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Brazil’s Congress approves new amnesty for undeclared assets abroad

Brazil’s Senate passed a bill on the 14th of March that reopens an amnesty for Brazilians to repatriate undeclared assets from abroad without prosecution, though they will have to pay 35 percent in tax and fines.

The 120-day repatriation window will open as soon as President Michel Temer signs the bill into law.

Temer’s government expects to collect 13.2 billion reais ($4.32 billion) in extra revenues from the new program that was decided on the success of an earlier amnesty last year that brought in 46.8 billion reais.

Those revenues helped Brazil’s authorities meet their primary budget deficit goal for 2016. The proceeds from the new amnesty will be shared with cash-strapped Brazilian states and municipal governments that are desperate for funds to pay salaries and suppliers.

The amnesty taps the desire of Brazilians who hold billions of dollars in off-shore assets to come clean with the tax man at a time of growing international uncertainty and the increasing exchange of tax information between governments.

The extra cash comes in handy in a country that has posted widening budget deficits for three straight years and whose government is struggling to restore fiscal discipline with unpopular austerity measures.

Critics say the amnesty allows holders of assets gained through graft to launder funds they stashed abroad at a time when prosecutors are investigating Brazil’s largest ever corruption scandal involving bribes and political kickbacks.

Source: Reuters Brazil

Surprise drop in Brazil inflation paves way for sharper rate cut

Brazil’s inflation rate eased much more than expected on the 10th of March to its lowest level since 2010 amid a deep recession, strengthening the case for a steeper interest rate cut by the central bank next month.

Consumer prices rose 4.76 percent in the 12 months through February, according to government statistics agency IBGE’s IPCA index, slowing from an increase of 5.35 percent in January.

February’s inflation came in below expectations of all 24 economists polled by a British news agency. The index also undershot expectations for a seventh straight month.

For the first time since 2009, annual inflation is lower in Brazil than in emerging market peer Mexico, where price increases shot up to their highest rate in nearly seven years after the U.S. presidential election sparked a sharp drop in the Mexican currency.

Brazil’s sudden inflation slowdown highlights the unprecedented severity of the country’s two-year recession and is helping President Michel Temer’s economic team to restore the credibility of fiscal and monetary policy to curb price rises.

“That’s the kind of inflation rate that every central banker would like to see,” said Marco Caruso, an economist with Banco Pine in São Paulo. “But it’s a good outcome of something that is really bad: a very poor economic situation.”

Yields on interest rate futures fell sharply on Friday as investors saw a greater likelihood that the central bank would cut its benchmark interest rate by 100 basis points in April.

The bank reduced the rate by 75 basis points at its last monetary policy meeting in February.

Most economists expect Brazil’s inflation to fall below the official goal of 4.5 percent this year, which would likely lead the government to cut the target for 2019 and beyond, according to a British news agency surveys.

The IPCA index rose 0.33 percent in February, the smallest increase for the month since 2000.

Source: Reuters Brazil

Brazil mining reform bills may go to Congress in weeks: minister

Bills to reform Brazil’s mining industry are expected to go before Congress in late March or early April and could be enacted by 110 days after that, the country’s mines and energy minister said in an interview on the 5th of March.

A remodeled mining code, aimed at reviving investor interest, was first proposed in 2009 but stalled in Congress in 2013. To ease its passage, the bill has been broken into two sections that revise government royalties and establish a new regulator.

“We are finishing the discussions inside the government, we are very near closing the discussion for them to go to Congress,” Fernando Coelho Filho said in an interview at the Prospectors and Developers Association of Canada conference in Toronto.

“If we are able to send both of them, in late March or early April, (implementation would be) probably 90 to 110 days after that,” he said.

The minister also said a decision on who will replace Vale Chief Executive Murilo Ferreira, whose term expires on May 26, could come by the end of March or beginning of April.

State pension funds led by Previ Caixa de Previdência [PREVI.UL], Bradespar SA, Mitsui & Co and an investment arm of state development lender BNDES are all members of Valepar SA, the investment holding company that controls Vale.

Vale, the world’s No. 1 iron producer, was partly privatized in 1997, although the government still wields influence through BNDES’ investment arm and the pension funds.

The government pension funds have “a key role in this” selection process, along with other partners in Vale, Coelho Filho said. “For now, we’re still looking.”

The royalty bill will likely get smooth passage, he said, because it will boost the funds going to government.

The bill will set a flexible iron ore rate of 2 percent to 4 percent, depending on international prices for the steelmaking raw material, the minister said. The current rate is 2 percent.

Royalties for copper will remain at 2 percent, gold will increase to 2 percent from 1 percent, potash will drop to 2 percent from 3 percent, phosphate will remain at 2 percent, niobium will increase to 2 percent from 1 percent, and aggregate will drop to 1.5 percent from 2 percent, he said.

Funding for the new national mining agency will come from a portion of royalties, Coelho Filho said. That is the same model now used, although little of that money goes to the regulator because it is being spent by the government.

The agency’s budget may remain at about 300 million to 350 million reais ($96 million to $112 million), but the portion of the royalty rate has not yet been decided, he added.

Originally proposed by former President Dilma Rousseff in hopes of increasing government revenue from a then-booming mining industry while encouraging development of mineral claims that had been idle for years, the code was criticized by industry as a means of tightening state control over natural resources.

Source: Reuters Brazil