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SAO PAULO (Reuters) - Brazil's government should pursue reforms aimed at making the country a more attractive place to do business, instead of simply cutting taxes or interest rates to improve returns, billionaire financier André Esteves said on Tuesday.
Even though the country needs a softer tax burden on companies similar to that of peer emerging market nations, the emergence of a new middle class is demanding other reforms, Esteves, the chief executive officer of BTG Pactual Group (BBTG11.SA), said at an event in São Paulo.
Esteves, addressing a gathering of executives and government officials, mentioned programs to enhance the quality and coverage of education, rules to facilitate the securitization of corporate receivables and the simplification of laws to open small business as some of those measures. BTG Pactual is Brazil's sole listed investment bank.
"It is obvious that the nation has urgent needs for reform of great scope but at this point an agenda of microeconomic reforms would be more effective, in my view," Esteves, 44, said. "Tax cuts won't do the job alone."
A growing chorus of executives, economists and investors has been urging President Dilma Rousseff to embrace a more pro-business agenda. According to the World Bank, Brazil ranked 130 of 185 countries this year in pro-business policies.
Since taking office in January 2011, Rousseff's government has resorted to protectionism and subsidized lending to protect jobs as well as manufacturers from Chinese competition. Industrial lobbies and some unions have welcomed those measures. But others would prefer the government to ease regressive labor and tax codes, excessive red tape and infrastructure bottlenecks.
Esteves said the government should strengthen legal rules to enhance certainty and unlock long-term financing in a country that for decades bore the world's highest borrowing costs. Murilo Portugal, president of Brazil's biggest banking lobby Febraban, agreed and said lenders "have come a long way" over the past decade to open access to credit.
While borrowing costs in Latin America's largest economy are likely to remain at single-digit levels for the years to come, more is needed to stoke economic development such as incentivizing small- and mid-sized businesses, Esteves said.
"It is valid to talk about inflation, the currency or interest rates but I think the time has come for us to change the subject, to talk about more long-term issues that are hampering social and economic development," Esteves added.
Esteves expects the central bank to raise the benchmark Selic overnight lending rate by as much as 2 percentage points during a tightening cycle aimed at heading off inflation.
BTG Pactual and Esteves, the bank's largest shareholder, have become symbols of Brazil's growing financial markets in recent years, competing head to head with global investment banks in a country with bustling capital markets and a promising long-term growth outlook.
Reporting by Guillermo Parra-Bernal; Editing by Gary Hill and David Gregorio