Brazil’s Growth Recipe: Exports Up and Inflation Down

Brazil’s Institute of Applied Economic Policy (Ipea) released its Conjunctural Bulletin #68, with revised forecasts for growth in this year’s GDP (Gross Domestic Product).

According to the economist Paulo Levy, Ipea’s director of Macro-Economic Studies, the increase should come to 3.5%, down from the 3.8% predicted in the previous forecast.

With regard to this year’s export volume, on the other hand, the Ipea doubled its growth forecast from 5.1% to 10.2%, in consequence of the dynamism demonstrated by shipments of products abroad.

The institute’s growth forecast for imports was also revised upwards, from 13.8% to 18.9%. The projected trade surplus for this year was raised US$ 3 billion, from US$ 24.7 billion to US$ 27.7 billion, Levy said.

Levy pointed out that the projected trade surplus is lower than the US$ 33.6 billion achieved in 2004.

Monetary Policy

Meanwhile, Minister of Finance, Antônio Palocci, assured that Brazil’s monetary policy is on the right track. He reiterated that the country’s monetary policy is pursuing levels of inflation that will ensure long-term growth and that the government will not abandon this goal.

“Nothing is worse for growth than rising inflation, because, in the first place, it consumes family income, and, in second place, it disorganizes the economy,” he observed.

Palocci affirmed that the quest to keep inflation down preserves family income and guarantees consumption. He pointed out that industry achieved record growth in 2004 and that workers’ incomes also rose.

The Minister contended that these two factors, together with an adequate system of credit, help enable families to consume.

In Palocci’s view, the country is experiencing a moment of favorable investments, and periods of slower economic activity are normal, since linear growth is non-existent.

Translation: David Silberstein
Agência Brasil


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