Brazil wants regulation, low interest rates

The Brazilian government will keep pressing the world’s big economies to regulate financial markets while taking stimulus measures at home, Finance Minister Guido Mantega said in separate interviews with two newspapers on Sunday.

“The great financial institutions don’t want regulation, they want to stay free to do what they want,” Mantega told O Estado de S. Paulo and Folha de S. Paulo newspapers. “We have to keep pressuring the G20 (Group of 20 nations).”

Governments that gave the financial sector too much freedom acted irresponsibly, he said.

“The crisis was provoked by a bubble in the financial and real estate sectors in the United States,” he said. “Some (countries) got stuck in the crisis up to their necks, some up to their waists, and Brazil, up to the ankles.”

Brazil will keep taking anti-cyclical measures, he said, though the form of those measures will change. “We haven’t exhausted our arsenal.”

He also emphasized that the benchmark Brazilian interest rate — historically high but now at record-low 8.75 percent –does not need to return to its pre-crisis levels as Brazil’s economy stabilizes.

“The reduction in interest rates doesn’t need to be reversed. I don’t see any reason to raise them, but I don’t have the last word on this question,” he said.

At some point in the future, he said, Brazil will have a real benchmark interest rate of between 2 percent and 3 percent.

“We have to take measures to increase the competitiveness of Brazilian industries, to reduce costs,” he added.

But the government has no plans to further extend tax breaks on vehicles, home appliances and construction materials, credited with sparking domestic demand during the downturn, he said.

Mantega said the Brazilian government’s stimulus package would cost about 1 percent of GDP, but add about 2.5 percent of GDP, for a net effect of 1.5 percent of GDP.

That, he said, will bring the country to growth in 2009 of about 1 percent overall of GDP.