BRASILIA, June 21 (Reuters) - Brazil's government may have to cut current expenditures to compensate for a slump in tax revenue, Finance Ministry Guido Mantega said in an interview with a local newspaper on Sunday.
The fall in tax collections was expected, since economic activity has slowed and the government has granted tax breaks to various hard-hit industries, but if the slump continues the government could be forced to take more action, he said.
Investments and the government's massive infrastructure program, known by its Portuguese acronym PAC, would not be affected, he added.
'If there continues to be a frustration in tax revenues, we could cut current expenditure at the ministries,' Mantega told O. Estado de Sao Paulo newspaper, reiterating comments made earlier in the week by Planning Minister Paulo Bernardo.
Bernardo said on Wednesday that tax revenue so far in 2009 was 63 billion reais ($ 31.9 bln) short of the government target, and the government would slash spending in the federal budget to make up for the short-fall, without giving details on where cuts would be made.
Data released on Tuesday showed tax receipts fell for a seventh straight month in May as Latin America's largest economy slumped. Brazil's economy contracted 0.8 percent in the first quarter of this year after a 3.6 percent plunge in the fourth quarter of 2008, tipping the economy into recession.
Mantega said there was more room for reducing banking spreads -- or the difference between the rates at which banks borrow and the rates at which they lend -- which in April stood at 28.2 percentage points. The government has repeatedly pushed for a reduction in banking spreads in an attempt to boost consumer demand and stoke growth.
'The Brazilian consumer pays absurd interest rates, but we are on our way,' Mantega said. A sharp reduction in the benchmark Selic rate, cuts in the interest rates public banks charge and strengthening of small and medium-sized banks have already contributed to lower banking spreads, he said. Brazil's central bank has cut borrowing costs by 450 basis points so far this year to a record low of 9.25 percent.
'The government has to create conditions for (more) competition,' he added.
A recent sharp strengthening of the local currency versus the U.S. dollar was also a concern because it makes Brazilian exports less competitive and could bring in an unwanted inflow of imports, Mantega said.
Measures could be adopted to attenuate this, he said, while defending a floating currency regime.
($1=1.974 reais)
(Reporting by Ana Nicolaci da Costa; Editing by Leslie Adler) Keywords: BRAZIL ECONOMY/ (ana.nicolacidacosta@thomsonreuters.com; +55 61 3426-7027) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The fall in tax collections was expected, since economic activity has slowed and the government has granted tax breaks to various hard-hit industries, but if the slump continues the government could be forced to take more action, he said.
Investments and the government's massive infrastructure program, known by its Portuguese acronym PAC, would not be affected, he added.
'If there continues to be a frustration in tax revenues, we could cut current expenditure at the ministries,' Mantega told O. Estado de Sao Paulo newspaper, reiterating comments made earlier in the week by Planning Minister Paulo Bernardo.
Bernardo said on Wednesday that tax revenue so far in 2009 was 63 billion reais ($ 31.9 bln) short of the government target, and the government would slash spending in the federal budget to make up for the short-fall, without giving details on where cuts would be made.
Data released on Tuesday showed tax receipts fell for a seventh straight month in May as Latin America's largest economy slumped. Brazil's economy contracted 0.8 percent in the first quarter of this year after a 3.6 percent plunge in the fourth quarter of 2008, tipping the economy into recession.
Mantega said there was more room for reducing banking spreads -- or the difference between the rates at which banks borrow and the rates at which they lend -- which in April stood at 28.2 percentage points. The government has repeatedly pushed for a reduction in banking spreads in an attempt to boost consumer demand and stoke growth.
'The Brazilian consumer pays absurd interest rates, but we are on our way,' Mantega said. A sharp reduction in the benchmark Selic rate, cuts in the interest rates public banks charge and strengthening of small and medium-sized banks have already contributed to lower banking spreads, he said. Brazil's central bank has cut borrowing costs by 450 basis points so far this year to a record low of 9.25 percent.
'The government has to create conditions for (more) competition,' he added.
A recent sharp strengthening of the local currency versus the U.S. dollar was also a concern because it makes Brazilian exports less competitive and could bring in an unwanted inflow of imports, Mantega said.
Measures could be adopted to attenuate this, he said, while defending a floating currency regime.
($1=1.974 reais)
(Reporting by Ana Nicolaci da Costa; Editing by Leslie Adler) Keywords: BRAZIL ECONOMY/ (ana.nicolacidacosta@thomsonreuters.com; +55 61 3426-7027) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.