Uncertainty affects business plans


Source: Folha de S. Paulo, 16/08/2005


Businessmen meeting yesterday at a seminar in São Paulo to discuss tax evasion and the tax burden in Brazil fear that the political crisis will affect their businesses at the end of the year.

Major investments, according to them, are already being postponed until it becomes clearer what the outcome will be in Brazilian politics - what it means until Luiz Inácio Lula da Silva remains or not in the Presidency.

“We cannot say that all investments are locked. But, at a time like this that we are living in, investment decisions require a much deeper analysis than if we were in a period of euphoria ”, says Carlos William Ferreira, development director of the Saint-Gobain group.
“Entrepreneurs do not want to commit to high investments in this climate of political uncertainty. They are preferring to wait a little longer to see what the political direction will be ”, says João Carlos Basílio da Silva, president of Abihpec, an association of manufacturers of personal hygiene products, perfumes and cosmetics.

Industries are concerned about the effect of the political crisis on consumers and the economy. “In our case, the problem is the exchange rate, since we are major importers of raw materials”, says Ciro Mortella, executive president of Febrafarma (Brazilian Federation of Pharmaceutical Industry).
About 80% of the raw materials in the pharmaceutical sector are imported, and 30% of the drugs sold in the country come from abroad. “If the crisis affects the exchange rate, the sector will suffer. Approximately 80% of the drugs have controlled prices ”, says Mortella.
Gabriel Tannus, chief executive of Interfarma (Association of the Pharmaceutical Research Industry), says the sector is in the process of observing political turbulence. “Medium and long-term investments are solid. Now, there is a certain apprehension among entrepreneurs. ”

The construction material industry believes that the political crisis should affect the sector's businesses. "We have no information if it has already been affected and in what way, but the feeling of the manufacturers is that it will affect it," says Luis Fernando Ferrari, president of Artesp, an association that brings together São Paulo paint dealers.
Ferrari says that stores already feel that consumers are more discouraged about shopping. "We are still not clear whether the drop in consumption is related to the political crisis, but sales are 4% lower than in the same period last year," he says.

In addition to the political crisis, businessmen are concerned about the delay in discussions on tax reform. Yesterday, after the first debate at the seminar, promoted by Etco (Brazilian Institute of Competition Ethics) and which discussed tax burden and development, some were discouraged.
“What we hear is that the concrete reform should come out in three years from now with the new team of deputies and senators. I don't know if you can wait until then, ”says Melvyn David Fox, CEO of Abramat, an association that brings together the construction material industry.

Emerson Kapaz, president of Etco, said that the political crisis cannot interrupt a "positive" agenda and maintained that it is possible to raise more by taxing less.
One of the factors that stimulates tax evasion, in the analysis of entrepreneurs, is the high Brazilian tax burden. In the personal hygiene industry, the tax evasion rate reaches 60%, according to Abihpec.