Finance Minister Says Brazil Has Been Crippled by Rich Countries and Lack of Credit

Brazil's Guido MantegaAccording to Brazilian Finance minister Guido Mantega, Brazil’s economy is walking with “two crippled legs.”  He puts the blame on the effects of the international slowdown with different rates of recovery, and the lack of credit to prop consumer spending.

“The low growth of the global economy, particularly in developed countries has become an adverse wind for the performance of the (Brazilian) economy, as well as a higher rate of delinquency, which has made banks more cautious about new loans and thus limiting domestic demand,” said Mantega during a meeting with industry barons in São Paulo.

“This means the Brazilian economy is walking on two crippled legs: on the one side contained and scarce consumption credit, and on the other the international crisis which is stealing us of growth chances.”

But the minister also pointed out that the delinquency rate was down and there are signals of global recovery, which together should help the Brazilian economy to retake solid growth.

At the meeting the minister told the audience that the subsidized interest rate program to prop investment will continue in 2014 but at higher rates, since the Treasury needs to support a balanced budget and the promotional rates are below market level.

Mantega added that the variation will have the purpose of accompanying the increase of the basic Selic rate, but rates will still be lower. Loans for the purchase of trucks, buses and machinery will increase from 4% to 6%; innovation investment from 3.5% to 4% and financing exports from 5.5% to 8%.

He also announced that tax revenue in November was above 110 billion reais (US$ 43 billion), the highest for any month in the year, mainly because of a plan with incentives to collect pending fiscal debts.

The minister also replicated to criticism about the budget’s primary surplus, recalling that the government had sacrificed revenue to stimulate the economy, help with cost reductions and support investments. (Primary surplus does not include debt payments as opposed to fiscal surplus).

The statement follows a similar position expressed by Central bank president Alexander Tombini addressing a congressional committee who underlined that: “the higher the fiscal surplus, so much better”.

However the primary surplus set out for this year was 111 billion reais, but in October the accumulated surplus, including the Union, states and cities, stood at 51.2 billion reais, which means 64 billion reais short of the annual target.

Less Stimulus

Brazil will raise interest rates on some state-subsidized credit lines in 2014 withdrawing part of the stimulus that helped boost investments but also hurt public finances this year.

Interest rates on loans for the purchase of capital goods and trucks will climb to 6% per year, from 4%, while a special credit line for exports will climb to 8% from 5.5%.

The announcement was done by Finance minister Guido Mantega who also said the Brazilian economy was on the path to recovery.

The subsidized credit lines are part of a special program by state development bank BNDES to lower the cost of capital goods for industries and farms.

The program spurred investment and boosted a tentative economic rebound in the first half of this year, but also alarmed ratings agencies by lifting Brazil’s gross debt.

Brazil’s benchmark lending rate is currently at 10% after six consecutive increases this year.

Mantega had already announced that the credit line program would be extended into 2014 with some adjustments, but carmakers and machinery builders had been asking for further details to carry on with their investment plans for next year.

Brazil is facing presidential elections next October and president Dilma Rousseff is expected to bid for re-election boosted by favorable opinion polls, despite the June/July rioting and protests against political corruption and the poor quality of public services.

As he announced the changes, Mantega said Brazil’s economy is on a path of gradual recovery that should continue in 2014 and the government is committed to strong fiscal results this year and next.

Mantega has previously forecast average growth of 4% per year over the next decade, a rate Brazil has not managed once under President Dilma Rousseff. In the third quarter, the Brazilian economy contracted for the first time since 2009.



You May Also Like

Brazilian Quintet leader Vinicius Cantuária

Boston Gets a Double Dose of Brazil’s Edge: Cantuí¡ria and Cí©U

Two of the hottest new Brazilian musical acts will be showing their talent this ...

Newborn Rescued in Brazil After 24 Hours Buried in Armadillo Burrow

A newborn baby was found Monday, October 9, by the Brazilian police buried in ...

Brasileiro's director Hélio Campos Mello

New Magazine Vows to Show Brazilians a Brazil They Ignore and Neglect

Brave Brazilians telling stories about so many other brave Brazilians. This is the proposal ...

Brazil Calls IMF’s Report on Country’s Economy Wrong and Stupid

For Brazil’s Finance minister Guido Mantega the International Monetary Fund’s assessment that Brazil’s fiscal ...

Brazil Has Never Seen Its Key Interest Rate So Low: 10.25%

The Central Bank of Brazil cut its benchmark interest rate Selic for a third-straight ...

Gol to Get 30 New Boeings

Gol Linhas Aereas Inteligentes S.A., Brazil’s low-fare, low-cost airline, yesterday announced that it has ...

After the Generals the Catholic Bishops Wage War Against Lula

After apparently overcoming military intransigence Brazilian president Luiz Inácio Lula da Silva and his ...

Sugarcane bagasse in Brazil is used to feed animals in the Northeast

Brazil Wants to Make Ethanol from Wood and Sugar Cane Residues

The production of biofuel from cellulose may be attained before estimated by specialists. Embrapa ...

Brazil Believes It Can Have Social Indicators of Rich Country in 6 Years

Brazil may achieve social indicators similar to those of developed countries by 2016 if ...

Made in Brazil Design Gets Its Trade Show

Brazilian design companies and fostering agencies should have an opportunity to close deals and ...