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Manifesto Urges Brazil to Promptly Cut “Absurd” Interest Rates

At yesterday’s, December 1st, meeting of Brazil’s Economic and Social Development Council, the president of the Federation of Industries of the State of São Paulo (Fiesp), Paulo Skaf, presented a Manifesto for Brazilian Development.

The document was prepared by the Fiesp and the Institute of Industrial Development Studies (Iedi).

Besides an accelerated, immediate reduction in the government’s benchmark interest rate, Skaf emphasized the need for a "management shake-up" to eliminate the "wastes" in government spending.

The document also criticizes "the excessive tax burden, the appreciated and volatile exchange rate, and the dearth of investments and infrastructure, forming an absolutely adverse macroeconomic scenario, in the countercurrent of successful development experiences."

The president of the Fiesp believes that political motives were not responsible for the third-quarter decline in the Gross Domestic Product (GDP), announced yesterday by the Brazilian Institute of Geography and Statistics (IBGE).

"Had there been a spillover from the political crisis, we would be seeing a bear market and an appreciated dollar, whereas what we observe is a bull market and a depreciated dollar," he affirmed.

"What we have is a spillover effect caused by flaws in economic policy, principally in the area of monetary policy, which must be corrected immediately for us to recover what we lost in 2005," he insisted.

According to Skaf, the entrepreneurs had already warned the government that the "absurd" interest rates and the sluggish pace of interest rate reductions could harm growth in 2005.

"In 2005, we are going to have a result that should be between 2 and 2.5%, as against last year’s 4.9%. It’s half the average growth rate worldwide, a third of the average for the emerging countries, and a quarter of what Argentina’s growth rate will be this year. It’s lamentable," commented the president of the Fiesp.

Agência Brasil

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