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Finance Minister Betting Brazil Will Be Growing 4% Soon

Volkswagen factory in Brazil Brazil’s economy could grow 2.5% in 2018 and expand at an even faster rate over the following years, the Brazilian Finance Minister, Henrique Meirelles, said at a seminar in Shanghai.

There are US$ 269 billion in investment opportunities mapped out in Brazil for the next four years, Meirelles added, which would help the economy recover from the severe recession is has been going through since 2014.

“The historical trend is for Brazil to have substantially faster growth rates and we will work to have growth back to an average of 4%,” Meirelles said.

The minister attended the seminar along with President Michel Temer in the framework of the G20 summit in China.

Volkswagen factory in Brazil

The investment opportunities in Brazil include concessions of public services and the privatization of state companies, Meirelles said, adding that some of the projects will be detailed later this month by the government.

The Senate dismissed President Dilma Rousseff last week, clearing the way for Temer, interim president since May, to push fiscal reforms and privatizations.

But Temer’s business-friendly agenda faces an uphill battle in Congress in an electoral year, his economic advisers and senior lawmakers have admitted.

Brazil is holding next month municipal elections, after two rough years with the worst recession in seventy years and when there has been a clear erosion of the political system standing for a disenchanted and divided public opinion.

G20 Summit

After his return from China, Meirelles described Brazil’s participation in the G20 summit as a success, adding that investment in Brazil sounds like a great idea overseas. Meirelles was a member o President Michel Temer’s entourage in Hangzhou, where the gathering took place.

“Much interest has been raised in investing in Brazil. That is indeed a promising piece of information, as it shows that everyone believes in Brazil’s recovery and everyone’s ready to consider the idea of investing here. Some countries even plan to further trade negotiations. In short, everything went very well,” he pointed out.

According to the minister, the Brazilian entourage introduced the main topics supported by the country both the international field—like climate and fair dealings in commercial relations. “We also explained what the situation facing Brazil today is like and what we have done, as well as what we’re proposing: to recover Brazil’s economy. Our participation was very important,” he said.

Everyone attending the meetings in China showed interest in what is going on in Brazil, Meirelles reported. “It went very well, and everybody was very interested in understanding exactly what the situation is and what is happening in the Brazilian economy today,” he stated.

The G20 summit focused on building an innovative, collaborative, and inclusive global economy. During the opening ceremony, Chinese President Xi Jinping argued that G20 should change from being a discussion forum to an active mechanism.

Car Sales

Car sales in domestic market increased by 1.4% in August, compared with the previous month. A total of 183,900 units were sold, indicating that growth pace has slowed compared with July, when business increased 5.6%.

From January to August, a decrease of 11.3% was posted compared with the same period in 2015. Compared with August last year, the drop stood at 23.1%.

Data were released by the National Association of Auto Manufacturers (ANFAVEA), representing carmakers in the country.

Data also indicate that the industry reduced revenue last month compared with July 2016, reaching US$ 923.8 million (down 1.9%).

Production also fell 6.4%, or 177,700 units. From January to August, production declined 18.4% and on August 2015, 20.1%.

ANFAVEA’s President, Antonio Megale, pointed out that as the country’s political scenario was defined, it is now “time to move on.” He defended structural reforms, noting that the pension deficit issue is “a time bomb”. For the businessman, the country also has to develop the issue of infrastructure to become more competitive with external market.

According to Megale, the automobile industry has achieved good results in trade agreements with foreign countries, and we must “enjoy this moment and take a turn to compete with the world.”

The Brazilian central bank said that future interest rate cuts will not depend on any single factor, signaling that policymakers are ready to ease monetary policy as inflation expectations improve. In the minutes of its last rate-setting meeting, the bank said all members were satisfied with the progress of disinflation, but remained cautious about high inflation expectations for 2017.

Last week, the bank kept its benchmark Selic rate steady at 14.25% for the ninth straight time in a bid to lower inflation that is near 9%. The central bank then listed conditions for a rate cut, including the persistence of food price shocks, uncertainty around fiscal adjustment measures and a pick-up in disinflation.

The bank also removed previous references to a lack of room to cut rates, as well as a mention to lower private inflation expectations before any changes in policy.

Some analysts, however, interpreted the minutes as signaling that the bank could wait a bit longer to cut interest rates if some of the conditions are not met.

“It is not because some of these factors are materializing that the bank will cut rates. The bank has to be certain that inflation will converge to 4.5% before any cut,” said Alessandra Ribeiro, economist and partner with consultancy Tendências.

Brazil’s president, Michel Temer, has vowed tough economic reforms to rebalance the public accounts and help the central bank slash some of the world’s highest interest rates.

