NEWSLETTER - Latin American New Zealand Business Council

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Analysts do believe the country will continue to grow, albeit at lower levels. "This is a cyclical response," said William R. Cline, senior fellow at the Peterson Institute for International Economics in Washington. "The general expectation is that growth will begin to revive and will be at reasonable levels for the next few years." PERU Brazilian President Dilma Rousseff is ramping up bullish rhetoric. The straighttalking technocrat recently stepped out of character to do a little cheerleading about Brazil's ability to weather the global crisis. "I can assure you, Brazil is 100 percent, 200 percent, 300 percent ready," Rousseff said. In 2010, Brazil's economy expanded by 7.5 percent, but it only managed 2.7 percent growth in 2011, out of league with fellow BRICS nations, which managed to grow by 4.3 percent to 9 percent that year. Teofilo Cubillas Brazil's target of 4.5 percent growth this year looks unlikely to analysts, who are betting expansion will end up closer to 3 percent. On top of that, the outflow of $2.59 billion in foreign investment in May was the biggest since the outbreak of the 2008 global crisis, reversing an inflow of $5.99 billion just the month before. Brazil's success before the current crisis had inspired imitation by Latin American countries such as Peru and Mexico, which adopted a more conservative fiscal approach and amassed enough foreign reserves and flexibility to likely ride out the storm, Shearing said. Brazil's international reserves ballooned from $38 billion in 2002 to $240 billion by the end of the 2009, helping the country survive the 2008 global credit crunch without much damage. Now, Brazil is even better prepared than it was in 2008, Rousseff said, with some $370 billion in international reserves. Gabriela Pérez del Solar URUGUAY Oil reserves have helped some countries resist global headwinds, as crude prices remain high despite financial woes. But most of Brazil's vast, recently discovered oil reserves are still years from production. Countries that have built much of their economies around exporting commodities to China are vulnerable, and several of them have prepared themselves for the eventual commodities downturn. So far, Brazil has responded to the slowdown with measures such as reducing its benchmark interest rate and taking measures to weaken the Brazilian real, which helps exporters. Diego Forlan Finance Minister Guido Mantega has also announced measures to boost domestic consumption: targeted tax cuts on Brazil-made products, interest rate reductions and an extension in the time allowed to pay back loans. The measures will make local cars about 10 percent cheaper, and reduce taxes on financial transactions. These measures have had some immediate impact. Car dealerships such as Euro Barra in Rio de Janeiro saw sales of their locally made Fiats shoot up by 40 percent in May, with lines stretching out the door as consumers came in hoping for a deal and an easier time paying back their loans. Abel Hernández Page 16 of 18
Their enthusiasm didn't last long, said Euro Barra general manager Antonio Carlos Maciel Junior. VENEZUELA Within two weeks, movement in the dealership was back to normal. That's because it's still hard to qualify for a car loan in Brazil, he said. Buyers have to put down half a new car's total cost to benefit from the lower rates. Others still pay 10 percent to 12 percent interest a year, he said. "The government is going in the right direction, stimulating sales," said Maciel Junior. "But the banks are still hesitant. The government took steps on this that the banks haven't followed. They need to relax rules around lending as well, make it easier for people to borrow." Taking advantage of her high approval ratings, Rousseff is also pushing through public pension reforms that had been unpalatable to her predecessors, said Joao Augusto Castro Neves, an analyst with the Eurasia Group consultancy Wilson Ramos Even as the world warily watches Brazil and the rest of Latin America, Rousseff says her country has indeed turned a corner and is not about to go back to the bad old days of hyperinflation and economic meltdowns. PHOTOS FROM THE SPEAKER'S RECEPTION FOR LANZBC Jose Manuel Rey Thomas Manning, Dr The Rt Hon Lockwood Smith, Heather Ward, HE Mrs Renate Stille Clare Callow, Barry Brook, Ian Troughton, HE Mr Isauro Torres, Thomas Manning & Dr The Rt Hon Lockwood Smith Page 17 of 18
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NEWSLETTER - Latin American New Zealand Business Council

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