Brazil’s Minister of Finance, Antônio Palocci, acknowledged that real interest rates are still high on the Brazilian market. But, in his view, a “significant” reduction in these rates has occurred over the last 10 years.
Palocci affirmed that average annualized real interest rates stood at 21.4% in 1997. They declined to 15.8% in 2001 and 2002 and to 13.2% in 2003.
“We are now in the vicinity of 10% real interest rates, which are still high, but they represent the effort Brazil has been making over the years to establish more favorable interest rate conditions for the country’s development,” the Minister told the Economic and Social Development Council at their meeting, November 10.
According to the Minister, the Brazilian government visualizes the process of building long-term, sustainable growth as a construction with foundations, walls, and objectives.
The Minister said that macroeconomic stability represents the foundations of the growth structure.
“All the economic analyses show that there doesn’t exist an example of a country with prolonged growth without macroeconomic stability. On the other hand, it is also important for us not to treat stability as an end in itself, but as the basis of a growth process that requires a set of initiatives and measures on the part of society and the government to promote the most important goal of economic development, which is the enlargement of family income, job creation, growth, and, in a country like ours, a clear commitment to the reduction of poverty and inequality,” he said.
Economic policy, according to Palocci, is reflected in the growth of the Gross Domestic Product (GDP).
The Minister recalled that the GDP declined during the first two quarters of last year, since that was the period when monetary readjustment was strongest.
Nevertheless, Palocci affirmed, the GDP recovered before the end of 2003, and Brazil has had five straight quarters of GDP growth. Over the past 12 months the GDP has grown around 5.5%.
“We are now in the sixth quarter in which the growth indicators remain positive, which is reflected in the increases in production, employment, and the income of workers and Brazilian firms,” the Minister remarked.
The creation of jobs represents another mirror of economic growth, according to the Minister. Palocci referred to IBGE (Brazilian Institute of Geography and Statistics) data that indicate increases in employment rates in the six major metropolitan areas of Brazil.
According to Palocci, the data show that there has been a change in investment behavior in Brazil, setting more store on regions in the interior of the country, where the evolution of the employment rate has been more pronounced.
“This is a structural change, which has to do with the evolution of agribusiness, family farming, adequate funding for these sectors, and the advances in productivity these sectors are attaining in Brazil, as well as in the areas of infrastructure development and the production of industrial inputs, which generally come from the interior,” he affirmed.
Translator: David Silberstein