APLA '12: Brazilian costs hamper economic growth - economist

13 November 2012 18:17  [Source: ICIS news]

RIO DE JANEIRO (ICIS)--Bureaucracy, taxes and other costs of doing business in Brazil make it harder for local companies to compete worldwide, an economist said on Tuesday.

Brazil is home to several major chemical and energy producers, including Braskem, Petrobras, Elekeiroz, Unigel and Ultrapar, the parent company of Oxiteno.

Taxes make up a significant portion of the so-called 'custo brasileiro', said Ricardo Roriz Coelho, director of the department of competition and technology for the Federacao das Industrias do Estado de Sao Paulo (FIESP).

Coelho made his comments during a presentation at the Latin American Petrochemical Association (APLA) annual meeting.

Moreover, Brazilian companies need to pay taxes for goods before they collect money from clients, a practice that dates back to when inflation was high in the country, he said.

Because of the nature of the tax code, Brazilian companies need to set aside a large number of employees to process the taxes, Coelho said.

Energy costs are among the highest in the world, although companies should get some relief from a recent move to lower electricity taxes, Coelho said.

After paying for power, companies face more expenses because of Brazil's high cost of raising capital, he said.

The Brazilian central bank has gradually lowered the country's interest rate to 7.25%, but it is still high when compared with other countries, he said.

Brazil's logistics weigh down companies with even more costs, Coelho said. "Our position is terrible when we compare our infrastructure."

Out of 142 countries surveyed, Brazil ranked 104th, he said.

"Brazilian companies are not in a position to compete on an equal footing," Coelho said.

The APLA conference ends on Tuesday.

By: Al Greenwood
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