Forecast for Brazil: 4.5% GDP Growth with 4% Inflation

Brazilian industry The Gross Domestic Product (GDP) of Brazil should grow 4.5% this year in comparison with last year. The forecast is by the Institute of Applied Economic Research (Ipea). The GDP is the sum of all final goods and services produced in the country in a given period.

The Ipea has increased its forecasts since the last estimate, made in June, which was for growth of 4.3% this year. The figures are included in the Ipea Conjuncture Bulletin.

"What we have identified is greater dynamism in the Brazilian economy in the cases of consumption and investment indices," explained Ipea economist Fábio Giambiagi. "What is more important is that the forecasts point at maintenance of this dynamism for next year," he said.

The forecasted growth in family consumption in 2007 was revised from 5.7% to 6.2%, and the Gross Formation of Fixed Capital, which means investment, rose from 9% to 10%. The GDP growth for 2008, however, has been maintained at the same level as forecasted for this year, 4.5%.

According to Giambiagi, this third bulletin of the year has generated a conservative forecast for the growth of the economy due to uncertainty in the agricultural sector, whose forecasted growth dropped from 4.5% to 3%.

"The country GDP may grow more than 4.5%. The news that is being aired by the press shows optimism regarding the agricultural sector," stated the economist.

"But we have taken into consideration that the GDP growth in the second quarter was good for the economy as a whole, in general lines, but very bad for agriculture. This put us in doubt as to the sector performance in the whole of this year, so we decided to be conservative," he justified.

Also according to the Ipea Bulletin, the forecasted industrial growth was increased from 4.3% to 4.8% and in the service sector the figure was raised from 4% to 4.2%.

The Ipea is also forecasting a higher inflation for 2007. The inflation measured by the Wide Consumer Price Index (IPCA) should end the year at 4%. The previous forecast, in June, was for a 3,4% inflation. The Ipea also expects inflation to be 4.3% in 2008.
"In the last three months we had negative surprises brought in from inflation originated in food, which has become a problem for central banks in Brazil and the rest of the world. Food prices, which presented deflation during a few months last year, have already increased by 9% in the last 12 months," said Giambiagi.
According to the Institute, the basic rate of interests, the Selic, is expected to be 11.1%, in the last quarter, against 10.7% reported in the previous bulletin. From January to December, the Selic average should be 12%, a little above the 11.9% projections from the last report.

As for the dollar, the expectation has fallen from 1.99 reais for a dollar to 1.95 reais. The average exchange rate for the year, according to the Ipea, should be 2 reais.


  • Show Comments (19)

  • Swiss Pride

    to Joao da Silva, concerning our little Swiss Pinochio
    Is it conceivable for an investor as well informed as Ch.c, didn’t know that Haitian blue is more of a PROCESS rather than a BEAN qualityÀ¢€¦especially when he claims that he will be successfully farming it ?
    Is it conceivable that Chc with all the knowledge about his new investment that he would had mist the JL HUFFORD heavy sustainable investment to the magnitude of 20,000 farmers involving 24 cooperatives and 23 processing plants in Haiti; for Mr. Chc to make this statement
    **** Blue Haitian coffee, is top quality produced in small quantity, by very small farmers with small land acreages and in hilly lands and in a decrepitated country politically and economically. And in a country decimated year after year with floods and typhoons****
    Is it conceivable to imagine that such a detailed minded man like Mr. Ch.c donÀ¢€™t know that the only requirement of the coffee bean itself for the Haitian Blue coffee is the high altitude of its plantationÀ¢€¦??? (6000 ft.Above Sea Level)
    One may want to ask where exactly in Brazil Mr. Ch.c lands areÀ¢€¦I would hate to think that some Brazilian have sold Mr.Ch.c a few National parks
    (LAUGH LAUGH LAUGH) such as Chapada da Diamantine with 5,249 FT. or Pico da Bandeira National park with 9,488 FT.

