Paulo Sotero - Financial Times, September 16, 2015

Stopping the downward spiral of Brazil’s economy will take a bitter combination of tax increases and spending cuts. But highly negative reactions to the latest set of such measures announced in Brasília on Monday suggest that the government of president Dilma Rousseff no longer has the credibility needed to be able to contain the crisis it brought upon the nation through miscalculation, mismanagement and an astounding incapacity to govern.

The measures – centered on the recreation of a tax on banking transactions that was shelved just three weeks ago after being rejected by the business community, the public and vice-president Michel Temer – have little chance of being implemented by such a discredited president and government.

“Brazil’s very high tax burden of some 37 per cent of GDP hinders the credibility of a fiscal strategy that is heavily concentrated on tax hikes,” says Monica de Bolle, visiting fellow at the Peterson Institute for International Economics.
This does not mean, however, that Brazilians won’t accept sacrifices needed to overcome the current difficulties and put the country’s economy on a more promising path. Asked whether the ongoing federal investigations into corruption at national oil company Petrobras should continue despite the negative effects they may have for an economy already in recession, 88 per cent said they agreed, in a telephone survey conducted by Ideia Inteligencia, a polling firm, with 20,006 interviews in 144 cities in Brazil, from September 10 to 14.

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