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Analysts say CBD will benefit as Brazil gooses retail (BRF)

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Concerned by signs of an economic slowdown, the Brazilian government has cut taxes on a wide range of financial transactions from investments to pasta, effective immediately. This should give leading retailers like Companhia Brasileira de Distribuicao ( CBD , quote ) an edge and the small-cap sector in general ( BRF , quote ) a broader lift.

The reduction in taxes is likely to result in 10% to 15% lower prices for buyers of home appliances over the next few months.

The consumer credit tax has also been lowered half a point to 2.5% and the government has zeroed out a tax on foreign investments in Brazilian stocks.

Raymond James Latin America research analysts Daniela Bretthauer and Mauricio Rosal say that goods manufacturers will benefit from the tax cuts, with ripple effects for suppliers of plastic components and steel.

Consumer finance companies will also benefit from the cuts and increased business financing appliance purchases.

Bretthauer and Rosal identified CBD as a likely beneficiary. The NYSE-traded retailer gets 15% of its revenue from these goods.

Raymond James Lat Am estimates that Brazil will see 3.3% GDP growth in 2012, but notes that the government may take additional steps to hit its 5% growth target.

Look for possible reductions in banks' reserve requirements, or renewed efforts to boost exports.

BRF is roughly 30% skewed toward consumer stocks and has another 22% of its holdings in the manufacturers that supply local retailers.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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