Mercopress/ABr

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It seems the future never arrives in Brazil What Lies Ahead in Brazil? Brazil Has No Exemplary Past or Present. But What Lies Ahead for the Country? Europeans, US, developed country, developing country. Bolsonaro, future B. Michael Rubin For years, experts have debated what separates a developing country from a developed one. The GDP (Gross Domestic Product) of a country is one simple way to measure its economic development. Another way to measure a country's progress is the extent of public education, e.g. how many citizens complete high school. A country's health may be measured by the effectiveness of its healthcare system, for example, life expectancy and infant mortality. With these measurement tools, it's easier to gauge the difference between a country like Brazil and one like the U.S. What's not easy to gauge is how these two countries developed so differently when they were both "discovered" at the same time. In 1492 and 1500 respectively, the U.S. and Brazil fell under the spell of white Europeans for the first time. While the British and Portuguese had the same modus operandi, namely, to exploit their discoveries for whatever they had to offer, not to mention extinguishing the native Americans already living there if they got in the way, the end result turned out significantly different in the U.S. than in Brazil. There are several theories on how/why the U.S. developed at a faster pace than Brazil. The theories originate via contrasting perspectives – from psychology to economics to geography. One of the most popular theories suggests the divergence between the two countries is linked to politics, i.e. the U.S. established a democratic government in 1776, while Brazil's democracy it could be said began only in earnest in the 1980s. This theory states that the Portuguese monarchy, as well as the 19th and 20th century oligarchies that followed it, had no motivation to invest in industrial development or education of the masses. Rather, Brazil was prized for its cheap and plentiful labor to mine the rich soil of its vast land. There is another theory based on collective psychology that says the first U.S. colonizers from England were workaholic Puritans, who avoided dancing and music in place of work and religious devotion. They labored six days a week then spent all of Sunday in church. Meanwhile, the white settlers in Brazil were unambitious criminals who had been freed from prison in Portugal in exchange for settling in Brazil. The Marxist interpretation of why Brazil lags behind the U.S. was best summarized by Eduardo Galeano, the Uruguayan writer, in 1970. Galeano said five hundred years ago the U.S. had the good fortune of bad fortune. What he meant was the natural riches of Brazil – gold, silver, and diamonds – made it ripe for exploitation by western Europe. Whereas in the U.S., lacking such riches, the thirteen colonies were economically insignificant to the British. Instead, U.S. industrialization had official encouragement from England, resulting in early diversification of its exports and rapid development of manufacturing. II Leaving this debate to the historians, let us turn our focus to the future. According to global projections by several economic strategists, what lies ahead for Brazil, the U.S., and the rest of the world is startling. Projections forecast that based on GDP growth, in 2050 the world's largest economy will be China, not the U.S. In third place will be India, and in fourth – Brazil. With the ascendency of three-fourths of the BRIC countries over the next decades, it will be important to reevaluate the terms developed and developing. In thirty years, it may no longer be necessary to accept the label characterized by Nelson Rodrigues's famous phrase "complexo de vira-lata," for Brazil's national inferiority complex. For Brazilians, this future scenario presents glistening hope. A country with stronger economic power would mean the government has greater wealth to expend on infrastructure, crime control, education, healthcare, etc. What many Brazilians are not cognizant of are the pitfalls of economic prosperity. While Brazilians today may be envious of their wealthier northern neighbors, there are some aspects of a developed country's profile that are not worth envying. For example, the U.S. today far exceeds Brazil in the number of suicides, prescription drug overdoses, and mass shootings. GDP growth and economic projections depend on multiple variables, chief among them the global economic situation and worldwide political stability. A war in the Middle East, for example, can affect oil production and have global ramifications. Political stability within a country is also essential to its economic health. Elected presidents play a crucial role in a country's progress, especially as presidents may differ radically in their worldview. The political paths of the U.S. and Brazil are parallel today. In both countries, we've seen a left-wing regime (Obama/PT) followed by a far-right populist one (Trump/Bolsonaro), surprising many outside observers, and in the U.S. contradicting every political pollster, all of whom predicted a Trump loss to Hillary Clinton in 2016. In Brazil, although Bolsonaro was elected by a clear majority, his triumph has created a powerful emotional polarization in the country similar to what is happening in the U.S. Families, friends, and colleagues have split in a love/hate relationship toward the current presidents in the U.S. and Brazil, leaving broken friendships and family ties. Both presidents face enormous challenges to keep their campaign promises. In Brazil, a sluggish economy just recovering from a recession shows no signs of robust GDP growth for at least the next two years. High unemployment continues to devastate the consumer confidence index in Brazil, and Bolsonaro is suffering under his campaign boasts that his Economy Minister, Paulo Guedes, has all the answers to fix Brazil's slump. Additionally, there is no end to the destruction caused by corruption in Brazil. Some experts believe corruption to be the main reason why Brazil has one of the world's largest wealth inequality gaps. Political corruption robs government coffers of desperately needed funds for education and