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Brazzil - Economy - August 2003
 

Brazil Is All Smiles over Prime Fall

Despite the cooling-off of the Brazilian economy, 618,577 new
jobs were created in the country in the last 12 months. This
represents a 2.78 percent increase, according to the Ministry
of Labor. In July alone, 37,233 jobs  were generated. So far
this year, new job positions amount to 598,140.

AB

 

The decision by the Brazilian Monetary Policy Committee (Copom) to reduce the prime interest rate (Selic) from 24.5 percent to 22 percent per year pleased the National Industrial Confederation (CNI). CNI president, Armando Monteiro Neto, affirmed that this is a move in the direction called for by the industrial sector. "It was a more daring measure that does not put at risk the control of inflation. I feel satisfied, because, as I said yesterday, a reduction of less than 2.5 percent would leave us frustrated."

Monteiro Neto pointed out that this sends a positive signal to economic actors and shows that the Administration is moving in the direction of a looser monetary policy, which would be good for production and job preservation.

The 2.5 percent reduction in the Brazilian benchmark lending rate rate (Selic) should save the government R$ 11.1 billion (US$ 3.7 billion) over the next 12 months, according to the economic consultancy firm, Global Invest.

According to chief economist Marcelo Ávila, this reduction in interest payments on the public debt represents the equivalent of 22.83 percent of what the government intends to save over the next 20 years as a result of social security reform. "Today's decision amounts to 4.5 years of the savings expected by the government through social security reform," Avila affirmed.

Unemployment

On the wake of good news on the prime rate some neutral news: The unemployment rate in Brazil was 12.8 percent in July, stable in comparison with June (13.0 percent), but 0.9 percent less than in July, 2002, according to information released by the IBGE (Brazilian Institute of Geography and Statistics).

The Monthly Employment Survey indicates that the economically active population increased 5.4 percent in July, in comparison with July, 2002. On the other hand, the average salary for workers was R$ 833.50 (US$ 278), the lowest since October, 2001.

The survey, which covers the six largest metropolitan areas of the country, revealed that the number of unemployed people looking for work in July fell 1.9 percent in comparison with June. The largest declines occurred in Belo Horizonte (-7.1 percent) and Porto Alegre (-8.8 percent). In other areas, the rates were: -4.1 percent in Recife, -2.8 percent in Rio de Janeiro, -1.6 percent in Salvador, and 0.7 percent in São Paulo. Compared with July, 2002, the unemployed population grew 13.4 percent.

Despite the cooling-off of the economy, 618,577 new jobs were created in the country in the last 12 months. This represents a 2.78 percent increase, according to information contained in the General Registry of Employment and Unemployment (Caged), released by the Ministry of Labor. In July alone, 37,233 new jobs arose. So far this year, the cumulative total of new formal positions, with signed working papers, amounts to 598,140.

According to the Caged, the sector in which employment in July rose most was agriculture, with 26,974 new jobs, the sector's best performance since 2000. The explanation behind this rise in agricultural employment is the expansion of the harvest, including exports, in the Center-South.

The service sector, for its part, was responsible for 8,230 new jobs in July. New jobs in commerce and construction came to 7,662 and 3,504, respectively. Manufacturing employment, on the other hand, declined by 9,748 in July, as a result of the negative balance in some sub-sectors. Rubber, hides, and skins, for example, sacrificed 6,779 jobs during the period. For the year as a whole, however, manufacturing presents a positive balance of 118,272 new jobs.

São Paulo was the state in which the largest number of new jobs arose in July: 17,256. Minas Gerais was second, with 5,574. On the downside, Rio Grande do Sul was the leader, with 11,073 fewer positions.

Sad 2002

On the other hand, the year of 2002 was not a good one for the Brazilian non-financial business sector. High interest rates, exchange rate instability, the uncertainty caused by the presidential election and the US invasion of Iraq resulted in 43 percent of the country's top 500 corporations closing out the year in the red.

That is the news in the report on non-financial corporate operations in 2002 by the Brazilian Economic Institute at the Foundation Getulio Vargas (FGV).

The forecast for 2003 is more optimistic. There are good perspectives for reduced interest rates. The stronger real will give corporate balance sheets a boost, even though the outlook is for weaker demand in the second half.

The FGV ranking for 2002 had Petrobras in first, for the eighth consecutive year. Telemar and Telefonica, telecommunications operators, were in second and third, respectively. Vale do Rio Doce was in fourth, followed by Furnas, Brasil Telecom, Embraer, Embratel, Pão de Açúcar and the National Steel Company. The aviation sector had the worst performance, down 47 percent. The energy and telecommunications sectors also had losses in 2002.

Bank to the Rescue

On Monday (18), the Bank of Brazil inaugurated a low-cost line of credit for retirees and pensioners who receive their INSS (National Social Security Institute) benefits through the bank. The program should provide assistance to around two million people.

The loan corresponds to the amount of the monthly benefit, but it should not exceed two minimum wages, equivalent to R$ 480 (US$ 160). The funds are available at once through the bank's 35 thousand automatic terminals scattered across the country. Recipients will have 6-12 months to repay the loans. A 2 percent monthly interest rate will be charged.

According to the Minister of Social Security and Social Assistance, Ricardo Berzoini, who attended the inauguration ceremony, the government is removing all restrictions so that the Bank of Brazil can act with security and good judgment to fulfill its social mission together with its role as a financial institution essential to the country's economy.

The Bank of Brazil also intends to establish credit lines for people who have small savings accounts—between R$ 20 (US$ 7) and R$ 200 (US$ 70)— as well as for people engaged in the informal sector of the economy, through the Popular Bank of Brazil, set up to deal with people who have no proof of income.

 

This material was made available by Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lucas@radiobras.gov.br

 









 
 
 







 



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