MercoPress. South Atlantic News Agency

Brazil pumps more consumer credit lines trying to bolster the economy

“Inflation is under control, the public finances are under control” said Rousseff

The administration of President Dilma Rousseff will hand out 17 billion Reais (8 bn dollars) in cheap loans for home appliance purchases it was announced this week, a further attempt bolster Brazilians' buying power as an anemic economy and high inflation erode its approval rating.

President Rousseff has seen her high popularity edge lower for the first time in months as Brazilians grow wary of high inflation and slow growth, two recent opinion polls showed, which is interpreted as a strong warning for her re-election bid.

The new credit line underlines President Rousseff’s efforts to cast a positive light after weeks of non-stop negative news ranging from violence between Indians and farmers to violent protests with torching in several cities over a hike in bus fares and Standard & Poor's warning of a rating downgrade.

Rousseff also sent a clear message to investors worried about the stability of an economy that only three years ago grew a staggering 7.5%, but last year only managed 0.9%.

“Inflation is under control, the public finances are under control,” Rousseff said after announcing the new credit line that also includes loans for furniture purchases.

Heavy public spending has been criticized by some economists who say it undermines the central bank's efforts to contain persistently high inflation. The central bank started to hike interest rates in April after bringing borrowing costs down to record lows.

Government officials launched a media offensive this week to assure markets that the administration remains fiscally responsible despite weakening budget indicators.

Finance Minister Guido Mantega said the government is willing to cut spending to reach an already-lowered fiscal savings target this year, according to an interview with local daily Folha de Sao Paulo.

The government has relaxed its tough fiscal savings rules in the last two years to bolster public investment and give billions of dollars in tax breaks to local businesses.

The credit line is earmarked for participants of a social housing program called “Minha Casa Minha Vida.” It will be financed by the Brazilian treasury, which usually sells local debt and transfers the funds to state-run banks which disburse the credit to customers.