Gerdau: Brazil needs Structural Reforms to be competitive

"We see several government initiatives that are positive, such as infrastructure concessions and those that have been taken to make the industry more competitive, with tax breaks on payroll, reducing the tax burden of IPI (Tax on Industrialized Products). This has helped, but for the country to grow at levels much higher than 2% or 2.5%, it needs structural reforms. It has to reduce the tax burden, have more competitive interest rates, invest more in education, make huge investments in infrastructure.


We see that there are funds, plans and all these announced concessions of highway, airports and railways. However, investments end up stuck when executing the bid, in the discussion of marginal returns and rules or time implementation of works and obtaining licenses".

Measures proposed by the steel industry to the Brazilian Goverment

"Increasing domestic consumption of steel, improving the capacity to compete with its peers and reducing the tax burden. Data show that if Brazil's GDP grows 4%, the steel industry is likely to expand 5% to 7%. But it grows very little if it [GDP] stays at 1% to 2%. The multiplier effect of GDP is very large. That is, the country needs to grow to stimulate steel consumption".

"Having that, there must be equality so that we can compete. We have a real interest rate of 2.4% (compared to 1% or 1.5% of our competitors), electricity at $80 per MWh against $40 in most countries), natural gas at $17 per MBTU, expensive and inefficient logistics... Not only companies need to be efficient, the country needs also. The tax rate in Brazil is 35% of GDP, a developed world rate. In India it is 10%, in China is 20% and in Mexico 15%. Brazil taxes as a developed country: Europe, US and Japan".

Excerpts of Interview by Valor International to André Gerdau