Southern Exposure

Desde as Entranhas dos Labirintos Latinos.

Tuesday, November 25, 2003


The week's news from Brazil

Free Trade - By agreeing to disagree (for now), the US and Brazil, the region's two largest economies, managed to put aside the toughest issues remaining between them in order to keep the FTAA (ALCA) negotiations on-track for a 2005 rollout. Some critics are calling the current version "ALCA light", "menu ALCA", and "ALCA a la brasileira." Brazil held fast to restrictions on liberalising government purchase contracts, standardising rules for investment and intellectual property reform, while the US refused to reform agricultural subsidies, insisting that this be conducted through the WTO mechanism. The agreement reached will allow negotiations to continue (in February), while not accepting the more broad-ranging, inclusive and binding agreement desired by other participants such as Chile and Canada.

Slave Labour - The government published a list of 52 persons or businesses that have been convicted of using slave labour between 1995 and 2002. In the past year, 4300 people have been freed from conditions of slavery, nearly twice as many as in the previous year. Typically, those in slavery sign onerous contracts they do not understand, then are removed to rural locations where they have no means to leave.

Income Tax - New proposals to adjust the tax bands and deductible limits would see the average middle class Brazilian income taxes rise by about 23%. The restructuring is expected to bring an additional R$3.5bn into government coffers.

Interest Rates - The Monetary Policy Committee of Brazil's Central Bank lowered interest rates from 19% to 17.5%. The rate has fallen from 26.5% since earlier in the year, and is starting to alleviate some of the pressure this very high rate was having on economic growth. This was the first reduction since the downward trend started not to have unanimous support, suggesting that further reductions may be on hold pending a review of the impact the current reductions have had.

Buying on Time - led by the recent cut in interest rates, Brazil's retailers are lowering interest charges and lengthening the sem juros (interest-free) period on purchases in the hopes of a strong holiday shopping season. Some are offering interest-free shopping until after Carnaval (late February). There are signs that the strategy is working - an early 12-15% increase in numbers and in purchases has been reported. In Rio, this is partially credited to a run of overcast weather which has kept the beaches relatively empty and people in the malls in search of diversion.

Police Matters - Brazil's governors support a new constitutional amendment which would clear the way for (without obliging) the merger of the civil police and policia militar at the state level. The result would be to streamline Brazil's policing. The current distinction between the two is roughly between investigation and street policing. Separately, in Rio state, the government is proposing that the police force declare their possessions and how they came to pay for them in an effort to expose corruption.

Futebol - Brazil's national side had a lucky escape, drawing with Uruguay after allowing a 2-0 lead to evaporate with three quick Uruguay goals in the second half. Ronaldo scored his 50th goal for the Brazilian side with just 3 minutes remaining to level the score at 3-3 and allow Brazil to remain near the top of the standings for the World Cup qualifiers. Back in the Brasilerao, Cruzeiro won it's match vs Parana, leaving them one victory short of the championship. Bahia assumed the lanterna position by losing at home while Gremio managed to beat Vasco. Both teams are still in the zone, but with three matches left, there's still a chance of escape with the next few teams only 2-3 points ahead of them in the standings. Rio side Botafogo gained promotion to the first division.


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