Brazil offers new credit line as Rousseff pushes positive agenda

(Reuters) – Brazil will hand out 17 billion reais ($8 billion) in cheap loans for home appliance purchases, the government said on Wednesday, in a move to bolster Brazilians’ buying power as a lackluster economy and high inflation erode its approval rating.

President Dilma Rousseff, a leftist economist who plans to run for re-election next year, saw her high popularity edge lower for the first time in months as Brazilians grow wary of high inflation and slow growth, two recent opinion polls showed.

The new credit line underlines the administration’s efforts to cast a positive light after weeks of non-stop negative news ranging from violence between Indians and farmers to protests over a hike in bus fares and Standard & Poor’s warning of a rating downgrade.

Rousseff also sent a clear message to investors worried about the stability of an economy that only three years ago grew a staggering 7.5 percent. Last year Brazil grew only 0.9 percent.

“Inflation is under control, the public finances are under control,” Rousseff said after announcing the new credit line that also includes loans for furniture purchases.

Heavy public spending has been criticized by some economists who say it undermines the central bank’s efforts to contain persistently high inflation. The central bank started to hike interest rates in April after bringing borrowing costs down to record lows.

Government officials launched a media offensive this week to assure markets that the administration remains fiscally responsible despite weakening budget indicators.

Finance Minister Guido Mantega said the government is willing to cut spending to reach an already-lowered fiscal savings target this year, according to an interview with local daily Folha de Sao Paulo.

The government has relaxed its tough fiscal savings rules in the last two years to bolster public investment and give billions of dollars in tax breaks to local businesses.

The credit line is earmarked for participants of a social housing program called “Minha Casa Minha Vida.” It will be financed by the Brazilian treasury, which usually sells local debt and transfers the funds to state-run banks which disburse the credit to customers.

($1 = 2.1450 Brazilian reais)

(Writing by Alonso Soto; editing by Andrew Hay)

By Carl Patchen

BRASILIA | Wed Jun 12, 2013 1:52pm EDT


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