A hidden tax (Brazil)
- May 23, 2021 1:19 pm GMT
A hidden tax
The Brazilian debt is almost an annual GDP.
The official interest rate determines most of its cost on a month-to-month basis.
For the Government, keeping the rate low matters, as the cost of debt remains "small". If the rate increases it weighs more on the country's budget. The end result: the current official rate is inconsistent with inflation.
Most of the Brazilians who save are remunerated at the official rate, and so end up losing in real value.
That is to say, there is a hidden tax for those who save. International investors end up preferring to allocate their resources elsewhere, which do present a balance that is not found here in Brazil.
Power relaed investments are also exposed to this scenario. If revenues of a contract is indexed to inflation,it means losso ofreal value along the time.
Is it time to wake up to reality?
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