Boosting investment: Where will it come from?

The article, “Brazil to boost investment” pasted below was published by Sinapress and copied/posted by the Information Company of Seattle. Certainly, it is well known that Brazil’s savings and investment rates have been comparably low and well below China’s forced savings rate. Brazil currently invests less than 20% of GDP. Part of this comes from the deep rooted tradition of spending now because of inflation and another part come from fear associated with a preference to moving savings offshore and trying to escape the whims of the government and the voracious tax appetite of the state. The attempt to boost investment, while welcome, is problematic because the private sector is waiting on the public sector to lead and the public sector has its hands tied because of lack surplus. Government discretionary spending is limited. Basically, all tax revenues are already allocated to debt service, social security, social programs and other budgetary commitments. The so called PAC has not taken off because the investments are not there. If the government tries to increase spending it will only generate more inflation which is already very close to upper end of the target range.

It would be great if Dilma can work some magic….but it looks tough.

Brazil to boost investment to 25 pct of GDP: President

Posted by infoadmin

Brazil’s President Dilma Rousseff said on Wednesday the government seeks to boost total investment to 25 percent of gross domestic product (GDP).

“We have made a huge effort in infrastructure and we want this effort to pay off, (and) it is impossible to continue transporting minerals and grains only via highways,” Rousseff told a meeting of the Economic and Social Development Council (CDES) in Brasilia.

She also said the government plans to announce new tax cuts to stimulate investment.

At the same meeting, Fernando Pimetel, Brazil’s development, industry and trade minister, said the investment in Brazil should grow 30 percent by 2016, or reach 3.8 trillion reals (1.9 trillion U.S. dollars) over the three-year period, driven by infrastructure and industry sectors.

“We are convinced that in 2013 and in the next few years, there will be growth in investment in infrastructure, industry and other sectors as well,” he said.

The current investment rate of South America’s largest economy stands at around 20 percent of the GDP, according to Brazil’s Finance Ministry.

Economists in Brazil say the country is about to hit a bottleneck of economic expansion and needs to bolster investment to accelerate growth.

Pimentel indicated that the government is providing solutions to boosting economic growth, and now it needs businessmen to jump on the bandwagon.

The government earlier announced several measures to increase the competitiveness of the Brazilian industry by improving efficiency of transportation and logistics networks.

Brazil’s GDP growth registered a tepid 0.7 percent from January to September last year, and the full year growth would not exceed 1 percent, analysts say.

Source: Sina English

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