World Crisis Won’t Stunt Brazil’s Growth, Says President Lula

zzz The president of Brazil, Luiz Inácio Lula da Silva, underscored the good indicators of the Brazilian economy in spite of the world crisis and soaring food prices and said his administration's policy is to increase production to combat inflation.

"The Brazilian economy is showing strength and sustainability and I think we are going to continue growing even with this inflation caused by food prices, worldwide, which is most fluid," said the president during his weekly broadcast Café com o Presidente (Breakfast with the President).

"In Brazil we have decided that the best remedy to combat inflation is increasing production. That is why we will continue to promote agriculture," he added.

Brazil is one of the world's leading suppliers of food but international prices have hit the domestic market forcing the Brazilian Central Bank to tighten credit with higher interest rates. Possibly the highest in the world with the basic rate at 13% and inflation estimated in 7%. Compare this with the US where the Fed rate stands at 2% and retail inflation is close to 5%.

Private economists in Brazil expect inflation in the range of plus 6.7%, higher than the latest target of the Central Bank, 6.5%.

Lula in his broadcast pointed out that Brazil has record numbers in job creation and in certain sectors of the economy such as agriculture and construction. In the first six months of the year Brazil generated 1.3 million new formal jobs. which represent a 5% increase over the same period a year ago. He also pointed out most of the jobs were created outside the main urban areas given the very intense expansion of farming and investments in infrastructure and construction.

But in spite of Lula's optimism, Brazil posted a wider-than-expected current account deficit in June as companies nearly doubled profit remittances abroad because of a strong domestic currency, according to data released by the Central bank on Monday.

The deficit reached US$ 2.6 billion in June compared with a 539 million surplus in the same month of 2007. In May, Brazil posted a current account deficit of US$ 649 million, according to previously reported central bank data.

The deficit should widen to US$ 2.8 billion in July, said Altamir Lopes, head of the central bank's economics department.

Multinational companies in the country sent US$ 3.4 billion in profit and dividends abroad, compared with US$ 1.75 billion in June 2007, as gains in Brazil's currency made it cheaper to buy dollars.

Brazil's currency Real has gained nearly 13% against the US dollar so far this year after surging more than 20% last year. The strong real has fueled a surge in imports, cutting the country's trade surplus and affecting Brazil's external accounts.

Foreign direct investment in Brazil fell to US$ 2.72 billion in June from US$ 10.3 billion in the same month in 2007. FDI is forecast to reach US$ 3.2 billion in July, Lopes said.

Risk Is Up

Brazil and Mexico risk ratings dropped nine and six points respectively while Argentina's climbed ten, according to the EMBI index from the US JP Morgan bank reported this Monday the Mexican Finance ministry.

On July 25th, Mexico's rating stood at 165 points, Argentina's at 609 and Brazil's at 217, according to the report.

The risk rate is an indicator used to assess the economic stability of a country and its capacity to accomplish financial obligations.

The percentage number is the difference in quotation between the sovereign debt instruments issued by different countries and those of the US Treasury measured in hundredths of percentage point.

The EMBI index from JP Morgan shows the evolution of yields from those debt instruments which are traded in international markets, issued by 19 emerging countries.



  • Show Comments (15)

  • dnbaiacu

    Hey,, we are almost in real time here 😀 😀 😀 😀
    I am going to check it out now.. I saw him on the Brazilian shoe thread.. This should be good. 😉

  • dnbaiacu

    Just what thread is “Lord Augustus” on? I can’t wait to see it! I was out of the loop for a minute. So I may have some searching to do.

  • dnbaiacu

    All is and went well on the trip.. I was told that “Lojas Tem Tudo” should have it. I will have to check on the next trip. And I will never go one month after another. Way too exhausting. I don’t want to see Bahia until October at the earliest.
    [quote welll…..I agree with you 99 % only. [/quote]

    Can you believe that?!! 😉 I was estatic! I must be learning these days to merit some kudos from Ch.c
    Not as accurate as I should have been by business standards though? Its funny how things change so fast. I was referring more to the general public . They are usually late at picking up when a boom period is over or technically “never was” .

  • dnbaiacu

    Good points by Ch.c
    It’s true Lula is an undercover crook. Now that it is revealed he has always supported and promoted UnaSur (SAU)
    [quote]yESSSSS……..the central bank said Brazil posted a record current-account deficit in the first half of the year. The deficit, the broadest measure of trade in goods and services, rose to $17.4 billion in the first six months of 2008, the central bank said in a statement !!!!
    Funny this was not really published in Brazilians medias ! Guess why,,,,with Bin the Crook at ther helm of your boat[/quote]
    Hopefully many aren’t believing the hype. But of course most will.
    Lula is being pimped by much larger international forces. But for nationalistic purposes has to convince Brazilians that there is some new bright future on the horizon.. At least for the rest of his term. The truth is the best days for Brazil are NOW,, short term.. enjoy them while they last. All the while avoiding the credit/debt trap.
    South America was annexed May 23rd with Brazil leading the way.
    Parabems! 😉

  • João da Silva

    Hi Dnb,

    Check [url][/url]

    Both are about to commence a mortal combat 😀

  • Ossy

    Doha Collapse was healthy
    Past agreemtns were simply offering access for a couple of islands to ship bananas. The globalziation struck. Now countries have to negotiate with the shirtless owners of the natural resources. They don;t know ho to to this. Couple with that with naive negotiators that think that developee countries have wheel barrows full of money. They don’t! Add to that worng timing. US faces an election and is not in the mood to make the life toughen for their farmers trated to easy money. Europe? Forget Europe. Those countries have electoral corrals that depend on money doled out every year, a favor that’s paid back woth votes. But tthis is not going to last much longer. The market will teach them a lesson.

