Rio, November 29, 2002 (Agência Brasil - ABr) - Reducing the prime interest rate in Brazil is being studied by experts in charge of the new administration's economic policy, vice-president-elect, José Alencar, said yesterday (28). He clarified, however, that it is not known whether a possible reduction can be announced right away at the beginning of the new administration.

Alencar pointed to the cost of capital in Brazil as one of the most perverse factors affecting the country's competitive capacity in foreign trade. As an example, he cited the real interest rate which is practically negative in the United States, as it is in Japan, and nominal interest rates in Europe on the order of 3.5%, where inflation of around 2.2% is expected this year, resulting in real interest rates of about 1%, as against the real interest rate of 10% in Brazil, 10 times greater than in Europe and 20 times greater than in the United States.

The vice-president-elect affirmed that this situation must change, for Brazil to compete on an equal basis. The tax system is another shackle on Brazilian exports, because of cumulative taxation. "We are rewarding imports and punishing exports, when we need to do the opposite." (DAS)