Brazil raises interest rates on subsidized credit lines

Reuters

By Luciana Otoni

BRASILIA, Dec 11 (Reuters) - Brazil will raise interestrates on some state-subsidized credit lines in 2014, FinanceMinister Guido Mantega said on Wednesday, withdrawing part ofthe stimulus that helped boost investments but also hurt publicfinances this year.

Interest rates on loans for the purchase of capital goodsand trucks will climb to 6 percent per year, from 4 percent,while a special credit line for exports will bear rates of 8percent a year, up from 5.5 percent.

The subsidized credit lines are part of a special program bystate development bank BNDES to lower the cost ofcapital goods for industries and farms.

The program spurred investment and boosted a tentativeeconomic rebound in the first half of this year, but alsoalarmed ratings agencies by lifting Brazil's gross debt.

Brazil's benchmark lending rate is currently at10 percent after six consecutive increases this year.

Mantega had already announced that the credit line programwould be extended into 2014 with some adjustments, but carmakersand machinery builders had been asking for further details tocarry on with their investment plans for next year.

As he announced the changes, Mantega said Brazil's economyis on a path of gradual recovery that should continue in 2014and the government is committed to strong fiscal results thisyear and next.

Mantega has previously forecast average growth of 4 percentper year over the next decade - a rate Brazil has not managedonce under President Dilma Rousseff. In the third quarter, theBrazilian economy contracted for the first time since 2009.

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