Following an election process filled with financial market speculation, Brazil’s President Lula da Silva has dedicated much of his time to impressing upon the international community his country’s commitment to respect contracts and become a safe destination for foreign investments. While pursuing capitalist policies, Lula has not compromised the social welfare of his country.
In effort to meet the demand for government-funded welfare programs in his country, Lula has implemented Zero Hunger and The First Job. Zero Hunger is a welfare program that is similar to the American system of food stamps, while First Job grants financial benefits to businesses that hire applicants between the ages of 17 and 24. It is hoped that as the younger generation gains work experience, they will further contribute to and help grow a vibrant economy.
While Lula is an advocate of social programs, he also understands the advantages of a functioning market economy. For this reason, he appointed Henrique Meirelles, former worldwide president of BankBoston, to preside over Brazil’s Federal Reserve. Moreover, he has maintained the conservative fiscal policy implemented by his predecessor and has repeatedly stated Brazil’s commitment to protect contracts.
Lula’s actions have received compliments from the international community. Recently, IMF Managing Director, Rodrigo Rato stated, “The advances made by the Brazilian government are very impressive….These courageous policies have paid off. Brazil’s vulnerabilities have been reduced, and the increased resilience has helped to weather recent global market turbulences. GDP growth is now robust, benefiting from continued strong export performance, a pick-up in domestic demand and rising wages and employment.” [IMF press release n. 04/186 (09-03-2004)] In late November of this year, Brazilian newspapers reported that GDP is the highest it has been in the past eight years.
Lula da Silva also intends to increase the Brazilian presence in the global market by investing in other countries—Petrobras, a Brazilian owned company plans to invest US$ 7.5 billion abroad—exporting more and enhancing importation. In 2004, Brazil imported US$ 52 billion, an impressive increment when compared to the same period in 2003, when it imported US$ 47 billion.
Intending to encourage foreign investments, Brazil’s finance minister, Antonio Palocci, has recently announced a program called “Invest Now” which consists of an expedited tax refund for the value paid in federal taxes by businesses operating in Brazil. He also announced a significant federal tax reduction in addition to reductions on insurance, financial operations, industrialized products and construction investments.
Taking advantage of this investment-friendly setting, China has recently announced an investment of over US$ 1.3 billion for the construction of a gas pipeline in the eastern part of Brazil and may invest up to US$ 6 billion in the near future.
If you would like to learn more about investing or conducting business with Brazil, please contact Gabriel Sanchez at csanchez@kmclaw.com. Kirton & McConkie acknowledges the assistance of Brazilian attorney Augusto Perez in preparing this article.