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Bonds News

Rousseff, Brazil front-runner, may cut debt-report

* Rousseff may cut debt to 30 pct of GDP, Valor says

* Would seek to stimulate private financing of works

* Focus tax reforms efforts on overhaul of state taxes

SAO PAULO, Sept 13 (Reuters) - Dilma Rousseff, the front-runner in Brazil’s presidential election next month, could slash the national debt and impose limits on government spending to help boost investment in infrastructure, the Valor Economico newspaper reported on Monday, citing campaign advisers with knowledge of the matter.

The advisers told Valor that Rousseff could slash the so-called net debt ratio to the equivalent of 30 percent of gross domestic product by the end of her term in 2014 as part of a plan to streamline growing expenses. The net debt-to-GDP ration was 42.8 percent last year.

A reduction in levies charged on investments is also part of Rousseff’s program, according to the advisers, who spoke on condition of anonymity. A Rousseff campaign spokeswoman declined to comment, when contacted by Reuters.

Other items on the candidate’s fiscal agenda could include stimuli to encourage the private sector to more aggressively help fund infrastructure projects, a simplification of state taxes and an overhaul of public pension regimes, Valor reported.

The report came as investors looked for hints regarding Rousseff’s budget-cutting credentials. She has defended an increase in the size of government to execute ambitious social programs and investments spearheaded by incumbent President Luiz Inacio Lula da Silva, her political mentor.

Polls point to a first-round win in the Oct. 3 election for Rousseff, the ruling party candidate and also Lula’s former chief of staff.

Rousseff told Reuters in a recent interview that if elected president, she would rule out drastic tax hikes and spending reductions to keep government finances in balance.

The efforts to pare back debt and stimulate a more active role by the private sector in the financing of infrastructure projects should help pave the way for a more rapid reduction of Brazil’s interest rates toward international levels, Valor said.

Currently, borrowing costs in Brazil remain the highest among the world’s top-ten economies. The central bank held the benchmark lending rate at 10.75 percent at a meeting earlier this month. (Reporting by Guillermo Parra-Bernal; editing by Jeffrey Benkoe)

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