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Brazil’s Central Bank Chief See Country on Recovery Path

Bovespa, Brazil's stock exchange Henrique Meirelles, the president of the Brazilian Central Bank said that Brazil is leaving the international financial crisis "in a more favorable situation than most countries," mainly due to the distancing from the epicenter of the crisis, which began in the United States, with immediate impact in Europe and Japan.

In a videoconference at the National Confederation of Industries (CNI), when he spoke to businessmen from the Federation of Industries of the State of Rio Grande do Sul (Fiergs), Meirelles pointed out that "Brazil is in a recovery trajectory," although at a lower level than prior to the crisis, which erupted in September last year with the bankruptcy of North American bank Lehman Brothers.

Contrary to the manifestation of euphoria, the president of the Central Bank alerted that the signaling of recovery in some sectors of the economy, like the concession of credit and the return to foreign investment, still happens slowly and gradually. "We should not confuse this with the end of the crisis. We know that it is not like that, and we still have a lot of space ahead," said Meirelles.

"But there is no doubt that Brazil is also being seen abroad as one of the preferred sites for new investment," he concluded. Apart from the return of foreign funds to the São Paulo Stock Exchange (Bovespa), Meirelles stated that there are negotiations with great foreign investment in national companies and this causes him to believe that the inflow of foreign direct investment (FDI) this year should be around US$ 25 billion.

Meirelles also commented that despite the statement made by the president of the Central Bank of the United States, Ben Bernanke, that the North American economy "is still going to drop a little more, before returning to growth," the stock markets of different countries, including the United States, are anticipating the process of recovery.

As examples, Bovespa rallied 6.59% last Monday, May 4, accompanying stock markets worldwide. On Tuesday, the Stock market rose 0.53%, despite many investors having made use of the rise for profit taking, and Wednesday it rose another 1.64%.

At the same time, the dollar weakened against the Brazilian real over the last few days, with US$ 1 being sold for 2.12 Brazilian reais, causing the Central Bank of Brazil to increase its purchases on the exchange market.

The organization bought US$ 3.412 billion to contain the devaluation of the North American currency and not stunt Brazilian exports. For this, the BC promoted inverted swap auctions, which it had not done since September 2008.

Anba

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