Brazil's Mantega vows more spending controls

SAO PAULO: Brazil will rely more on spending reduction than in interest-rate increases to keep a spike in inflation at bay, Finance Minister Guido Mantega told Valor Economico newspaper in an interview on Monday.

Mantega told Valor that the government is committed to meeting its deficit reduction goals and ruled out a plan to ease spending controls next year.

"Only President Dilma Rousseff and I are authorized to speak on the matter," Mantega told Valor.

The times of conflicting fiscal and monetary policies "are over," Mantega told Valor, signaling that the government will try to reduce expenses when economic growth is accelerating. Economists often said Mantega's fiscal largess in the past made it harder for the central bank to raise interest rates to control inflation.

"We have changed the policy mix in a permanent way" to "enhance its efficiency," Mantega said.

Last week, Valor said, citing a cabinet minister who did not want to be quoted by name, that the government was considering a series of measures to make spending practices more flexible in the event of an economic slowdown in 2012.

Calls made to the Brasilia-based finance ministry to confirm the content of the interview were not immediately answered.

Mantega also told the newspaper that the ministry is unlikely to negotiate with market participants to lower a tax surcharge on the trading of fixed-income and currency derivatives.

A July decision to hike a transactions tax on trading of those instruments needs "fine-tuning, not any type of conceptual change," Mantega told the newspaper.

Copyright Reuters, 2011