WRAPUP 1-Brazil boosts credit as economy nears recession

miércoles 20 de agosto de 2014 15:34 GYT

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By Luciana Otoni

BRASILIA Aug 20 (Reuters) - Brazil's government unveiled a flurry of measures on Wednesday aimed at pumping credit into a languishing economy, its latest effort to avoid a recession as a tightly contested presidential election draws closer.

The Brazilian central bank increased the amount of capital available for commercial loans by at least 25 billion reais ($11.1 billion), the second such move in less than a month. The total potential stimulus offered by the central bank since July adds up to 70 billion reais ($31.1 billion).

Later in the day, Finance Minister Guido Mantega announced steps to boost mortgage and auto loans, including the creation of a new debt instrument to support real estate purchases.

"This will irrigate some segments of the economy that ran completely out of credit," Mantega told journalists as he announced the measures. "Credit retreated too sharply but will improve, though at a gradual pace."

Shoring up Brazil's sluggish economy has proven a hard task for President Dilma Rousseff since she took office in 2011. Signs of a possible recession have piled up in recent months, including job cuts in some sectors, despite a string of tax breaks and targeted subsidies.

Brazil's economy may have contracted nearly 1 percent in the second quarter, according to private estimates of gross domestic product data due out later this month. This could be a potential blow for Rousseff's hopes of getting re-elected in October.

Mantega said Brazil's economy is picking up speed gradually since July and blamed the recent slowdown on tight credit. Bank lending grew in June at the slowest pace in a decade, according to central bank data.   Continuación...