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Brazil boosts public savings rate

01 september 2011, 13:37
0
Brazilian President Dilma Rousseff. ©AFP
Brazilian President Dilma Rousseff. ©AFP
Brazil on Monday announced that it would boost its government savings rate to protect itself from international financial strains and encourage lower interest rates, AFP reports.

President Dilma Rousseff's government increased this year's budget surplus target -- savings on public spending that is to be put toward paying off interest on debt -- by 10 billion reais (about $6.25 billion) or about 0.25% GDP, Finance Minister Guido Mantega told a news briefing.

Brazil had a surplus target of some $73 billion for the public sector as a whole, of which about $56.6 billion was federal government spending.

The government's surplus target now has been increased by those $6.25 billion, Mantega explained.

Brazil "must act as a protective measure to stop worsening (global) economic conditions from affecting Brazil's economic strides," Mantega said.

The measure "also makes viable in the medium and longer term, reductions in interest rates," Mantega added noting that the Central Bank when it deems appropriate.

Rousseff's chief of staff Gleisi Hoffmann earlier this month told a crowd that European countries and the United States "have so far not succeeded in finding sensible solutions" to ballooning debt problems.

Hoffmann forecast tough times ahead at the time, and added: "We must be prepared to protect Brazil from this serious crisis."

Rousseff is the first woman president of Brazil, Latin America's emerging economic and diplomatic powerhouse.

Rousseff, with the leftist Workers Party, only took over from predecessor Luiz Inacio Lula da Silva on January 1. She had promised to bring interest rates down, but has been caught by rising consumer prices.

A trained economist herself, Rousseff's country has traumatic memories of hyperinflation in the 1980s and 1990s that at one point reached 2,000 percent a year.

A return to those bad old days would erode the wealth residents in Latin America's biggest economy have accrued over the past decade, when inflation was kept under tight rein and growth bloomed.

To that end, Rousseff has ordered $30 billion in cuts to public spending.

Brazil's manufacturing sector, though, is complaining loudly about the successive rate hikes, which are pushing up the value of the real, making exports less competitive, and increasing their costs.

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