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A hidden tax (Brazil)

image credit: Rafael Herzberg
Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • May 23, 2021
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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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Thank Rafael for the Post!
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