Government announces R$8 billion to boost growth

Faced with a sluggish economy, the government announced the expansion of the Accelerated Growth Program (“PAC”) to include the purchase of equipment. It will be known as PAC Equipamentos and endowed with a budget of R$8.4 billion. The main goal is to speed up government procurement; specifically, the acquisition of domestically manufactured items.

Another goal is drive GDP growth after a disappointing 2.7% last year and recent forecast by the Central Bank that growth will be only 2.18% this year.

The program rolled out by the government will include purchases in the areas of health, defense, education and agriculture. Among the purchases: earth moving equipment (back hoes and so forth), ambulances, school buses, motorcycles for police, missile launchers and armored vehicles.

In the health area, PAC equipamento purchases are to be given what is known as a margin of preference of up to 25%; that is, a domestically produced item can be acquired even though it is up to 25% more expensive than the same imported item. The margin of preference can vary from 8% to 25% and is to remain in effect for five years, until June 2017. The idea is to purchase, among others, tomographic and hemodialysis equipment, along with 2,100 ambulances.

The government will also allow, as part of PAC equipamentos, the Brazilian Development Bank (“BNDES”) to finance medical equipment that will have to be at least 60% domestically made.

Besides stimulating the economy, PAC equipamentos is to give a hand to combating problems such as drought (8,000 trucks and 3,000 farm vehicles) and benefit schools through the purchase of school buses (8,500) and classroom furniture (30,000 items). There will also be purchases of 160 train cars and 500 motorcycles for the police.

Out of the R$8.4 billion, a total of R$6.6 billion is “new” money; that is, the rest was already in the 2012 budget. According to minister of Finance, Guido Mantega, with the new program, PAC spending in 2012 will rise from R$42.6 billion to R$51 billion. “That is the biggest increase of the year,” he declared.