It’s Time Brazil Depend Less on the US and Raw Material

Brazil mining "Brazil is not in charge of its own economy. When the world does good, Brazil does good." The statement was made by consultant Walter Brasil Mundell during his lecture "The second Lula term in the light of the global scenery: more of the same?", at the headquarters of the Arab Brazilian Chamber of Commerce, in the southeastern Brazilian city of São Paulo.

"Brazil is surfing the world economy," said Mundell, to whom the current Brazilian situation reflects a trend in global economy, particularly in the economy of United States.

The developing countries, according to Mundell, are now benefiting from the increased price of commodities and raw materials, which in turn is driven up by the increase in consumption among Americans.

Brazil is a major exporter of commodities and raw materials. The Americans, says the economist, started consuming more in the beginning of the current decade due to a reduction in interest rates determined by the Federal Reserve (Fed), the central bank of the United States, in order to prevent the onset of a global crisis.

During the lecture, though, the economist expressed uncertainty regarding the continuation of such accelerated consumption in the United States, and spoke of the effects that an eventual slowdown would have on Brazil.

"In the event of a foreign crisis, we will grow even less than we are growing now," said Mundell.

To the consultant, there is "reasonable" chance of a global recession. FED has already increased its interest rate. Americans' savings rate is quite negative, due to the decreasing price of real estate, which is the main investment for Americans.

"When the price of real estate goes down, Americans consume less. Of the total income of Americans, 20% is needed to pay debts, and real estate enterprises answer to 76% of such debts. Americans made fantastic operations aimed at obtaining income from their real estate properties, whose price is now decreasing. The United States banks are already beginning to withhold credit," Mundell claimed.

Prices for imported goods are on the rise, and the country's installed industrial capacity also has a high rate of use. This means that, in order to contain inflation, the United States must increase interests rates even further to reduce credit and consumption.

And how does this affect Brazil? "Americans will consume less. They are the ones who maintain the price of commodities," said Mundell. He also called attention to the fact that when the United States' industrial production decreases, the price of metals around the world decreases as well.

"What will happen if our economy continues to be driven by the price of commodities?," the economist asked the audience attending the lecture. "The more the cost of raw materials increases, the more the real (the Brazilian currency) appreciates against the dollar. Inflation falls because the real appreciates," he explains.

Mundell called for the implementation of reforms aimed at reducing the size of the Brazilian government, so the country can be stronger in the face of an eventual global crisis.

The consultant advocates a lower tax burden, more expenditure in infrastructure, and less expenditure in social security. According to Mundell, 60% of the government's social expenditure is currently in social security, and half the country's Gross Domestic Product (GDP) is informal.

The economist also discussed economic events from other historic periods, such as the 1990s, which led Brazil and the world to its current economic status.

Anba –


You May Also Like

Brazil Celebrating Low Unemployment and High Industrial Output

It was the lowest unemployment rate in Brazil for the month of March since ...

Amid Corruption Charges, Delays, Cost Overruns, Pelé and Romário Lambast World Cup Preparations

According to Brazilian soccer legend Édson Arantes do Nascimento, better known as Pelé, Brazil ...

Ronaldo Practices Alone in Brazil’s First Training Session for World Cup

Ronaldo practiced separately from the rest of Brazil’s squad on Wednesday, May 23,  in the ...

An Ethanol Pump in Every Gas Station Makes Brazil World Leader in Biofuel

Brazil enjoys a privileged position compared with other countries, when it comes to guaranteed ...

Brazil Wants South American Summit to Create Anti-Drug Council

Unasur, the Union of South American Nations, will debate the creation of four ministerial ...

In Brazil, When Things Go Wrong They Just Blame the Press

Salvador, Bahia, commemoration event of the Holocaust organized by the Brazilian Jewish community in ...

Brazilian Senator Concedes: In Congress We’re All Crooks

Following months of claims of corruption practices in the Brazilian senate, senator Demóstenes Torres ...

Brazil’s 10-Years Global Bonds Get BBB- from Fitch

New York and London-based financial rating agency Fitch Ratings has assigned a rating of ...

Brazil and India Cold to G8’s One-Month Deadline for WTO Negotiations

Leaders of the Group of Eight major industrial countries meeting in St. Petersburg, Russia ...

WordPress database error: [Table './brazzil3_live/wp_wfHits' is marked as crashed and last (automatic?) repair failed]