Interview with Brazil's president: Lula on his legacy | The Economist - 0 views
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It’s also difficult to do public works because of the fact that Brazil had 25 years of doing almost no infrastructure projects. I always say that the last time there was investment in infrastructure was during the Geisel government [from 1974 to 1979], which took on too much debt. Brazil had contracted debts in dollars when interest rates were 3%. Then, to solve the American fiscal deficit, Paul Volcker pushed interest rates to 21%, making Brazil’s debt unpayable—and then we spent the next 20 years trying to solve our debt problem. They were two and a half decades in which Brazil had no capacity to invest in infrastructure. Just to give you an idea, in 1989 we had in Brazil about 50,000 project-engineering businesses.
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But then I discovered that there are hidden enemies of tax reform. Because people who were in favour here, in our meetings, worked in Congress to ensure that the reforms were not voted on, including governors. Why? Because we wanted to reduce the 27 tax rates of the ICMS [Imposto sobre Circulação de Mercadoriase Prestação de Serviços, the tax on the exchange of goods and services] in the states to two, or three, or five, and no governor wanted this.
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On one side you have the employers, who talk about labour reform and want to abolish all the rights that workers won over time. It’s impossible. On the other side, you have the workers who say that what’s needed is union and labour reform, but want to keep all the rights that are guaranteed under the CLT [Consolidação das Leis do Trabalho, Consolidated Labour Law].
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