Tax Hikes Expected in Brazil to Counter Sluggish Economy

Brazil was a model for financial discipline during the global financial crises. While much of the world economy was slowing down or contracting, Brazil will was chugging along quite serenely. Unfortunately, as with all things-good or bad-, it came to an end. Now Brazil is preparing to face some tax hikes for the first time in years.

These tax hikes are more the result of allowing tax cuts enacted over the last few years to lapse rather than proactive increasing of taxes. Since then, Standard & Poor’s Rating Service reduced Brazil’s outlook to negative from stable, which allows for the possibility that the country’s sovereign debt-rating will cut as well. Surprisingly, Brazil’s deficit has grown to only 3.45% of GDP, which is tiny in comparison to many developed nations (including the United States!).

Nevertheless, the Brazilian government, and the investment industry therein, have grown concerned with the direction the economy is headed. You might be wondering, what does this have to do with us? The Brazilian economy has grown to be a very important aspect of both global trade, but also that of the United States. It is imperative that their economy continues to hum along nicely to ensure that our own economic recovery does not get derailed. It remains to be seen what impact the 2014 World Cup to be held in Brazil will have on their economy.