LatinNews Daily Report - 27 June 2012

ECONOMY | Government procurement stimulus plan. President Dilma Rousseff will today (27 June) announce a new R$5.0bn-R$6.0bn (US$2.5bn-US$3.0bn) state procurement package designed to prop up the local economy by favouring local suppliers. The new package will channel spending by the education, health and defence ministries towards local manufacturers in selected industries that have been most hurt by the slowdown in growth. Back in April the government said it would pay up to 25% more for selected locally-made goods. Finance Minister Guido Mantega is also expected to extend temporary tax cuts on several categories of consumer durables (white goods, electrical goods etc) as well as for the civil construction sector, in a bid to support consumption. The private sector consensus growth forecast compiled for 2012 is now at just 2.18%.  Critics suggests that the official focus on consumption-led growth is asking too much of Brazil’s domestic market.  Credit growth was still a strong 18.3% in the year to end May, according to the central bank, meaning that total credit in Brazil breached 50% of GDP for the first time ever. However, the ratio of non-performing loans (90+ days overdue) also hit a series high of 6.0% (of total outstanding loans) at end May.

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