UPDATE 1-Brazil Lula calls for 503 bln reais in investments http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-01-22T140854Z_01_N22439078_RTRIDST_0_BRAZIL-ECONOMY-PLAN-UPDATE-1.XML
Mon Jan 22, 2007
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BRASILIA, Jan 22 (Reuters) - Brazil's president unveiled a plan on Monday that calls for 503.9 billion reais ($237 billion) in public and private infrastructure investments over four years to speed economic growth in Latin America's largest country.
President Luiz Inacio Lula da Silva said just 67.8 billion reais of investments would be made by the central government. The rest would come from state-run companies and the private sector, which the government hopes to woo with tax breaks. The tax benefits will be 6.6 billion reais this year and 11.5 billion reais in 2008.
The higher spending on some projects could reduce Brazil's effective primary budget surplus by 0.5 percent of gross domestic product to 3.75 percent from the official target of 4.25 percent, the report said.
"The challenge now is to accelerate the growth of the economy," Lula said. The plan would uphold commitments to fiscal prudence, inflation control and stability, he said.
The plan says the net public-sector debt load will fall to 39.7 percent of GDP in 2010 from 48.3 percent in 2007 thanks to faster economic growth and lower interest rates.
The plan also estimates the nominal budget deficit will narrow to 0.2 percent of GDP in 2010 from 1.9 percent of GDP in 2007.
Business leaders said the plan for energy, transportation, sanitation and housing was a step in the right direction but that the government could pave the way for faster growth by cutting its bloated budget in other areas.
"Government costs must fall," Jorge Gerdau Johannpeter, chairman of steelmaker Gerdau (GGBR4.SA: Quote, Profile , Research), said in a television interview.
Finance Minister Guido Mantega said the plan would restrict salary increases for public servants to 1.5 percent a year.
Lula, whose second term started this month, will need broad political support for the plan to take root. Some economists also say it may not be far-reaching enough to boost economic growth to 5 percent a year as the government hopes. In 2005, Brazil's economy moved 1.9 trillion reais in goods and services.
Brazil's economy has grown about 3 percent a year for the last two decades, lagging behind emerging market peers like China and India.
($1 = 2.13 reais)
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