- Winning ticket for $590.5 million Powerball lottery sold in Florida
- HSBC cuts gold, silver price forecasts for 2013, 2014
- Rod Stewart tops UK album chart for first time in 34 years
- S.Africa minister accuses Indian High Commission official in Gupta scandal
- Indian cinema on a mission at Cannes to dispel Bollywood image
UPDATE 2-Brazil unveils measures to spur consumption, investment
* Government offers cheaper credit for trucks, machinery
* Tax cut renewed for appliances, construction materials
* Reduced tax on most local cars extended through October
By Luciana Otoni and Tiago Pariz
BRASILIA, Aug 29 (Reuters) - Brazil's government unveiled a host of new measures on Wednesday aimed at increasing investment and consumption as it expanded efforts to boost a sluggish recovery in the world's sixth-largest economy.
The latest round of stimulus included cheaper credit for trucks and machinery and an extension of tax breaks for makers of home appliances and automobiles, Finance Minister Guido Mantega told reporters in the capital, Brasilia.
"The financing is meant to stimulate investment in the country," Mantega said. "Investment takes a little longer to recover from a crisis, so we're giving more stimulus."
Slipping investment and plunging industrial output have contributed to flat economic growth in Latin America's largest economy. Data on Friday is expected to show the economy struggled to gain momentum in the second quarter, despite government stimulus and interest rate cuts.
Brazil will likely trim its benchmark interest rate for the ninth straight time later on Wednesday to an all-time low of 7.5 percent.
The measures laid out by Mantega, following more than a dozen such packages over the past year and a half, highlight the government's readiness to back up the central bank with fiscal stimulus.
The federal government will forgo 1.6 billion reais ($781 million) in revenue this year and 3.9 billion reais in 2013 because of the tax breaks it was extending on everything from washing machines to construction materials.
State development bank BNDES will also offer lower interest rates on credit lines for trucks, machinery and other capital goods.
CAR SALES RECOVERING
While most of the tax breaks were offered through the end of the year, relief for automakers was extended for just two months, Mantega said, since surging car sales over the past three months showed the sector was on the rebound.
The Brazilian auto industry, which makes up more than a fifth of the country's industrial output and 5 percent of its gross domestic product, has become a focal point of President Dilma Rousseff's efforts to reignite a stalled economy.
By slashing the so-called IPI tax on most locally made vehicles, the government jump-started car sales in May, leading to the best ever July for new automobile registrations.
Production levels have been slower to recover, as the industry focused on clearing inventories from the first half. Some automakers are wary about increasing industrial output only to find the market hung over after temporary tax breaks expire.
Tax relief has also come on the condition that carmakers avoid layoffs, making it harder for companies such as General Motors Co to shift production to more efficient plants.
The political pressure has added to plunging productivity in the auto industry. Output per employee, calculated with data from automaker group Anfavea, dropped by 12 percent in the first half of 2012 to its lowest in eight years.
Brazil is the world's fourth-biggest auto market, with most local production coming from Italy's Fiat SpA, Germany's Volkswagen AG and U.S.-based General Motors and Ford Motor Co.
- Tweet this
- Share this
- Digg this