01 Logística e Infra-estrutura no Brasil – Desafios e ... - Swisscam

economia brasileira
Brazilian economy
needs a boost
Thanks to the responsible economic
policy maintained in 2005, the Brazilian
economy stands on a reasonably solid
basis. However, expectations for 2006
are not so rosy. The country needs a
boost to prevent bureaucracy, the heavy
tax load, protectionism and the exorbitant
interest rates from hindering economic
growth
Foto: Ulisses Matandos
brazilian economy
Few promises for 2006
by Christiane Henkel
Brazilian president, Luiz Inácio Lula da Silva,
was a little too audacious in his forecast for
2006. He said the Brazilian economy would
grow as much as in 2004, reaching around
5%. He added that was not a forecast; it
was a guarantee. Actually, such significant
growth would be theoretically possible. The
economic growth potential, that is, growth
that can be achieved using the country’s
existing capacity, is at most 5%.
Chain of favorable conditions
However, it is not realistic to speculate that
the country’s GDP will grow as much as in
2004. That year, Brazil was blessed by a
series of favorable circumstances: the weak
Real and the strong foreign demand for raw
materials and agricultural products stimulated
exports, climatic conditions allowed for
record harvests, and, because the country
was on the verge of a recession in 2003
(GDP +0,5%), the statistics ended up overvaluing
the growth rate.
In 2005, however, the tenth largest economy
in the world grew below the expectations. In
its recent inflation report, the Brazilian Central
Bank changed its 3.4% projection to 2.6%.
The agricultural sector was hurt by climatic
and sanitary problems; the industrial sector
and exports slowed down because of the
high interest rates and the appreciated Real.
The UN Economic Commission for Latin
America (ECLAC) estimates the Brazilian
economy will grow only 2.5%. In that case,
the country’s growth rate would be far below
the region’s average rate of 4.3%. However,
a strong growth in a country in Latin
America is not necessarily a decisive factor
to determine how solid its economy is. Let us
consider the countries ranking at the top of
the Eclac’s list: Venezuela (9%) and Argentina
(8.6%), countries whose economies are
increasingly unstable and whose growth
rates are unsustainable.
Sustainability over short-term
success
Brazil is going the opposite way: it is cementing
its economic foundation, without
prioritizing growth. Brazilian growth rates
are timid because, among other reasons,
the country is working towards achieving
sustainable growth and assuring a stable
macroeconomic structure. The government’s
central-left coalition is conducting its strict
economic policy. The priority in 2005 was
to assure continuing low inflation rates by
keeping interest rates high: Brazilian real
Brazil has taken a historic
turn in record time, turning
from an economy focused on
the domestic market into an
exporting economy
interest rates are among the highest in the
world. However, the effort has paid off: for
the first time in many years, the Brazilian
Central Bank has lowered inflation to the
pre-established level.
The economic strategy in 2005 also succeeded
in lowering the country’s foreign
debt. The country will probably achieve a
primary surplus (before payment of interest
rates) of 4.8% of the GDP, or R$ 95 billion,
this way surpassing the 4.5% target. Unfortunately,
not everything is rosy: achieving
these results was only possible through
reducing investment and raising taxes. Even
so, they are extremely important, since they
allow the country to pay the biggest portion
of its foreign debt interests without borrowing
new money. Consequently, new indebtedness
is low and, thanks to the economic
growth, public debt, as a percentage of the
GDP, is even decreasing.
The government’s efforts in the composition
of public debt are also an attempt to lower
the level of indebtedness. A team of expert
technocrats of the Ministry of Economy
have succeeded in partially consolidating
the previously unstable “debt mountain”.
Above all, the country is not so dependent
on exchange rate fluctuations anymore.
Today, only about 3% of all government
bonds are directly linked to the dollar-real
variation; in October 2001, the percentage
was 33%. This means drastic exchange rate
variations, which punished Brazil in the past,
will not have such high impact on the
country’s level of indebtedness any more.
Long-term growth consolidation
The government continues its efforts towards
stabilization, initiated in 1994 with the
monetary reform, and has succeeded in
securing what has been achieved so far.
Simultaneously, Brazil has taken a historic
turn in record time, turning from an
economy focused on the domestic market
into an exporting economy. The volume of
exports is expected to increase two-fold
compared to three years ago, and reach
04 swisscam nº44 03/2006