Source: O Estado de São Paulo, 17/05/2007

Sharp cuts in interest rates, on the basis of the 'pen,' reduction of public spending to contain demand in the economy and reduction to zero of all import tax rates. These are the ingredients of economist and former Finance Minister Antonio Delfim Netto's recipe so that the government can contain the process, which he qualifies, of 'overvaluation' of the exchange rate.

'Overvaluation can only be eliminated through radical action. Of course, this has a cost for the country, but it is perfectly bearable and admissible', said the former minister, during the seminar 'Brazilian Economy in Perspective', held by the School of Economics of São Paulo (EESP) of the Getúlio Vargas Foundation (FGV ).

According to Delfim, by zeroing import rates, the government will be able to guarantee the maintenance of market supply, especially if an accelerated cut in interest rates causes consumption pressure.

For the former director of the Central Bank (BC) and professor at PUC-Rio Ilan Goldfajn, the low exchange rate of the dollar reinforces the expectation of an acceleration of the Selic cut by the Copom. According to him, the current level of the dollar cannot be considered a disaster for the economy, but it is important that the Central Bank continues to smooth the trajectory.