Brazil Tries to Put a Good Face on Bad GDP Numbers

Brazilian real Brazil’s minister of Finance, Guido Mantega, called the latest numbers from the government statistical bureau (IBGE) that showed GDP growth in the second quarter at 0.4%, “…good but not extraordinary.” The minister added that there was clearly a tendency for growth during the rest of the year.

“The numbers we have today are numbers we are looking at through the rearview mirror. It is a result that we left behind. Anyway you look at the numbers, it is a good result, compared to the first quarter. It is not exceptional, but it foretells a tendency for better results in the second half,” declared Mantega.

The minister went on to say that the data indicates an economy that is gradually speeding up and that expectations are that expansion will continue in the third and fourth quarters of the year.

“The next two quarters will be better than the second when the international crisis worsened and exerted a negative influence on performance in emerging nations,” concluded the minister.

The government’s focus on stimulating certain specific economic segments is one of the reasons for sluggish economic growth, says economist, Fernando de Holanda Barbosa Filho, of the Getúlio Vargas Foundation. He calls the 0.4% GDP growth in the second quarter, compared to the first quarter, a weak performance.

“What we have seen over the last year is the government trying to resolve a global problem with surgical measures at localized points. This has not had the globalized effect on the economy that has been hoped for,” Barbosa Filho said.

“It’s pretty disappointing. Last year, everybody bemoaned GDP growth of 2.7%, which will be very good if it happens this year. Estimates are for GDP growth of less than 1.8% – closer to 1.5% than 1.8%,” said the economist.

Barbosa Filho’s formula for growth is more spending at the same time that production costs are slashed. He points to the problem of what is known as the Brazil Cost (Custo Brasil), which consists of a long series of cascading costs that fall on goods made in Brazil as they move to market or export ports making them more expensive, such as taxes, infrastructure, logistics, raw material and labor.

Brazil’s GDP grew 0.4% in the second quarter, compared to the first quarter, rising to 1.1 trillion reais, reported the government statistical bureau (Instituto Brasileiro de Geografia e Estatística – IBGE).

Compared to the same period a year ago, the second quarter of 2011, GDP growth was up 0.5%. In the first half of 2012, compared to the same period in 2011, GDP growth was 0.6%. For the last twelve months, there has been cumulative GDP growth of 1.2%.

In the second quarter of 2012, there was strong growth in the farm sector, up 4.9%. There was average growth in the services sector, up 0.7%. And weak performance in the manufacturing sector, down 2.5%.

ABr

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