In New York, Mailson criticizes protectionism and improvisation in the economy.
Measures like increasing the IPI tax on imported cars close the market and are not good in the long term, says former minister.
Brazil is moving towards a more closed and less competitive economy, which should have negative long-term consequences, according to former Finance Minister and partner at Tendências Consultoria, Mailson da Nóbrega. He believes that both the increase in the Tax on Industrialized Products (IPI) for imported automobiles and the decision to apply the Tax on Financial Operations (IOF) to transactions with currency derivatives are examples of misguided decisions by the Ministry of Finance.
"These measures show that this is a government that improvises, that believes the government has to subsidize certain sectors, choose winners, and protect the domestic market. This is a mistake, it will further close the Brazilian market and it's not good in the long term," Mailson told Agência Estado today, during the Brasil Inc. event in New York, promoted by the newspaper "Meio e Mensagem".
According to the former minister, in the end both consumers and industry lose out with protectionist measures. "Consumers end up paying more and industry becomes less competitive," he assessed. He stated that the government demonstrated its improvisational nature by deciding in July to apply IOF (tax on financial transactions) to derivatives, initially at 1%, but potentially reaching 25%, between long and short positions in the futures market, without any consultation. "These are decisions made hastily," he said.
The new IPI (Tax on Industrialized Products) rules stipulate that companies that do not meet the requirements for investment and use of national components will face a 30 percentage point increase in the tax by the end of 2012. Automakers will have to use at least 65% national or regional (Mercosur) content, invest in research and development, and complete at least six stages of production in the country.
Selic - Mailson also said that the Central Bank's decision to cut interest rates by 0,50 percentage points, to 12% per year, at the last meeting, may also prove "inappropriate" in the future. For now, Mailson believes that the basic interest rate will have three more cuts of 0,50 percentage points, reaching 10,5%.
"I believe the primary surplus in 2012 will be 2,2%, not 3% as the government expects. And I don't see a high risk of collapse in the financial system like in 2008. So, if the Central Bank's scenario doesn't materialize, it will have to raise the rate again. This will further damage the Central Bank's credibility, which is already tarnished," he analyzed.