Belt-Tightening Won’t Be Loosened, Says Brazil’s New Finance Minister

    After taking office, Tuesday, March 28, in the Planalto Palace in Brazilian capital BrasÀ­lia, Brazil’s new Minister of Finance, Guido Mantega, said that in the past he expressed opposition to the "immobility of the annualized benchmark interest rate (the Selic)," but his current understanding is that "now, since it has been falling for six months, it should continue to fall, which is fully warranted by the state of the economy."

    With respect to the Long-Term Interest Rate, the TJLP, which he wanted to reduce during his term as president of the National Economic and Social Development Bank (BNDES), the minister said that the current situation guarantees that it should decline even further during the course of the year.

    The TJLP, which is fixed every quarter, currently stands at 9% per annum. It is used by the BNDES to adjust the interest it charges on its development loans. It was 9.75% at the end of 2005.

    Mantega assured that he will maintain the country’s present economic policy, "with fiscal belt-tightening and in pursuit of the goal of lowering inflation. My concern is to do a good job of administering the economy, maintaining solid foundations to ensure growth, with my sights set on this year." He said that since the beginning of the year all signs point to the country’s sustainable growth.

    The minister pointed out that credit in Brazil already represents 30% of the Gross Domestic Product (GDP), the sum of all wealth produced in the country, and that the ideal is for it to attain 40% or 50% of the GDP. Last year, according to Mantega, the financial market provided 70% of the country’s finances.

    In the minister’s view, economic stability favors an expansion of credit. Regarding this item, he said that the new bankruptcy law is one more point contributing to the expansion of credit, since the new law provides protection to companies when they face difficulties, and this offers assurances to their business partners.

    He said that the ideal thing would be for the country to grow between 4% and 4.5% this year. "We have to congratulate former minister Antônio Palocci for all he did when he directed the Ministry of Finance," he added.

    As for the personnel changes in the Ministry of Finance, Mantega observed that "it is normal, when we switch positions in the government, to bring in people who are close to us."

    Nevertheless, he informed that he does not plan to change the entire staff, and he asked everyone to keep working as usual, "since the Ministry follows a routine that cannot halt."

    The departure of the former secretary of the Treasury, Joaquim Levy, was predictable, Mantega explained, since he was invited to assume the vice-presidency of the Inter-American Development Bank (IADB).

    As for the executive secretary of the ministry, Murilo Portugal, the new minister commented: "He expressed an interest in leaving the post to devote himself to the private sector."

    Agência Brasil

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