    So, Joao da Silva… if it smells like bulls**t… feels like bulls**tÀ¢€¦ sounds like bulls**t… guess what joaoÀ¢€¦

  • Swiss Pride

    hey joao da silva, concerning our “Pinochio” friend Ch.c
    Ohhh yeahhh sure Ch.c bought land in Brazil for half of the valueÀ¢€¦ laugh laugh laugh
    IF it smells like bullshit… feels like bullshitÀ¢€¦ sounds like bullshit… guess what joaoÀ¢€¦

    Please read the full historical facts of the Haitian Blue Coffee below. One can only conclude that this man CH.C is tell you a lie.

    JL HUFFORD American group has total control of the blend from planting location (6000 ft above sea level) to patented methodology (which Haitian Blue is) to in situs state of the art labs processing and drying.
    See insert À¢€œImmediately after roasting the bean, the coffee is packaged into nitrogen-flushed bags. This process forces nitrogen into the package, replacing the oxygen, that would otherwise quickly age the coffee. The nitrogen preserves the wonderful flavor characteristics of fresh-roasted coffee. In the case of flavored coffee, flavor oils are added in a cup-tested proportion such that just the right amount of each flavor is weaved into the bean during the appropriate minutes of roasting.

    . They succeeded, and named it Haitian Bleu. The “blue bean” of Haiti is perfectly balanced, with rich flavor, snappy acidity and wonderful mellow body. This coffee rates as one of the world’s best. Since its introduction, our Haitian Bleu roaster became and still maintains to be the largest distributor of Haitian Bleu in the United States. This coffee is a “Master Roast”, which means it is an exclusive roast – preferred by the vast majority of Americans. 1 lb.

    This goes in direct conflict with your believes of brasil and its À¢€œunfair trading ideology because À¢€¦look what they say À¢€œWe at JL Hufford have always stayed on top of growing coffee trends. We are proud to be a retailer of one of the Midwest’s first large distributions of Certified Fair Trade coffeesÀ¢€Â

    A bit of history about this coffee:From 1990 to 1996, the project spent $5.8 million to help 20,000 farmers belonging to 24 local cooperatives. The project united them into a single federation, which acquired an export license in order to sell the coffee directly to customers abroad. That cut out brokers in Haiti, which increased the farmers’ potential share of profits from their coffee, project managers say. The project helped farmers plant 4,350 acres of coffee. This effort, along with planting new trees on existing plantations, required 5.7 million coffee seedlings, along with nearly a quarter-million plantain plants and 30,500 citrus trees. Because coffee needs moist soil, coffee farmers plant other trees around the coffee to provide shade.Agriculture agents working for the project helped farmers boost production by improving techniques, too. They shared information about properly spacing coffee trees, replacing old trees that have passed their peak years, and other ways to produce more beans on the same land.To launch the project’s second phase, marketing in the United States, the cooperatives also needed new facilities for processing the coffee, a necessary step in meeting the demands of specialty coffee shops. The agricultural institute helped the farmers set up 23 processing plants to wash the beans, sort out only the ripe beans, and then sun-dry them on clean, cement drying beds. The coffee is then sold to exclusive U.S. coffee roasters and then market it.Thanks to CafÀƒ©iÀƒ©res NatÀƒ­ves, A.I.D., and the few exclusive roasters picked to sell Haitian Bleu in the U.S., this coffee has become a success story. Not only have a group of farmers succeeded in producing a world-class coffee that rates with the best, they have done so amidst a sea of political turbulence. The coffee industry has allowed the Haitians to rise above their poverty, political strife and violence in an attempt to control and enrich their lives. 19,000 peasant coffee farmers who have re-created a rare coffee once enjoyed by European Kings.Interesting facts about Haiti:À‚· One out of every six people in Haiti rely on the coffee industry for survival.À‚· Coffee accounts for 30% of Haiti’s products, making it #1.À‚· There are over 145,000 hectares of coffee cultivated in Haiti.À‚· Haitian Bleu coffee is grown at altitudes at over 6,000 feet.

    It would be impossible for you and your group of swiss investors to simply grow and sell À¢€œHaiian Blue Coffee. Period.

