.
The latest tax hike still needs to be reviewed by the South
American trade group Mercosur, which includes Brazil, Argentina,
Uruguay, Paraguay and new member Venezuela.
(Additional reporting and writing by Alonso Soto; Editing by
Steve Orlofsky and Phil Berlowitz)