By JANAINA LAGE, FROM FOLHA ONLINE, NO RIO, Folha de S. Paulo - 24/02/2005

Most entrepreneurs dismiss the hypothesis of exhaustion of installed capacity and say they are more concerned with taxes than with rising interest rates, reveals the complementary survey by the FGV (Fundação Getúlio Vargas) Survey.

Only 9% consider capacity depletion possible this year. The concern with the level of capacity utilization was one of the main arguments of the Central Bank to raise interest rates from 16% to 18,75% per year in the last six months.

The survey also shows that taxes weigh more than interest in the evaluation of the business community. The tax burden was considered an obstacle to growth sustained by 58% of the 1.020 respondents. The result is two percentage points higher than last year. The sectors that most commented on the issue were: transport material, clothing and footwear and electrical and communications material.

High interest rates were mentioned by 23% of the companies, especially representatives of the intermediate goods industries, such as chemistry, metallurgy, cellulose, paper and cardboard.

There was also an increase in the percentage of respondents concerned about the infrastructure: it went from 4% in 2004 to 10%.

Despite the 8,3% growth of the industry in 2004, the highest in the last 18 years, according to data from IBGE (Brazilian Institute of Geography and Statistics), 71% of the companies affirm that they have sufficient capacity to meet the external and internal demand for your products. The exception was on account of intermediate goods.
In this category, 43% of respondents stated that they can reach the limit of production capacity. Of this total, 30% responded that this could happen in three months. In the metallurgical sector, 65% bet on capacity depletion this year.

According to the research coordinator, Aloisio Campelo, the result shows that the possibility of depletion is limited to sectors influenced by high commodities, such as steel. "Research shows that the increase in prices due to demand supply is not a pressure factor this year."

The survey confirms the leadership trend of the domestic market in the expansion of the industry in 2005. The greatest expectations for expansion for the period from 2005 to 2007 are in sectors related to the domestic market, such as electrical and communications material (32%), metallurgy ( 23%), clothing and footwear (22%) and food products (22%).

For 2005, businessmen maintained last year's capacity expansion rate of 8%. The most favorable investment expectation for this year is that of capital goods, such as machinery and equipment, of 9%.

For the 2005-2007 triennium, the projected average expansion is 19%. According to Campelo, the companies show their intention to maintain a level of investment comparable to that of the first years of the Cruzado Plan.

FGV points out that the categories of capital goods and intermediate goods operated in 2004, with levels of capacity utilization above historical averages since 1970, the period of the most vigorous expansion in the industry. The consumer goods category was the only one to operate below the historical average in 2004, despite the recovery in consumption. According to FGV, investment projections for the coming years, of 18%, indicate optimistic expectations on the part of companies in the sector.