Brazil announces $60bn stimulus package

President Dilma Rousseff President Dilma Rousseff wants to encourage more private investment in the Brazilian economy

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Brazil's government has unveiled the first phase of a major economic stimulus package designed to boost growth in the flagging economy.

More than $60bn (£38bn) will be invested in the country's roads and railways over the next 25 years, with more than half in the next five years.

This includes 8,000 kilometres of new roads and 8,000kms of railways.

Further announcements involving investment in ports and airports are expected in the coming weeks.

Growth in Brazil is predicted to be less than 2% this year, the weakest annual performance since 2009 and a sharp slowdown from an impressive 7.5% rise in 2010.

The government's recent measures, such as the recent devaluation of the currency, the real, and the progressive reduction in interest rates, have so far failed to stimulate growth.

"The measures unveiled by the Brazilian government this afternoon are good news insofar as they will help tackle some of the supply-side problems that are holding the economy back," said Neil Shearing at Capital Economics.

But he said the benefits would not be felt fully for a number of years.

Changing tack

Brazil's growth over the past few years has been based on the expansion of credit and on consumer spending.

But while this strategy seemed to work, it also exposed serious weaknesses in the country's infrastructure.

The government has now made a conscious decision to encourage more private sector investment.

The business community in Brazil has praised the government's decision to boost investment in infrastructure, but says the action is long overdue.

In addition to the announcements made on Wednesday, President Dilma Rousseff is preparing to lower the price of energy for industry with the abolition of some federal taxes, which could cut the price by 10%.

Brazil is also hoping for an economic boost from hosting the Olympic Games in 2016.

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