infrastructure, in addition to creating an atmosphere that encourages everyday citizens to underreport income and engage in the shadow economy, thereby sidestepping tax collectors and regulators. "Why should I be honest about reporting my income when nobody else is? The politicians are only going to steal the tax money anyway," one Brazilian doctor told me. While Bolsonaro has promised a housecleaning of corrupt officials, this is a cry Brazilians have heard from every previous administration. In only the first half-year of his presidency, he has made several missteps, such as nominating one of his sons to be the new ambassador to the U.S., despite the congressman's lack of diplomatic credentials. A June poll found that 51 percent of Brazilians now lack confidence in Bolsonaro's leadership. Just this week, Brazil issued regulations that open a fast-track to deport foreigners who are dangerous or have violated the constitution. The rules published on July 26 by Justice Minister Sérgio Moro define a dangerous person as anyone associated with terrorism or organized crime, in addition to football fans with a violent history. Journalists noted that this new regulation had coincidental timing for an American journalist who has come under fire from Moro for publishing private communications of Moro's. Nevertheless, despite overselling his leadership skills, Bolsonaro has made some economic progress. With the help of congressional leader Rodrigo Maia, a bill is moving forward in congress for the restructuring of Brazil's generous pension system. Most Brazilians recognize the long-term value of such a change, which can save the government billions of dollars over the next decade. At merely the possibility of pension reform, outside investors have responded positively, and the São Paulo stock exchange has performed brilliantly, reaching an all-time high earlier this month. In efforts to boost the economy, Bolsonaro and Paulo Guedes have taken the short-term approach advocated by the Chicago school of economics championed by Milton Friedman, who claimed the key to boosting a slugging economy was to cut government spending. Unfortunately many economists, such as Nobel Prize winner Paul Krugman, disagree with this approach. They believe the most effective way to revive a slow economy is exactly the opposite, to spend more money not less. They say the government should be investing money in education and infrastructure projects, which can help put people back to work. Bolsonaro/Guedes have also talked about reducing business bureaucracy and revising the absurdly complex Brazilian tax system, which inhibits foreign and domestic business investment. It remains to be seen whether Bolsonaro has the political acumen to tackle this Godzilla-sized issue. Should Bolsonaro find a way to reform the tax system, the pension system, and curb the most egregious villains of political bribery and kickbacks – a tall order – his efforts could indeed show strong economic results in time for the next election in 2022. Meanwhile, some prominent leaders have already lost faith in Bolsonaro's efforts. The veteran of political/economic affairs, Joaquim Levy, has parted company with the president after being appointed head of the government's powerful development bank, BNDES. Levy and Bolsonaro butted heads over an appointment Levy made of a former employee of Lula's. When neither man refused to back down, Levy resigned his position at BNDES. Many observers believe Bolsonaro's biggest misstep has been his short-term approach to fixing the economy by loosening the laws protecting the Amazon rainforest. He and Guedes believe that by opening up more of the Amazon to logging, mining, and farming, we will see immediate economic stimulation. On July 28, the lead article of The New York Times detailed the vastly increased deforestation in the Amazon taking place under Bolsonaro's leadership. Environmental experts argue that the economic benefits of increased logging and mining in the Amazon are microscopic compared to the long-term damage to the environment. After pressure from European leaders at the recent G-20 meeting to do more to protect the world's largest rainforest, Bolsonaro echoed a patriotic response demanding that no one has the right to an opinion about the Amazon except Brazilians. In retaliation to worldwide criticism, Bolsonaro threatened to follow Trump's example and pull out of the Paris climate accord; however, Bolsonaro was persuaded by cooler heads to retract his threat. To prove who was in control of Brazil's Amazon region, he appointed a federal police officer with strong ties to agribusiness as head of FUNAI, the country's indigenous agency. In a further insult to the world's environmental leaders, not to mention common sense, Paulo Guedes held a news conference on July 25 in Manaus, the largest city in the rainforest, where he declared that since the Amazon forest is known for being the "lungs" of the world, Brazil should charge other countries for all the oxygen the forest produces. Bolsonaro/Guedes also have promised to finish paving BR-319, a controversial highway that cuts through the Amazon forest, linking Manaus to the state of Rondônia and the rest of the country. Inaugurated in 1976, BR-319 was abandoned by federal governments in the 1980s and again in the 1990s as far too costly and risky. Environmentalists believe the highway's completion will seal a death knoll on many indigenous populations by vastly facilitating the growth of the logging and mining industries. Several dozen heavily armed miners dressed in military fatigues invaded a Wajãpi village recently in the state of Amapá near the border of French Guiana and fatally stabbed one of the community's leaders. While Brazil's environmental protection policies are desperately lacking these days, not all the news here was bad. On the opening day of the 2019 Pan America Games in Lima, Peru, Brazilian Luisa Baptista, swam, biked, and ran her way to the gold medal in the women's triathlon. The silver medal went to Vittoria Lopes, another Brazilian. B. Michael Rubin is an American writer living in Brazil.

Brazil Has No Exemplary Past or Present. But What Lies Ahead for the Country?

For years, experts have debated what separates a developing country from a developed one. ...