UPDATE 2-Brazil tries again to help industry with new measures

Wed Jun 18, 2014 6:47pm EDT

(Adds details of new measures and fiscal context)

By Alonso Soto

BRASILIA, June 18 (Reuters) - The Brazilian government on Wednesday announced measures to help exporters and local factories, its latest attempt to bolster industries that have yet to benefit from earlier, costly efforts.

The new measures, which include more subsidized lending to industries and tax credits to exporters of manufactured goods, are the latest in a string of more than two dozen failed attempts over the last three years to invigorate Latin America's largest economy.

Growing pessimism among businessmen and consumers has slowed an economy that only a few years ago was an emerging-market star. This year it is expected to slow further and grow just over 1 percent.

President Dilma Rousseff is again trying to bolster confidence. While the leftist remains the clear favorite to win the Oct. 5 election, the combination of slow growth and high inflation has hit her popularity.

Finance Minister Guido Mantega said the government would also reduce the percentage of back taxes that smaller companies have to pay in cash under its settlement program. The government will hold the industrial tax rate for construction material and capital goods at zero, he said.

"We need to be ready for a new cycle of economic expansion," said Mantega after meeting with businessmen in the presidential palace in Brasilia. "We need to prepare our industry for that."

Analysts say past measures have had little effect on activity because the government's repeated involvement in the economy has raised uncertainty among investors.

The government will extend until late 2015 the Investment Support Program, or PSI, in which state-run development bank BNDES gives subsidized credit for companies to buy machinery, trucks and other capital goods.

It will also re-establish and make permanent the Reintegra program, which will give companies tax credits equivalent to between 0.1 and 3 percent of their export revenue, Mantega said.

The measures will mean little in fiscal costs for the government, Mantega said. Previous tax cuts and cheap loans have reduced tax revenues, leading the country to miss key fiscal goals in 2012 and 2013.

Past measures to stimulate consumption have also stoked inflation and reduced the strength of the central bank's monetary policy. (Additional reporting by Luciana Otoni; Editing by James Dalgleish, Jonathan Oatis and Lisa Von Ahn)

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