Hoje no Financial Times:
“REUTERS – Brazil’s Rousseff warns EU against restrictive taxes”. Yes, you read that right. The country that is ranked 152nd by the World Bank for its unwieldy and heavy tax system is advising against restrictive taxes.
Dilma Rousseff issued the warning on Monday as she kicked off her first visit to Europe as Brazilian president.
“In our case, extremely restrictive fiscal measures only deepened the process of stagnation and loss of opportunity,” she said, in reference to Latin America’s debt crisis during the 1980s. “It is difficult to exit crisis without increasing consumption and growth.”
Brazilian politicians have recently taken it upon themselves to solve the global financial crisis, doling out advice to the developed world.
Guido Mantega, Brazil’s finance minister, has been one of the pioneers in this regard. After rising to fame thanks to his ‘currency war’ discourse, Mantega last month proposed a slightly wacky ‘Bric’ rescue package for the eurozone.
The problem was that he had failed to consult the other Bric countries such as China, which holds the majority of the bloc’s foreign exchange reserves. Even many of his fellow countrymen were a little surprised by the suggestion that Brazil should bail out countries such as Italy, whose GDP per head is three times higher than their own.
Aside from unrealistic, the advice coming from Brazil has also sounded somewhat hypocritical.
Dilma recently spoke out about the need to combat protectionism only a week after increasing the tax on foreign-built cars by a whopping 30 percentage points. Even the complaints over currency manipulation are rather rich given that Brazil’s central bank has intervened in its spot currency market nearly every day since the crisis by buying dollars (the reason behind its impressive foreign exchange reserves).
But while it is all too easy to mock, Brazil’s new-found global voice is, in itself, a sign of greater economic stability at home. After all, in the wake of the 2008 collapse of Lehman Brothers, the country was too busy trying to prop up its own finances to worry about anyone else’s.
With one of the world’s most sound banking systems, a huge capacity for counter-cyclical stimulus measures, and those hefty foreign exchange reserves, no wonder Brazil now feels it has the right to dole out so much advice — however wacky.”