World’s Flu Doesn’t Give Brazil Pneumonia Anymore, Says Minister

In an address to foreign investors, Monday, June 5, on the first day of the International Conference of American Chambers of Commerce in Latin America, the president of the Central Bank, Henrique Meirelles, struck a positive note by affirming that Brazilian growth is sustainable.

Meirelles remarked that the country’s growth is secured by greater competitive capacity abroad, through the increase in exports and the economy’s competitive strength, and by domestic market expansion and the growth in the number of jobs, salary mass, and real income.

Furthermore, "the country is much less vulnerable to external shocks, insofar as all the foreign sector indicators have improved," he added.

In his view, the basic message is that the Brazilian economy is growing in a sustained and sustainable manner, on solid foundations. Meirelles emphasized that Brazil is now able to deal with alterations in international moods without plunging into crisis.

"At times in the past, the international market caught a flu, and Brazil contracted pneumonia. Nowadays, the international market catches a flu, and Brazil might catch one, too, preferably a milder form."

Meirelles said that, after suffering from hyperinflation, perhaps "the longest in recent history," the country is growing at a stable pace, with less volatility and the capacity to reap benefits from a sustainable growth trajectory.

According to the bank president, the country is maintaining economic stability, and there is greater predictability, as well as a longer planning horizon. "This lifts the level of investments and enhances the country’s potential rate of growth," he affirmed.

Unlike the period from 1995 to 2002, when an average of 33 thousand jobs were created annually, the average number of jobs generated annually between 2004 and 2006 amounts to 1.3 million,

Meirelles informed. He said that he hopes that the figure for 2006 will be even higher. This April alone, he said, 226 thousand new formal job positions were added.

Inflation Targets

The minister also said that Brazil expects to stick to the path of keeping inflation systematically within the government’s target and lowering average real interest rates.

Meirelles pointed out that when "inflation is on target, investors and the population are inspired not to raise prices above the established target."

This is so, he explained, "because the target will be met, which leads to lower interest rates in consequence of the falling risk premium."

In response to US entrepreneurs who praised Brazil’s economic situation but claimed that a decline in interest rates accompanied by exchange rate stability would enhance confidence and attract more investments, Meirelles informed that Brazil’s overall foreign reserves, which amounted to US$ 15.9 billion in 2003, now total US$ 64 billion, indicating the change for the better that has taken place in the Brazilian economy.

By the same token, the country’s foreign debt, which amounted to US$ 240 billion, now stands at slightly more than US$ 160 billion, of which US$ 70 billion corresponds to government debt.

Exchange Rate

Brazil’s Minister of Development, Industry, and Foreign Trade, Luiz Fernando Furlan, said that the government is thinking about a way to maintain a floating exchange rate that offers fewer risks to investors.

Furlan made this observation at the International Conference of American Chambers of Commerce in Latin America, responding to US entrepreneurs who indicated that exchange rate instability makes it difficult to invest in Brazil.

The minister emphasized that the last few days "are demonstrating that the currency exchange market has already grown calmer." In his view, Brazil is fully capable of easing the mind of investors.

Agência Brasil

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