Rousseff said the goal was achievable given the parameters of the government’s growth acceleration program she helped draft as President Luiz Inacio Lula da Silva’s chief of staff. The program forecasts annual growth of 4.5 percent, inflation of 4.5 percent and budget surpluses before interest payments of 3.3 percent of GDP in the 2011-2014 period, Rousseff said. She takes office on Jan. 1.
“This is a forecast for 2011 to 2014, no one makes projections for the year,” Rousseff, 62, told reporters today in Brasilia, when asked if the 38 percent target was for 2011 or 2014. “It is not for 2011, because if it were for 2011 we would have to halt all investments, all social programs.”
During her campaign, Rousseff pledged to bring net debt to about 30 percent of GDP by 2014. In an interview with Veja magazine in June, Rousseff said she would aim to cut net debt to 28 percent of GDP in a bid to give the central bank room to lower the benchmark interest rate.
The real gained 0.2 percent to 1.6993 per dollar at 2:40 p.m. New York time.
Rousseff said today that a drop in the net-debt-to-GDP ratio would allow Brazil’s benchmark interest rate, the highest amid the Group of 20 nations when adjusted for inflation, to converge to levels prevailing in developed countries. Interest rates should fall in a “sustainable” way, she said yesterday. Brazil’s real interest rate is about 6 percent.
A ‘Consistent’ Rate
“Everyone talks about 2 percent because this is more or less the consistent interest rate” internationally, Rousseff said.
Rousseff, who takes office Jan. 1, yesterday named former Finance Minister Antonio Palocci to lead her transition team along with Vice President-elect Michel Temer, Workers’ Party chief Jose Eduardo Dutra and Congressman Jose Cardozo. Palocci’s reduction of Brazil’s debt and budget deficit during Lula’s first term won the support of international investors including Pacific Investment Management Co., manager of the world’s biggest bond fund.
Now a congressman from Sao Paulo state, Palocci served as Rousseff’s main economic adviser during her campaign. Under his watch, from 2003 to 2006, Brazil’s inflation rate slowed to 5.3 percent from 17.2 percent and the Bovespa stock index more than doubled.
Before she named her transition team, traders were betting Rousseff wouldn’t be able to cut the fiscal deficit enough to allow the central bank to lower the benchmark rate, which was left unchanged last month at 10.75 percent.
The interest-rate futures contract due in January 2015, the month Rousseff’s first term would end, yielded 11.57 percent, a level that suggests traders expect policy makers will raise the benchmark rate about 0.75 percentage point during the next four years, data compiled by Bloomberg show.
Rousseff, a former Marxist guerrilla who had never run for public office before, became the first woman ever elected to Brazil’s presidency with 56 percent of the vote on Oct. 31 compared with 44 percent for Jose Serra, the former governor of Sao Paulo state.
The 62-year-old said she hasn’t decided who she will invite to join her Cabinet that takes over from President Luiz Inacio Lula da Silva’s government.
In her first press conference following the Oct. 31 election, Rousseff said she will raise the government’s cash payments to poor families, without giving details. She also said the country’s monthly minimum wage could go up to more than 600 reais ($324) by the end of 2011 and more than 700 reais by the end of her government in 2014.
The minimum wage is currently at 510 reais and the 2011 budget proposal raises it to 538.15 reais.
Rousseff said she doesn’t plan to send to Congress a bill re-imposing a tax on financial transactions, known as CPMF, to finance health care. According to her, state governors are discussing how to increase resources available for health measures and she will “dialogue” with them.
Lula, speaking to reporters today in Brasilia, said the U.S. and China are engaged in a currency war and that Brazil will take the necessary steps to avoid the real from being overvalued.
Rousseff said that all countries beside China and the U.S. realize that a currency war is going on and that there is no single solution for it. She said it’s better for countries to coordinate policies instead of engaging in “competitive devaluation.”
Brazil’s president-elect will take a break to rest from the campaign before resuming work Nov. 8, when she travels to South Korea for the G-20 summit with Lula.
To contact the editor responsible for this story: Joshua Goodman at email@example.com