Brazil looks toward fueling growth.

According to a June 13, 2005 analysis in Brazzil Magazine, Brazil has the highest interest rates in the world. The analysis went on to say that such high interest rates are a precursor to stunted expansion of the Latin American region's biggest economy. And the analysis implies as well that consumer spending would improve if rates were lower.

Further, the analysis suggests that the central bank's claim that high interest rates are needed to tame inflation mask the practice on the part of the government of maintaining a level of debt on a short term basis that other countries manage on a long term basis.

Rate cuts would stimulate economic growth, empowering Brazil's consumers, creating jobs, and attracting investment. Rate cuts would also stimulate tax revenue, which would relieve the government from part of the burden of having to borrow expensively to finance its programs. The analysis also makes an important observation about the country's informal sector. It says that recently published reports indicate that 98 percent of Brazil's small businesses are part of the informal economy. Bureaucratic inefficiency and disproportionate taxes are barriers to business registration with the government, and deprive the government of tax revenue that would derive from fair and efficiently managed taxation.

On June 11, 2005 Toronto's Globe and Mail carried an Associated Press (AP) dispatch saying that in May consumer prices rose fractionally on the basis of easing oil prices and stable food costs. The rise in consumer prices was the lowest since October 2004.

Then on June 15, 2005, Bloomberg News reported that at its policy meeting that day, Brazil's central bank declined to raise interest rates for the first time in nine months. Bloomberg News said that the vote was widely anticipated.

The report quoted a locally based economist to the effect that the central bank was likely to begin lowering rates in the final quarter 2005. At that time, the central bank would be able to clearly see the effect of a lowering of rates.

Flagging retail sales contributed significantly to bringing inflation under control, growing at only half the rate in May 2005 of the previous three months.

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