Brazil May Deduct Tax Cuts From Fiscal Target, Mantega Says

Brazil may discount 20 billion reais ($10 billion) in tax cuts this year from its primary surplus target of 3.1 percent of gross domestic product, Finance Minister Guido Mantega said.

The country may also abate as much as 25 billion reais in infrastructure investments lowering its budget surplus before interest payment to 2.3 percent to 2.4 percent of GDP, Mantega told reporters in Brasilia today. Brazil will still pursue fulfilling the 3.1 percent target this year, he said.

With the economy recovering at a slower than expected pace, President Dilma Rousseff’s administration is seeking alternative measures to rein in consumer prices, instead of raising the benchmark interest rate that is at a record low 7.25 percent. While the central bank estimates Latin America’s biggest economy expanded in 2012 at the slowest pace in three years, inflation quickened to 6.02 percent in mid-January, the fastest pace in a year.

Mantega said the government will reduce levies on food staples and extend payroll tax cuts to other industries.

“We have to continue reducing taxes,” Mantega said. “It is a very good way to lower costs for the population and also to reduce the cost of investment.”

Brazil’s central bank on Dec. 20 cut its 2012 GDP growth forecast to 1 percent. Growth in the world’s sixth-largest economy will rebound to between 3 percent and 4 percent this year, Mantega said in December.

The government withdrew 12.4 billion reais from its wealth fund and discounted 34.9 billion reais in infrastructure investments from its primary surplus goal to meet its 2012 fiscal target.

To contact the reporters on this story: Maria Luiza Rabello in Brasilia Newsroom at mrabello@bloomberg.net; Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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