Sign in Subscribe
Economic conditions

Brazil's Economy on the Mend

Strategic Insights

— 1 min read

Brazil's economy has been steadily recovering from the financial disaster of 2002, with inflation tamed, interest rates falling, and jobs being created. The country's economic managers are even targeting sustainable growth. According to Henrique Meirelles, Brazil's central bank president, "We have a healthy trade surplus, solid fiscal surplus and responsible monetary policy. All the indications are that we are on a recovery trend." The local currency, the real, has regained about a third of its value, inflation has fallen back towards single digits, and the central bank is on course to hit its target rate of 5.5 per cent for 2004.

Key Takeaways:

  • Brazil's trade surplus has been fueled by increases in volume, accounting for 70 per cent of last year's trade surplus of $24.8 billion.
  • The country's international credit lines have been restored, with exporters doing well, particularly with booming commodity prices.
  • The central bank has been successful in taming inflation, which has fallen back towards single digits.
  • Despite a disappointing growth rate, Brazil's decline was relatively mild compared to other countries exposed to similar external shocks.
  • Henrique Meirelles, Brazil's central bank president, insists that the total number of jobs is growing, despite high unemployment numbers in metropolitan areas.
  • Brazil's debt ratios are still high, with net public debt equal to nearly 60 per cent of output.
  • Guillermo Calvo, chief economist of the Inter-American Development Bank, warns that a rise in US interest rates could be complicated for Brazil.

Statistics:

  • Brazil's trade surplus was $24.8 billion last year.
  • The country's trade surplus for the first quarter of 2004 was $6.2 billion, compared to $3.8 billion in the same period last year.
  • The amount of domestic currency debt indexed to the US dollar has fallen from 40 per cent to 19 per cent in the past 18 months.
  • Brazil has a substantial cushion of $49.3 billion plus about $13.7 billion of an unused IMF credit to withstand an external shock.
  • The average due date for Brazil's debt was just over 33 months at the end of 2002, but by March this year, this average had declined to just under 30 months.

Sources:

  • Henrique Meirelles, "Interview with President Luiz Inacio Lula da Silva's Economic Team"
  • Article, "Brazil's Economy on the Mend", [Source not explicitly mentioned in original text, please provide original text source]

Read more