  • João da Silva

    [quote]I was estatic! I must be learning these days to merit some kudos from Ch.c [/quote]

    Hi Dnb,

    Glad that you got back to Texas in one piece. I am happy to inform you that there is a rookie blogger who goes by the name “Lord Augustus” who has challenged Ch.c for a duel.Of course, Ch.c tucked his tail behind his hind legs and ran away. It is very funny that the good Lord Augustus and Ch.c are agreeing on all the issues under discussion. I suggest you read the comments of “Lord Augustus” and give us all a feed back.

    btw, he is another good Brasilian.


    IT already has, Food Prices are higher than last year.
    Electric is more costly, petrol is more, real estate prices have slumped.
    A home down the street built by the same builder same year just sold for 24% less than our home cost last year. Both were new never lived in. This Guy needs to pull his head out of where ever he got it shoved.

  • João da Silva

    May be off topic a bit. I read the news about the “Collapse” of the Doha round of talks in Geneva in the following link:


    According to what I understood, U.S., China and India could not come to an agreement. What is your analysis? Clue us all in.

  • João da Silva

    [quote]Brazil best days…were yesterday (2006-2007), not NOW as you suggest. [/quote]

    Ch.c has a point there. I think he is reminding you of what you said of year 2008 in your previous comments.

    Good to see you back from BA. Did ya get to find the concrete stain?

  • Ossy

    misplaced US investment
    “too much of AmericaÀ¢€™s global infrastructure À¢€“ physical stock, workforce, research and development expenditures, foreign affiliate sales, and profits À¢€“ is sunk in the slow-growth, high-wage, mature markets of Europe, Japan and the developed nations in general. Conversely, too little of AmericaÀ¢€™s global assets are in the robust, demographically favourable markets of the developing nations. As a result, if the developing nations À¢€“ with their burgeoning middle classes and huge infrastructure needs À¢€“ represent the future, then many US companies are not ready for the future.

    This is a lesson! Forget the minnows! Seek the majors!,Authorised=false.html?_i_location=

  • Ossy

    Brazil growth saving the US
    We have long decoupled. Americans should be praying forBrazil not to stunt. Dell, HP, Caterpilar, Ford, GM… All large American companies that are not in worse shape because of the sales they are doing in Brazil. The future of the US is “Japanization”: provide cheap capital, technology in the hope that the emrging markets keep buying. Look to Toyota! Cheap JPY driving sales abroad. Yen carry-trade providing cheap capital. That’s the way it should be done.

  • ch.c.

    welll…..I agree with you 99 % only.
    Brazil best days…were yesterday (2006-2007), not NOW as you suggest.

    And yess South America was annexed May 23rd with Brazil leading the way….with the new club UNSURE ! smile

    May be that is the true reason behind the facts that both Brazil and Venezuela are sharply increasing their purchases
    of arms !!!
    Venezuela want to defend itself against the invasion from….Brazil.

    As to the debt trap, I agree only partially, Brazil being not that much indebted, also have debts too high.
    The trap is in the interests rate offered by the generous government, paying the second world highest rates….after inflation.
    Brazil ranked first for years, second was Turkey.
    Now Turkey “shines” with their base government rates at 7,55 % above inflation and Brazil at around 6,7 %….for the time being !

    Now Bin the Crook already announced there will be budgets cuts. Of course in the budgets available for the whole society :
    Infrastructures, healthcares, social programs.
    But I bet there wont be a budget cut in the government spending…..for their well being !!!

    Guess who is cornered ? the Brazilian society…..not those in control of your purses, because taxes are paid by…YOU the society, but you get very little in return, since the many political gangs controlling the country are already taking care of themselves….in priority….both with laws THEY vote and with the behind the scenes…..CORRUPTION !!!

    Viva Bin the Crook and his 4000 thieves and liars.
    They get you in your back and most brazilians beg for….MORE.

    😀 😉 😀 😉 😀 😉 😀 😉

  • ch.c.

    And what is said….
    “But in spite of Lula’s optimism, Brazil posted a wider-than-expected current account deficit in June “
    is only part of the real story….preciously hidden :

    For the first six months of 2008 Brazil has THE WORST EVER….CURRENT ACCOUNT….DEFICIT !!!!!

    yESSSSS……..the central bank said Brazil posted a record current-account deficit in the first half of the year. The deficit, the broadest measure of trade in goods and services, rose to $17.4 billion in the first six months of 2008, the central bank said in a statement !!!!
    Funny this was not really published in Brazilians medias ! Guess why,,,,with Bin the Crook at ther helm of your boat.

    Or said otherwise, the trade surplus in goods is shrinking and the trade deficit in services is increasing !!!

    Viva Brazil
    😀 😉 🙁

  • ch.c.

    “his administration’s policy is to increase production to combat inflation.”
    With heavy government subsidizes…to ALL Industries….not only agriculture !!!
    Even the exports are subsidized, not only the production of goods.

    May be he should reduce Brazilian oil prices…which is already 30 % below free market prices.
    Reduce the interests rates, one of the world highest….after inflation.
    No longer the world highest rates before Turkey but now after Turkey !
    Ask any entrepreneur what are his bank borrowing rates.
    Ask any entrepreneur what is the costs to their company…..your endless bureaucraty, add the red tapes costs of these administrative bureaucrats plus the additional cost of the company added workers needed to fill the endless forms.

    That is the base…of your inflation…when compared with the inflation rate in more developed and better managed countries.

    Lack of infrastructure for the transportation of goods also add to costs, therefore to inflation.

    Corruption practices for which Brazil excels is also a cost….producing inflation.

    Ohhhhh may be Bin the Crook should tell Cia Vale to reduce their iron ore prices.

    😀 😉 😀 😉

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