Brazil’s Lula eyes austerity on way out – report

* Lula could implement austerity measures before term ends

* Popular president would take the heat off successor

* Lula could seek tougher budget, measures on currency

BRASILIA, Nov 2 (BestGrowthStock) – Brazil’s President Luiz Inacio
Lula da Silva could implement unpopular economic measures in
his final two months to ensure a smoother start for his elected
successor in January, Folha de Sao Paulo said on Tuesday.

The daily newspaper said Lula and President-elect Dilma
Rousseff, also from the Workers’ Party, had discussed fiscal
and monetary adjustments, which they saw as necessary and which
would help the next government gradually bring down high
interest rates.

By implementing the least popular measures now, Lula could
take the heat off Rousseff, who faces the challenge of tackling
a strong currency, lowering one of the world’s highest interest
rates and reining in public spending.

Folha did not say how it obtained the information.

Rousseff won Brazil’s presidential election on Sunday by a
wide margin over rival Jose Serra and will succeed Lula, who is
nearing the end of his second term in office.

Folha said the Finance and Planning ministries would make
final studies on adjustments for the next government. The
government and Rousseff’s team overseeing the transition were
also discussing measures to prevent Brazil’s real (BRBY: )(BRL=: )
from appreciating further.

Specifically, it said Lula was prepared to negotiate a more
draconian budget for 2011 with the Congress.

Folha said he would also use his sky-high approval ratings
to push through an unpopular reduction in the standard salary
increase for civil servants and turn down demands for a
56-percent pay increase for the judiciary.

It said tax relief for sectors hit hardest by the
strengthening of the real was being considered.

Exporters say they are struggling to compete as a flood of
investor cash into the country caused the real to soar against
the dollar, making their goods more expensive in the global

Separately, daily newspaper O Estado de Sao Paulo said
finance minister Guido Mantega was preparing to announce
measures in the coming days that would increase incentives to
buy Brazilian sovereign and corporate debt.

The measures, which the paper said it had seen exclusively,
included exemption from income tax payable on corporate bonds
and other long term notes. Lenders also would be allowed to
reduce compulsory reserves for loans used for infrastructure
and real estate.
(Reporting by Peter Murphy; Editing by Padraic Cassidy)

Brazil’s Lula eyes austerity on way out – report