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Brazilian Analysts Predict Dollar Will Be 2.40 Reais by Year’s End

Brazil’s foreign current account balance for last year – the result of all commercial and financial transactions with foreign countries – has not been closed yet, but the average forecast by economists from the private sector is for a US$ 15 billion surplus.

This estimate is due mainly to Brazil’s excellent US$ 44.7 billion trade surplus (exports minus imports).

The Focus bulletin, released today by Brazil’s Central Bank (BC), containing the financial market’s projections for the chief economic indicators, shows that the trade balance is expected to continue to perform well.

The analysts project a US$ 37 billion trade surplus at the end of 2006, guaranteeing another current account surplus, of around US$ 8 billion.

Everything suggests, therefore, that the analysts included in the BC’s survey believe that Brazil will register a current account surplus for the fourth year in a row, improving the country’s financial health.

This does not translate, however, into confidence on the part of foreign investors, who invested no more than US$ 15.30 billion last year in the Brazilian productive sector and are expected to invest US$ 15 billion this year, according to the estimates reported in the Focus bulletin.

As in previous forecasts, industrial production is expected to grow 3.15% in 2005 and 4.05% in 2006, while the Gross Domestic Product (GDP) – the sum of all wealth produced in the country – is expected to grow 2.40% in 2005 and 3.50% in 2006.

If these predictions stand up, the ratio between net government debt and the GDP is expected to be 51.60%, when the accounts for 2005 are finally tallied, and decrease slightly to 50.70% in 2006.

The Focus bulletin study predicts that the exchange value of the US dollar will be 2.40 reais at the end of 2006 and that the annualized benchmark interest rate (Selic), which is now 18%, will be lowered to 17.50% this month and will continue to drop gradually to end the year at 15%.

Agência Brasil

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