  • João da Silva

    [quote]on my Brazilian land !

    It is nothing but a MULTI WIN situation. Buy the land when the price is low, pick a cash crop to grow for a very choosy market,cut the intermediaries (like the “Political Entrepreneurs”) and sell directly to the foreign buyers. My kudos.

    [quote] I bought the land not only because price collapsed, but also because grains prices collapsed too from 2004 to 2006 !

    I though I was one of the few lonely voices saying it,but good to know that there are some more people who share my opinion. This dramatic collapse wiped off lots of small farmers who grew rice in our state,though at the retail level there was no substantial reduction of prices (like so many other products, including Ehtnaol,Sugar,etc;-)

    I presume that your project is being financed from your pocket and with (or without) loans from your bankers in Switzerland and not by BNDES 😉

  • aes

    Quality is never about price, but they are often companions.
    You can always sell quality. However it is often hard to find. There is always room at the top. Well done Ch.c.

  • ch.c.

    To Joao…..on my Brazilian land !
    Of course there are reasons !
    1) I bought undeveloped farm land after it went down 50 %….in 2 years !
    2) I bought the land not only because price collapsed, but also because grains prices collapsed too from 2004 to 2006 !

    Why chose coffee production ?

    1) Brazilian coffee is of low quality produced in large quantity.
    2) Blue haitian coffee, is top quality produced in small quantity, by very small farmers with small land acreages and in hilly lands and in a decrepitated country politically and economically. And in a country decimated year after year with floods and typhoons.
    On top of that, foreigners CANNOT buy large land but it is not important with the reasons given above.

    Therefore producing top quality coffee in decent quantity, in homogenous quality because produced in the same farm by the same people, in levelled land for mechanical harvesting, in irrigated land (center pivots), should produce a very high return, even more so when you bypass most of the local intermediaries and deal directly with the foreign buyers.

    It becomes a WIN WIN WIN WIN WIN situation and not only a WIN or a WIN WIN situation.

    As I said, we even have no need to contact eventual buyers, the word of mouths resulting that the buyers contact us and try to get the most quantity they can get.

    Another simple trick, is that we will not sell our production during the course of a calendar year, but we will have special private auctions that coincide for the buyers to have our products so that they can sell it……AT CHRISTMAS TIME !
    Is it not at Christmas that one sells higher priced goods to consumers …WITH THE HIGHEST PROFIT MARGINS ???????
    And during the course of the year we will only send samples of our production, so that buyers know what is available in the next auctions.

    Right or not ? 😀 😀 😀 😉 😉

  • Ric

    Thank you, aes.

  • aes

    They were both clowns, but Feldman was funny. There is something ordinary about Nestor’s eyes, he lacks the extraordinary-ness of Feldman. . .he is fatter of face as well. There was a joie de vivre in Feldman that is lacking in the Nestor’s, but yeh there is a desperately faint similarity.

  • João da Silva

    [quote]I ask again, does anyone else see in President Nestor, a resemblance to actor Marty Feldman, or am I the only one? [/quote]

    I dont know about the physical resemblance between those two. But let me tell ya, both of them are actors and nothing else.For that matter, all the politicians are actors. I dont know if you were already here in Brazil during the Falkland/Malvina war. Gen.Galteiri used to project himslelf as Gen.Patton (because, the actor George Scott who played the role of Patton resembled him). That was 25 years ago!

  • Ric

    More Simple, There is Not
    I ask again, does anyone else see in President Nestor, a resemblance to actor Marty Feldman, or am I the only one?

  • João da Silva

    Thanks for the explanation and I do appreciate it.

    [quote]Facts are not as rosy as your government repeatidly caress their navel on a daily basis, when comparisons are taken in account.

    You dont have to tell me that. Enough to talk to the “Commoners” with whom I like to interact,because one can grasp the reality of the economy from them!

    [quote]You may as well look and compare with your cousins (that you hate so much, due to your jealousy)……Argentina.

