* Economy has continued to disappoint in Brazil
* Infrastructure concessions to bolster confidence
* Some analysts cast doubts on strength of recovery
By Alonso Soto and Luciana Otoni
BRASILIA, May 6 The Brazilian government is
betting the economy will shift into higher gear in the second
half of the year as business confidence improves and stimulus
measures take hold, a senior member of the administration told
The recovery of Latin America's largest economy remains
uneven with investment slowly rising and industrial output still
patchy, fueling expectations of a third straight year of
lackluster economic growth.
However, Brazil's economy should be firmly back on track by
July, when the government hopes a new round of auctions of
concessions for airports and roads will attract a wave of
investment, the senior member of the administration's economic
"That will change the mood, it will help turn around this
climate of mistrust," the official, who asked to remain
anonymous in order to be able to speak frankly about the
government's views, said in a recent interview, adding: "We can
Factor in expectations for a pick-up in industrial output
and 70 billion reais ($34.72 billion) worth of tax breaks and
you have the recipe for success, the official added.
Government officials and private economists agree this year
will be better than 2012 when the economy grew a
weaker-than-expected 0.9 percent, its worst performance since a
contraction in 2009 in the wake of the global financial crisis.
However, the intensity of that recovery has been
disappointing, leading many private economists to trim their
Expectations for a 3 percent economic expansion this year -
still below the 4 percent average of the last decade - are
starting to look optimistic.
Finance Minister Guido Mantega, whose rosy economic
forecasts in years past drew criticism after they failed to pan
out, has been more cautious this year. Instead of pinpointing a
forecast, Mantega has said the economy could grow between 3 and
4 percent this year.
Stronger growth is a top priority of President Dilma
Rousseff's administration, which has given billions of dollars
in tax breaks and cheap loans to struggling industries. Under
Rousseff, the central bank has also slashed interest rates to
record lows to boost consumption, though it raised rates last
month to rein in rising prices.
All that stimulus, however, has yet to secure a stronger
recovery for an economy that has suffered from years of anemic
investment and declining productivity.
"The government's arguments for a stronger recovery ahead
are not bad, but they continue to be just good-hearted bets,"
said Samuel Pessoa, an economist with the Getulio Vargas
Foundation and a partner at investment consultancy Reliance.
"I still don't see signs of a more solid recovery."
Pessoa, who was an advisor to an opposition senator in the
past, said he sees the economy growing 2.7 percent this year.
ECONOMY KEY TO 2014 ELECTION
Another year of disappointing growth could hurt Rousseff's
chances for re-election next year.
Although the career technocrat remains immensely popular at
a time when unemployment hovers near record lows, some of her
political opponents are starting to loudly criticize her
handling of the economy and inflation.
All that noise has made the job of the economic team more
difficult, the official said.
Annual inflation climbed to 6.59 percent in March, piercing
the ceiling of the official target range of 4.5 percent plus or
minus two percentage points for the first time in over a year.
However, inflation is expected to ease slightly to 6.41 percent
in April, according to the median forecast of 25 economists
surveyed by Reuters.
A steady drumbeat of media coverage of high inflation and
weak growth is complicating efforts to anchor price expectations
and bolster business confidence, the source said.
"We need to be much more careful," said the official. "We
don't want all the political noise to hurt the recovery."