Rousseff Sees Limited Space to Change Brazil’s Economic Policies

Brazil’s President Dilma Rousseff said her government has limited margin to change economic policy and is betting on measures to boost productivity as growth slows.

“At times your margin to maneuver is very tight,” Rousseff, 66, told reporters at the presidential residence in Brasilia today when asked how she would change economic policy in a possible second term. “Growth is extremely low in the entire world.”

Rousseff officially began her campaign for re-election this week, running on a platform of expanded social welfare and increased spending on health care and education. Her support ahead of the October vote has eroded as above-target inflation damps consumer confidence and crimps economic growth.

A trained economist, Rousseff said her opponents in the election have fomented an atmosphere of pessimism by saying the economy and hosting of the World Cup soccer tournament would fail. She said the “perfect storm” never hit.

Gross domestic product has expanded at an average annual pace of 2 percent since Rousseff took office in 2011, the slowest for a Brazilian president in more than two decades. Her policies to stimulate growth are fanning inflation, which last month exceeded the ceiling of the 2.5 percent to 6.5 percent target range for the first time this year.

Rousseff Rebounded

Support for Rousseff dropped 10 percentage points to 34 percent in June from February, according to polls conducted by public opinion research company Datafolha. She rebounded to 38 percent this month as the majority of respondents expressed pride in Brazil’s hosting of the World Cup, according to a July 1-2 Datafolha survey of 2,857 people. It has a margin of error of two percentage points.

The poll was conducted the week before Brazil’s national team lost 7-1 to Germany in the semifinals, the worst defeat in the five-time champion’s World Cup history. Rousseff said it’s not a tradition in Brazil to mix soccer and politics.

Aecio Neves of the Brazilian Social Democracy Party, who is running behind the incumbent in the polls, has seen his support rise 4 percentage points to 20 percent since February, according to Datafolha. Neves in an interview televised June 13 pledged to rein in public spending as part of a policy to slow inflation.

The practice of indexing prices to inflation represents a major cost of operating in Brazil, which has an “inflationary culture,” Rousseff said.

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