* Tombini, Mantega say banks have room to boost loans
* Economy starting to pick up pace after flurry of stimuli
* Economists say strength of recovery still uncertain
By Carolina Marcondes
SAO PAULO, Aug 17 Brazil's top economic
officials called o n F riday on state-owned and private banks to
step up credit disbursements to help the economy, which is
finally starting to shows signs of recovery.
Speaking at different events in the business hub of Sao
Paulo, Finance Minister Guido Mantega and central bank chief
Alexandre Tombini said there is room for banks to give out more
credit at better terms.
"Financial institutions have the financial capacity to
expand credit supply," Tombini said in a speech to auto
executives. "Granting credit on more favorable terms will be an
instrument to attract and maintain customers."
Mantega said state-owned Banco do Brasil, the
country's largest lender, should take bolder action to boost
lending as a way to pressure private banks into offering more
Since the start of the year President Dilma Rousseff has
raised pressure on private banks to cut rates and give out more
loans to bolster Brazil's cooling economy.
Both Mantega and Tombini said the nearly stalled economy is
starting to react to a year-long flurry of tax and interest rate
cuts aimed at supporting local demand. Stronger-than-expected
retail sales and a pick-up in economic activity in June are
signaling that the recovery could be picking up speed.
"The economy is already partially responding to (stimulus
measures), and this response tends to deepen," said Tombini, who
as head of the bank has trimmed 450 basis points from the
benchmark Selic rate since August to a record low of 8 percent.
In a hint that the central bank could keep cutting rates,
Tombini said prices should remain under control even as the
economy recovers. Most economists expect the bank to slash the
Selic by half a percentage point later in August.
However, many economists say the recovery is on shaky ground
as the industrial sector remains extremely weak.
For years local industries have struggled with a stronger
local currency, growing competition from abroad and soaring
output costs due to inadequate infrastructure and high taxes.
The Brazilian economy has reacted very slowly to the barrage
of stimulus measures and the aggressive rate-cutting cycle,
barely growing since mid-2011.
Data Friday showed that Brazil's economic activity climbed
in June at its fastest pace since March 2011.