Proverbial

And the year is off to a great start in Brazil. For starters, after Congress brought down the ridiculous 0,38% CPMF tax (something like Provisory Contribution on Financial Transactions), the government decided to recover the R$ 40 billion (~U$ 22.7 bil) by, you guessed it, increasing taxes.

Brazil will trim outlays by 20 billion reais, Mantega said. At the same time, a tax on financial operations, mainly bank lending, will be increased by 0.38 percentage point, and a tax on profits by financial institutions will rise to 15 percent from 9 percent, he said.

“It would be more appropriate to carry out a larger reduction to government expenses, but the increase in taxes is a tradition in Brazil,” said Joel Bogdanski, a senior economist at Banco Itau Holding Financeira SA. “It’s also relatively small, and it will not slow the economy.”

More appropriate indeed, but with Justice Ministry Tarso Genro saying that his budget won’t get any cuts (.br), even the R$ 20 billion in cuts that have already been promised seem kinda hard to believe.

Also, we get a new “covert” tax in the form of a requirement for diesel oil to have 2% of biodiesel, with plans of increasing it to 5% by 2013. With that, the government should save up to R$ 750 million (~U$ 437 mil) from foreign oil, and soy farmers get really happy with the federal incentive (not to mention continued investment in biodiesel plants).

On the other side, diesel gets 1 or 2 cents more expensive (.br) at the pump, which in a country where the vast majority of cargo is transported by trucks (reason why diesel is partly subsidized by the government, and only utility vehicles are allowed to use it) means shipment costs should, in turn, get more expensive, and so products in general.

According to a TV reporter, “it’s the price we pay for saving the environment”. More like the price we pay for farming subsidies. As for the environment…

Lured by the possibility of profits and quick-fixes to a complicated problem, the world moves into action. The European Union sets targets for biofuel production, Brazil sees a way of cashing in on its years of research into sugar cane-based fuel, North American farmers look to an exciting new global market, various African leaders envisage an agricultural revolution.

Only afterwards do the voices of caution sound. Nobel Prize-winning scientist Paul Crutzen warns that switching from fossil fuels to biofuels might do more harm than good because the nitrogen in fertiliser is converted into nitrous oxide, a potent greenhouse gas. Jean Ziegler, the UN special rapporteur on the right to food, describes biofuels as a “crime against humanity” because of the way they will probably push up food prices. Another scientist raises the issue of water: will the millions of people who lack access to clean water be joined by millions of others in the wake of a massive switch to thirsty agrofuels?

Not to mention the problem of deforestation in both the Amazon and Pantanal. Yeah, the year is off to a great start.