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In Brazil Recession Is Already History

Brazil cargo train
The economic recovery has already started in Brazil.  The same is also happening in Chile, Colombia and Peru. This according to a report released this Wednesday, August 19, and jointly drafted by Brazil's Getúlio Vargas Foundation and the University of Munich.

The study, however, says that Argentina, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela are still in a recessive phase .

The report adds that overall Latin America is in the midst of economic recovery with good prospects for the coming six months. The Economic Climate Index, ICE, shows the region with a surging tendency in July, close to the four points after having plummeted to its lowest historic record last January with 2.9 points.

The Current Situation Index, ISA, also advanced but remains at an unfavorable level with 2.6 points. However even when "the current situation is bad, prospects for the comings six months can be considered good," adds the report.

The combination of a positive ICE and a poor ISA indicates "the region is abandoning the recessive process and is entering the recovery phase of the economic clock."

Regarding economic climate ranking, Peru leads with 5.3 points followed by Brazil, 4.7; Uruguay, 4.6; Chile, 4.3 and Paraguay, 3.5. The list is based on the average ICE of the last four quarters. Brazil has moved to second place, while Uruguay, Paraguay and Bolivia have lost positions.

Post-Crisis Recovery

The international financial crisis drove Brazil off the path of growth and development that it had been on since 2006. But even though the country has not fully overcome the crisis yet, it is already experiencing a certain recovery, according to the evaluation of the director at the Institute of Applied Economic Research (Ipea), João Sicsú.

To the economist, data pertaining to unemployment rates, to the number of workers hired in the formal labour market, and to industrial production indicate that "we are now in a phase of overcoming the crisis, and should be back in our path of growth and development as early as the second half."

Sicsú claimed that starting in 2010, Brazil is going to be in a "quite acceptable" route of growth and development.

"We need the government to collect taxes and contributions. Development, however, means growth coupled with social inclusion and environmental sustainability," said Sicsú during a debate promoted by the Regional Council of Economics of the State of Rio de Janeiro (Corecon) at its head offices, to celebrate the Day of the Economist.

According to the Ipea economist, Brazil is headed in that direction because it is increasing the coverage and value of the Family Purse (an income transfer program of the federal government), raising the minimum wage, and increasing the scope and value of Social Welfare programs.

Thus, he asserted that 2009 is going to be a year of recovery and that in 2010, Brazil is going back on the path that it had started on in 2006. He pondered, however, that this resumption of growth and development must be accelerated. Measures recently adopted by the federal government aim to do just that.

Among them, he mentioned low-income housing construction program "Minha casa, minha vida" (My House, My Life), the reduction of taxes on credit operations and on certain industrial segments, and the expansion of credit by means of the reduction of interest rates charged by public banks.

Sicsú said that a crisis is always negative, but that it showed how the Brazilian economy is stronger, as it affected other countries in a harsher and more acute manner, whereas in Brazil, the "crash" was much softer.

MP/ABr

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