Reuters/Brasilia


The Brazilian government is betting the economy will shift into higher gear in the second half of the year as business confidence improves and stimulus measures take hold, a senior member of the administration said.
The recovery of Latin America’s largest economy remains uneven with investment slowly rising and industrial output still patchy, fueling expectations of a third straight year of lacklustre economic growth.
However, Brazil’s economy should be firmly back on track by July, when the government hopes a new round of auctions of concessions for airports and roads will attract a wave of investment, the senior member of the administration’s economic team said.
“That will change the mood, it will help turn around this climate of mistrust,” the official, who asked to remain anonymous in order to be able to speak frankly about the government’s views, said in a recent interview, adding: “We can grow more.”
Factor in expectations for a pick-up in industrial output and 70bn reais ($34.72bn) worth of tax breaks and you have the recipe for success, the official added.
Government officials and private economists agree this year will be better than 2012 when the economy grew a weaker-than-expected 0.9%, its worst performance since a contraction in 2009 in the wake of the global financial crisis.
However, the intensity of that recovery has been disappointing, leading many private economists to trim their growth forecasts.
Expectations for a 3% economic expansion this year - still below the 4% average of the last decade - are starting to look optimistic.
Finance Minister Guido Mantega, whose rosy economic forecasts in years past drew criticism after they failed to pan out, has been more cautious this year. Instead of pinpointing a forecast, Mantega has said the economy could grow between 3% and 4% this year.
Stronger growth is a top priority of President Dilma Rousseff’s administration, which has given billions of dollars in tax breaks and cheap loans to struggling industries. Under Rousseff, the central bank has also slashed interest rates to record lows to boost consumption, though it raised rates last month to rein in rising prices.
All that stimulus, however, has yet to secure a stronger recovery for an economy that has suffered from years of anemic investment and declining productivity.
“The government’s arguments for a stronger recovery ahead are not bad, but they continue to be just good-hearted bets,” said Samuel Pessoa, an economist with the Getulio Vargas Foundation and a partner at investment consultancy Reliance. “I still don’t see signs of a more solid recovery.”