    I have been to Argentina several times when their economy was good and bad and personally I dont feel jealous towards them,not hate them (though I wish the Argentine tourists who come here during the Summer time, would not tail gate ,while I am driving). In fact I would be more pleased if they dont elect NestorÀ‚´s wife as the next President, as it would ensure the “Caudilhismo e Coronolismo”, which the Brasilian electors may come to love and appreciate more and more!!

    [quote]Any other question ? [/quote]

    Yes. In spite of all the problems in Brazil, why did you opt to buy land in Bahia to grow BBC? There must be a very rational explanation for it. No criticisms on my part,but just curiosity 😥

  • aes

    Comparing GDP is meaningless. What is the mean income of the Chinese or the Indian? What does it matter that the GDP increases at a higher rate when the mean income is so low? 10% of $500 is $50. 4.5% of $3,000 is $135.

  • aes

    Gold goes up or down against all currencies. Brazil’s currency has increased in strength between 20-30% against all currencies. If you compare the strength of the Euro to the Real it has increased in strength.

  • ch.c.

    to Joao….with no tirades…ok….but still with some sarcasms !
    1) the measure of a GDP growth of 4,5 % or whatever, is always after inflation.
    2) Inflation of 4 % is ok but still on the high side, when compared to some other developing countries, but lower than some others.
    But certainly nothing exceptional.

    Your 2007 eventual 4,5 % GDP growth is still by far far far….the lowest of the club you belong to (they should expell you) called the BRIC !
    Thus in the league you proclaim yourselves to be, YOU ARE THE LAST ! More simple….there is not.
    And you have been AT THE QUEUE OF THE QUEUE, for 5 CONSECUTIVE years. More simple….there is not.
    And 4,5 % GDP growth will be the second best year after 2004……out of 5 years since Lula was elected.
    And for the last 5 years your GDP growth rate IS NOT EVEN HALF THE GROWTH RATE OF THE OTHER BRIC MEMBERS !

    If you applaude while being constantly at the queue….by a wide margin…..please continue to do so !
    Facts are not as rosy as your government repeatidly caress their navel on a daily basis, when comparisons are taken in account.
    You may as well look and compare with your cousins (that you hate so much, due to your jealousy)……Argentina.
    They beat you hands down, hands up, hands in the pockets or fingers in the nose. More simple….there is not.

    Any other question ? 🙂 😉

  • Ric

    Answer WonÀ‚´t Wash
    Gold throughout the year may be up and down, but in the last four years itÀ‚´s up and up. Most commodities go up and down a little through the month, but gold is up for the month, for the year, for the last five.

  • João da Silva

    [quote] The Real has increased in strength against the dollar over the past ten days. [/quote]

    Do you expect the value of Real to go up further in the coming weeks?

  • aes

    Because it involves averaging vis a vis gold. Gold throughout the year is up and down. The Real though not pegged, parallels the dollar. The Real has increased in strength against the dollar over the past ten days. The Real is 1.85 as we speak. [url][/url]

  • Ric

    How can the Real be a solid deflationary currency if it is as we speak, losing ground to gold along with the dollar instead of maintaining steady with gold and thus gaining in terms of its exchange rate with the dollar?

  • aes

    The real GDP growth is 4.5%. The growth of GDP has nothing to do with the rate of inflation. If you did not buy anything then the rate of growth would merely be the rate of growth. If you buy things that are not effected by inflation then your buying power is still increased by whatever the growth is. The value of the Real has a real value vis a vis other currencies. If the value of the Real were to drop then you could say that the growth in GDP was effected. If you measured the Real by the amount of gold it would buy if the world price of gold remains constant then the amount of gold that can be purchased will increase by 4.5%. As long as the Real remains a solid deflationary currency, backed by fiscal responsibility, increased foreign reserves then the increase in the growth of GDP is meaningful.

  • João da Silva

    [quote]4.5% GDP Growth with 4% Inflation [/quote]

    So, what exactly is the REAL GDP growth?

    Ran out of the battery(Chinese made,of course)for my TI calculator .Do you think you could help me to calculate? No anti Brazilan tirades, please. Just the facts.


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