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Brazil to Offer Tax Incentives to Spark IPOs, Mantega Says

Brazil’s government will offer tax incentives to encourage initial public offerings by smaller companies amid an economic slowdown in the world’s second-largest emerging market.

People who invest in the IPOs of companies with market value of 700 million reais ($313 million) or less will not pay a 15 percent tax on capital gains through at least 2023, Finance Minister Guido Mantega said today at an event in Sao Paulo. The government will also cut taxes on infrastructure debentures and fixed-income exchange-traded funds, said Mantega.

President Dilma Rousseff, who is up for re-election this October, has seen economic activity undercut by low business confidence and above-target inflation. First-quarter growth moderated as investments dropped the most in two years. Economists expect policy makers to fail to reverse the slowdown, as they cut their 2014 and 2015 growth forecasts to the lowest ever last week.

“We saw great credit growth, but it’s still not sufficient for company needs,” Mantega said today. “This will attract private savings and also stimulate production.”

The measures will help small and medium-sized companies expand, Mantega said. He added that implementation of the measures was not immediate and that the government was unsure if they will become effective this year.

Analysts surveyed by the central bank on June 13 cut their growth forecast for this year and next to 1.24 percent and 1.73 percent, respectively. Both estimates were the lowest since the central bank started publishing data.

Latin America’s largest economy grew 0.2 percent in the first quarter, half the pace of the expansion recorded during the last three months of 2013. Expansion was held back by a 2.1 percent drop in investments and 0.1 percent decline in family consumption.

Annual inflation in May rose to 6.37 percent from 6.28 percent the month prior. Brazil’s central bank targets annual inflation at 4.5 percent, plus or minus two percentage points.

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