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Brazilian Finance Minister Forecasts Long Growth Cycle for Brazil

Speaking in an interview at the Rio de Janeiro Industrial Federation (Firjan),in Brazil, Brazilian Minister of Finance, Antonio Palocci, declared that based on real income and retail sales data, if the country can maintain economic stability and the flexible monetary policy already installed by the Central Bank, "there is a clear tendency for Brazil to continue on a long growth cycle."

Palocci pointed out that for over two decades the country’s social and economic inequalities were substantially unchanged. "What we now see, not only in our government, is an effort over a period of years that has resulted in a reduction in the difference between the income of Brazil’s richest and poorest. The poverty level has improved, so has the Gini curve," said the Minister.

He went on to say that 2.5 million people have risen above the poverty line, a result of "the work that Brazil is doing."

Palocci admitted that the fight against inflation has been costly, recalling that in 2003 "with an economic crisis the interest rate rose to 25% per year."

He concluded by saying that the Central Bank had to deal with an inflation spike at the end of last year that pushed it up to 8%, but that this year it will be around 5% because of strong monetary policy. "Sometimes it is necessary to pay the price of a rigid monetary policy so we can ensure long-term growth," said Palocci.

Agência Brasil

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  • Guest

    Flexible monetary policy ?
    How can a Minister of Finance says his country has a flexible monetary policy with an 18 % or so Selic rate when inflation is at around 6 % !.

    He forgets to mention that this is the highest real rates after inflation in the world for quite a long time now !

    Is he so proud of the Central Bank achievement ?

    And the poors are better off of 3 % in 3 years, while the wealthy are poorer by 0.9 % as per a recent government report ! Which by the way I doubt because the wealthy invested at no risk with the government during the last three years at an average of around 19 %or so annually. On top of that the stock market, after a big collapse earlier just tripled in value. Finally, the wealthy also got much richer with their real estate in housing and farmlands that boomed during these last 3 years.
    If one had 1/3 in cash, 1/3 in the Bovespa and 1/3 in real estate, an average profit was of 100 %.
    Even the chilly and non risk taker who invested all his money short term with the government would have done a 68 %
    in 3 years assuming a 19 % compound rate of return, without any risk ! NOT BAD.

    Finally, why does he start his speech by talking of “flexible monetary policy” and ends the same speech with “Sometimes it is necessary to pay the price of a rigid monetary policy ” ?

    Quite contradictory, similar to Lula speeches and comments !

    A true joke.

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