Brazil Bets on Billions in Credit to Help Revive Lagging Economy

  • State-controlled banks set to aid agriculture and industry
  • Government seeks to save jobs in worst recession on record

Brazil’s government presented measures to offer credit for agriculture, infrastructure, industry and construction, as Latin America’s biggest economy struggles to regain investor confidence and stem job losses amid its worst downturn in decades.

As much as 83 billion reais ($20.4 billion) will be offered at rates set by Banco do Brasil, Caixa Economica Federal and state development bank BNDES to help Brazilian companies weather the recession and hold on to workers, Finance Minister Nelson Barbosa said. The additional financing doesn’t conflict with monetary policy and doesn’t represent an additional cost to taxpayers, since rates won’t be subsidized, Barbosa said.

“These credit lines don’t jeopardize the fight against inflation because they come from resources that are already in the financial system,” Barbosa told reporters Thursday in Brasilia. “We have to restart economic growth, and this involves stabilizing credit.”

The minister also proposed setting a legal limit on government spending and creating ranges for future fiscal targets to allow for some fluctuations in tax revenue.

The policies are part of the government’s strategy to stimulate the economy without giving up on fiscal austerity measures, which are designed to slow inflation and shrink a record budget deficit. President Dilma Rousseff also is trying to start the year on a positive note, after her approval rating dropped to record lows in 2015 amid calls for her impeachment and a growing corruption scandal involving members of her party.

The measures were presented Thursday at a meeting of more than 90 prominent business executives and labor union leaders gathered to discuss strategies to revive growth. Participants at the meeting in Brasilia included Benjamin Steinbruch, president of Cia. Siderurgica Nacional SA, and Luiz Carlos Trabuco, Banco Bradesco SA chief executive officer.

Rousseff said she’s committed to working with Congress to approve a new tax on financial transactions. She said reform, which will need to include Brazil’s social security system, is necessary to secure benefits for future generations.