The study reveals that, for business owners, taxes are the prime hindrance to economic growth in Brazil. Interest rates appear in second place on the villains list.

In the survey, conducted for the third consecutive year, 43% of the 1003 companies interviewed named taxes as the prime factor limiting economic growth.

However, when compared with 2005, there was a decrease of 12 percentage points in the percentage of firms that ranked this item first.

Interest rates were ranked first by 33% of the companies interviewed, 14 percentage points more than gave it first ranking last year. The third most important factor limiting economic growth, in the eyes of the entrepreneurs, was domestic politics, which also received a larger percentage of first-place mentions this year than last: 7%, compared with 2%.

There was a big reduction, on the other hand, in the percentage ranking deficient infrastructure first: 5% this year, as against 17% in 2005.

The survey also included items related to what industries plan to invest in 2006 and over the three-year period 2006-2008 in increased production capacity.

The results show that the average growth in production capacity projected for this year is 8%, more than the 7% projected at the beginning of 2005.

For the 2006-2008 period, the average projected expansion was 17%, less than the 19% projected in January, 2005, for the three-year period covering 2005-2007.

Nevertheless, the study judges that "the current result is comparable to that of recent periods of economic growth, with the implicit expectation that installed capacity will increase at an annual rate superior to 5%."

Agência Brasil

"I’m not promising, I’m guaranteeing the Brazilian people that Brazil will develop much more in 2006, with a more vigorous and more solid expansion," said President Lula in his last radio program of the year.

"I believe 2006 will be exactly what I’m telling you, a year in which industry will grow more, employment will increase, incomes will increase and I’m sure everything is going to be better in 2006," he added.

But private analysts are not so convinced following the deceleration of the third quarter, which has led them to downgrade growth estimates for 2005 from 3% to 2.5%, and 3,5% for next year, according to the Central Bank monthly poll among the leading businesses of the country.

Finance Minister Antonio Palocci stated Friday that the Brazilian economy is poised to expand 5% in 2006.

Mr. Lula has insisted that although 2006 is an election year, "elections can’t become an obstacle, should not become an obstacle, will not become an obstacle" for the government development plans.

"Obviously we’ll have a political dispute which always generates much discussion but I think the role of the president is to ensure that politics don’t dominate the daily management of government or the country’s development".

President Lula has still to announce if he will be running for re-election. His popularity has suffered severely following revelations of a network of illegal payments orchestrated by his Workers Party to buy support in Congress for the government’s legislative agenda.

President Lula insisted that Brazil is now a country with international credibility, "with its books in order" and with the necessary robustness "to cancel in advance its debts with the International Monetary Fund".

"We’re making decisions with no interference from the IMF or any other multilateral organization," he highlighted.

The latest Central Bank poll also indicates that business leaders expect lower interests since the reference rate began a steady four months slide last September from 19.75% to the current 18% and hopes of a further cut in January to 17.5%, probably ending 2006 at 15%.

But economic agents also believe that foreign direct investment in Brazil will remain stabilized in US$ 15 billion both in 2005 and 2006, contrary to earlier forecasts in excess of US$ 16 billion.

Mercopress – www.mercopress.com