* Government extends payroll tax cuts to retailers
* Stimulus thus far has failed to revive stagnant economy
* Finance minister says gasoline prices to rise in 2013
By Luciana Otoni
BRASILIA, Dec 19 Brazil's government on
Wednesday said it would extend payroll tax cuts already enjoyed
by manufacturers to retailers, as President Dilma Rousseff seeks
to revive an economy that remains stagnant despite more than a
year of stimulus measures.
The government will also temporarily renew existing tax
breaks on the purchase of home appliances, but gradually begin
phasing out similar breaks on car purchases as of January,
Finance Minister Guido Mantega said at a press conference.
The retail tax cuts, aimed toward department stores and
hardware retailers - but not supermarkets - are an effort to get
shops to lower prices for consumers, Mantega said. Combined with
existing tax cuts for Brazil's struggling manufacturers, the new
breaks will represent 16 billion reais ($7.73 billion) in
foregone tax revenue by the government, Mantega said.
The continued stimulus measures come as Rousseff,
disappointed with economic growth for the year that may not
reach even 1 percent, struggles to revive Latin America's
Brazil's economy remains in a rut despite stimulus measures
that already include tax breaks, a prolonged series of interest
rate reductions and the expansion of subsidized credit programs
for industry. Even with those efforts, business and industry
have cut back on investments and consumers are growing more
In an address on Wednesday, Rousseff said the government
would keep finding ways to make Brazil's economy more efficient.
She said one of her "major struggles" in 2013 would be lowering
taxes that have long been considered too steep.
To that end, Mantega said the government will soon propose
changes to the ICMS tax regime, a complicated set of interstate
duties that has long been criticized by economists, business and
Earlier on Wednesday, Mantega said the government in 2013
will "certainly" raise gasoline prices, which will help stem
losses at state owned-oil company Petroleo Brasileiro SA
, or Petrobras, which needs extra revenue to fund a
massive investment program.
An increase in gasoline prices, however, will also add to
concerns that inflation, already above the center of the
official government target range, will keep creeping upward.
Meanwhile, Mantega, who has had to revise rosy forecasts all
year as the economy limped along, again suggested Brazil is on
the mend. In comments over breakfast with reporters in Brasilia,
he predicted 2013 growth of 4 percent, still more optimistic
than most economists, whose forecasts are closer to 3 percent.
"I see the economy in clear recovery," Mantega said.
The government is trying to revive investment by business
and industries that have grown less competitive because of
appreciation in Brazil's currency, the real, and cheap imports.
At the same time, Brazilian industry has lost productivity due
to a shortfall in skilled labor and a rapid increases in wages.
Greater investment is crucial in the coming years to help
revive an economy that over the past decade was sustained by
consumer spending. The retail boom is now seen as exhausted,
given high default levels on loans and the looming effects of a
INFLATION BITES EVEN AS ECONOMY STRUGGLES
All the same, the government and monetary officials are
keeping a close eye on price increases.
Even with sluggish growth, inflation remains persistent
because of a spike earlier in the year in global food and energy
prices and the country's long history of indexation, built-in
salary and price increases that were introduced during past
decades of volatility.
Consumer prices rose in the month to mid-December at the
fastest rate since May 2011, data showed on Wednesday.
The gradual end of the automobile tax breaks, to
be followed in February by the phasing out of some of the breaks
for appliances, are an effort to make sure the stimulus for
those sectors, while still needed, remains moderate.
The pending gasoline increase will add to price pressure.
Brazil's government in recent years has kept gasoline prices
below global levels. But the strategy has crimped revenues at
Petrobras, which earlier this year posted its first quarterly
loss in 13 years.
The company's losses are hampering Brazil's efforts to more
than double oil output by 2020 and join Russia, Saudi Arabia and
the United States among the world's top four oil producers.
Mantega said he expects global oil prices to fall in 2013,
which should help curtail price increases elsewhere in the