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Brazilian Economists Expecting Brazil Economy to Shrink

Street vendors in Brazil This year, Brazil's economy could shrink for the first time in 17 years as the global recession prompts Brazilian companies to cut output and staffing according to a Brazilian Central Bank survey of 100 economists released this Monday, April 6.

The median estimate from the one hundred economists was a contraction of 0.19% this year, down from zero growth a week ago. This coincides with reports from banks such as Morgan Stanley, Deutsche Bank AG and BNP Paribas which also forecast that Latinamerica's largest economy (1.5 trillion US dollars) will shrink this year.

Brazilian industrial production and demand weakened in the first three months of the year after a record contraction in the last quarter of 2008 as the full impact of the world's largest recession since World War II reached the shores of Mercosur main economy.

Brazil's gross domestic product will shrink 4.5% in 2009, Morgan Stanley said in a March 16 research report. BNP Paribas on March 10 forecast Brazil's GDP would shrink 1.5% this year, while Deutsche Bank forecasts a 1% contraction.

In a bid to counter recession, the Central Bank is expected to lower the benchmark interest rate Selic to a record low 9.25% by year- end. On March 11 the bank cut the overnight rate by 1.5 percentage points, the biggest reduction in five years, to 11.25% percent, matching the record low in place from September 2007 through April 2008.

Falling demand has helped rein in consumer prices. Analysts expect consumer prices to rise 4.26% in 2009, less than the midpoint of Brazil's inflation target, according to the median forecast in the central bank survey.

The central bank on March 30 indicated that lower interest rates coupled with rising household income may spark a rebound by year-end. "Recent results show a relative recovery, in the margin of the Brazilian economy," the bank said.

Central bank President Henrique Meirelles on March 25 said that the Brazilian economy should beat forecasts that policy makers view as "pessimistic."

The bank's policy makers said income gains were sustaining retail sales while revising their 2009 GDP forecast to 1.2%, down from a forecast of 3.2% made in December.

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  • forrest allen brown

    lulas buddie at work
    By NASSER KARIMI, Associated Press Writer

    TEHRAN, Iran À¢€“ Venezuelan President Hugo Chavez on Friday ridiculed the G-20 summit’s attempts to deal with the global financial meltdown, saying that capitalism is in crisis and must end.

    Chavez criticized the G-20 nations’ pledges of more than a trillion dollars for lending to struggling countries at Thursday’s summit in London, calling it “the same medicine that’s killing the patient À¢€” a trillion dollars … more money for a bottomless pit.”

    Speaking during a visit to Iran, the Venezuelan leader said the plans by the Group of 20 industrial and developing countries would strengthen “one of the great guilty ones behind the crisis: the International Monetary Fund.”

    The IMF and the World Bank are “tools of imperialism” and must be eliminated, Chavez said.

    In earlier remarks, he also blamed the United States and Britain, calling them “the most guilty” for the financial crisis sweeping the globe because of the financial model “they’ve been imposing for years.”

    “It’s impossible that capitalism can regulate the monster that is the world financial system, it’s impossible,” Chavez told Venezuela’s state TV late Thursday. “Capitalism needs to go down. It has to end. And we must take a transitional road to a new model that we call socialism.”

    Iran’s president, Mahmoud Ahmadinejad, shared that critique, saying “some decisions by the world leaders cannot restore dead imperialism.”

    The two leaders, appearing Friday at the inauguration of joint commercial bank, referred to their nations as the “G-2.” In recent years, Chavez and Ahmadinejad À¢€” both well-known for their anti-U.S. rhetoric À¢€” have boosted economic and political ties.

    The G-20 leaders on Thursday promised $1.1 trillion for lending to struggling countries. They also vowed major efforts to clean up banks’ tattered balance sheets, get credit flowing again, shut down global tax havens and tighten regulation over hedge funds and other financial high-flyers in the U.S. and elsewhere.

    Chavez said the summit’s efforts were not what the world needs “in the face of the great crisis of global capitalism.”

    Chavez’s own economic program to institute socialism in Venezuela could slow as his country’s oil-dependent economy suffers from falling crude prices. Inflation there has soared above 30 percent, eroding Venezuelans’ salaries.

    In his decade in power, Chavez has boosted state control over the economy and spent heavily on social programs meant to increase his popularity.

    http://news.yahoo.com/s/ap/20090403/…K91KKYX69vaA8F

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