Brazil’s government announced a new package of tax cuts, low-cost credits and other relief for ailing industries on Tuesday, as Latin America’s biggest economy struggles to regain momentum.

The measures came as fresh data showed signs of life in Brazilian industry after a prolonged slump, but some analysts cautioned that the latest policies would fail to tackle the root causes that have made domestic manufacturing less competitive abroad.

Finance Minister Guido Mantega said the government will cut payroll taxes in efforts to spur hiring in sectors ranging from textiles and plastics to the automotive industry. Together, the tax cuts represent about 10 billion reais ($5.4-billion) annually in foregone public revenue.

The government will also stimulate domestic industry through government purchases and inject 45 billion reais into the coffers of a state development bank that provides subsidized loans for Brazilian companies.

The moves are the second such stimulus package for ailing Brazilian industries since the country’s previously booming economy began to slow in mid-2011, hit by the worsening fears in Europe and slower growth in China.

“Given the international outlook, we must continue to take measures to stimulate public and private investment,” Finance Minister Guido Mantega said in a speech to business leaders in Brasilia, Brazil’s capital.

Brazil’s real currency firmed after Mr. Mantega’s comments, in which he said the recent retreat by the currency had put the real back at a “reasonable” level. The real climbed 0.3 per cent in Tuesday trade to 1.8250 to the dollar.

Brazil’s benchmark Bovespa stock index fell 0.9 per cent to 64,635.33.

After growth of 7.5 per cent in 2010, Brazil’s economy nearly screeched to a halt late last year, posting a full year gain of just 2.7 per cent – far less than originally predicted. The government hopes the new measures will help it reach its projection for growth of as much as 4.5 per cent in 2012.

Though welcomed by Brazilian industry as helpful, the package was criticized by many economists and business leaders as falling far short of the true reforms necessary to help unburden Brazil’s economy, long held back by high taxes and red tape.

“This doesn’t solve the problem,” said Mauricio Rosal, chief economist at Raymond James in Sao Paulo. Long-term, he added, “this does nothing to address the problems of competitiveness.”

Tuesday’s measures came as government figures showed that industrial output in February recovered most of its lost ground from a sharp drop in January, when Brazil’s overvalued currency and economic ills abroad continued to erode the competitiveness of manufacturers.

Industrial production rose a better-than-expected 1.3 per cent in February, posting the best monthly growth since February, 2011. In January, industrial output fell 1.5 per cent from a month prior, revised from a previously reported 2.1-per-cent decline.

Despite the snap back in February, analysts said the improvement hardly indicates the sort of robust production that would indicate a genuine recovery.

February’s industrial production fell 3.9 per cent from a year earlier, running below year-earlier levels for a sixth straight month.

Economist Thiago Carlos, of Link Investimentos in Sao Paulo, warned against excessive enthusiasm about the positive data.

“We can’t say industry is recovering. It’s not. It’s still weak and it keeps suffering from problems of competitiveness and there is no real improvement on the horizon,” he said.

Mr. Mantega said the government would also continue to enforce measures to stem the rise of Brazil’s currency, whose appreciation in recent years has made imports cheaper and exports less affordable overseas.

While recent moves to raise taxes on certain financial transactions and speculative capital have curtailed the rise in recent months, the real is still about 30-per-cent stronger than at the depths of the 2008 global financial crisis.