2007 Forecast: Brazil Will Grow 3.4% and Export Record US$ 150 Billion

Driven by domestic consumption, the Brazilian economy should grow 3.4% in 2007. The growth should be led by industry, to expand by 4.2% next year, which is more than the 4% estimated for agriculture and the 2.4% estimated for the service sector.

The forecasts are presented in the document "Brazilian Economy, Performance and Perspectives," published on Tuesday, December 19, by the National Confederation of Industries (CNI). "The trends for 2007 point to a scenario of moderate acceleration in the Brazilian economic growth rate," according to the CNI survey.

The document states that the industrial sectors to achieve best performances in 2007 should be mining, with an estimated growth of 7.6%, and civil construction, with a forecasted growth of 5%.

"The processing industry should maintain a moderate growth rate, due to the persistence of appreciated exchange rates and the loss of competitiveness against foreign competitors," according to the survey. The processing industry should grow 3.3% in 2007. Family consumption is set to rise 3.7%, and investments 9.2%.

The growth in the world economy, especially in the United States and China, is expected to keep foreign trade going strong in 2007. Given the favorable foreign scenario, Brazilian exports should increase 5.7% in 2007, to reach a record high of US$ 150 billion. The forecast is from CNI technicians.

The document states that the rise in imports is expected to be around 15%, amounting to US$ 107 billion. Given that, the estimated trade balance surplus for 2007 is US$ 43 billion, less than the US$ 45.5 billion forecasted for this year.

In the survey, the CNI technicians claim that the weak dollar will remain as the main obstacle for Brazilian exporters in 2007. The dollar is estimated to be worth 2.25 reais (the Brazilian currency) towards the end of next year, against an average of R$ 2.18 in 2006.

But the depreciation of the dollar against the real should be compensated, in part, by an increase in international prices for Brazilian commodities. In the accumulated result for the last 12 months, up until October, prices have increased 12.4% and accounted for 72% of the increase in Brazilian exports.

During the same period, the foreign sales volume increased only 5.3%, much less than the 11.6% recorded in 2005 and the 17.6% in 2004. "In 2007, lower growth rates are expected from exports," according to the CNI survey.

On the other hand, the depreciation of the dollar against the real will stimulate exports. Imports will also rise, driven by domestic consumption.

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