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Economy & Business - January 2004

BRAZIL: Central bank surprises and frets about inflation

Businessmen seem to be using the imminent increase in social security payments, the Cofins, as an excuse to push through price increases. The Cofins levy goes up from 3% to 7.6% from 1 February. The worry for policymakers is that industry is jacking up prices by more than the increase in the Cofins would warrant. Packaging companies, which use raw materials for which international prices have been rising, are particularly keen to widen their margins. There is also considerable evidence to suggest that providers of personal services, such as hairdressers, and professional services are taking advantage of the change to push through higher prices. The construction sector is also grumbling that it cannot go on absorbing the increases in the price of its inputs, such as steel.

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