Brazil’s Industry Outputs Shrinks. High Interests and Low Dollar Are Blamed.

Brazilian industrial production dropped 2% last September  compared to August and 0.7% in the third quarter against the second quarter according to the latest release from the Brazilian Geography and Statistics Institute, IBGE.

September industrial production was just 0,2% above the same month in 2004, recording the lowest expansion since September 2003.

IBGE numbers confirm fears of the Brazilian Industry Conference, CNI that manufacturing and factory production in Brazil has began to slow down after several months of sustained expansion.

IBGE and CNI coincide that interest rates, the highest in several years, with a minimum rate of 19.75% had a direct impact in industrial production and consumers’ access to credit. Although the Brazilian Central Bank eased its tight money policy last September it will take time to reach the market.

CNI also blames the poor performance of industry on the strong appreciation of the Brazilian currency, real, which at the beginning of 2005 was exchanging at 2.6 to the US dollar but has now soared to 2.19 to the US dollar.

"This has a double impact, it reduces Brazilian exports competitiveness and makes imported industrial goods cheaper," said a CNI spokesperson.

However in spite of the third quarter retraction, overall industrial production in the first nine months of 2005 stands at 3.8%, and 4.4% in the last 12 months to September. But the percentage was 5.1% in the last 12 months to August.

CNI numbers also show that industrial sales in real value dropped in September for the third month running and industrial capacity was operating at 80.1%, the lowest since October 2003.

Non perishable consumer goods such as automobiles saw production fall 8.9% last September compared to August, accumulating a 17% retraction in the third quarter.

Similarly production of consumer goods such as apparel, footwear and food contracted overall 3.4% in September.

This article appeared originally in Mercopress – www.mercopress.com.

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