Despite Infrastructure Woes Brazil’s Economy Is World’s 12th

Brazilian Agriculture, soybeansA Gross Domestic Product (GDP) of US$ 729.6 billion, the 12th position in the ranking of the greatest economies in the world, an investment rate of 19.6% of the GDP in 2004 and exports of US$ 104 billion in the last 12 months.

Last year, the Brazilian GDP increased 5.2% in relation to 2003, the greatest expansion since 1994. The result made the country jump from the 15th to 12th greatest world economy.

According to information from the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, IBGE), the economic growth in 2004 was driven by the industry, the families’ consumption and retaking of investments.

In the industry, durable consumers’ goods (furniture and home appliances) and capital goods (machinery and equipment) were the main sectors.

The carmakers, bus and truck manufacturers registered, last year, an increase in 20.7% more than in 2003. In 2004, the Brazilian companies manufactured 2.2 million vehicles. The sector, however, has the capacity to produce 3 million.

“Not even our current exchange rate, considered unfavourable for exports (the American dollar closed at R$ 2.47 last Friday), is getting in the way of the carmakers,” stated Rogério Mori, economics professor at the Economics School of São Paulo (EESP), of the Getúlio Vargas Foundation (FGV), university in São Paulo.

The automobiles meet the internal demand and are exported mainly to other countries in Latin America. Arab countries are increasing their purchases from Brazil.

Last year, according to information from the Foreign Trade Secretariat (Secex), automobile exports to the region yielded US$ 78.1 million for the companies.

In 2003, it was only US$ 37.3 million. “Exploring new markets has been important to the sector,” added Mori.

Cargo vehicles and busses are also sold to the region. Last year, sales added up to US$ 72.6 million. In total, the Arabs bought US$ 150.7 million in vehicles from Brazil.

Agribusiness

Agriculture continues as the country’s main motor. In 2004, the remainder in the agribusiness trade balance beat records, with a surplus of US$ 34 billion. This year, the performance promises to be even better.

Last February, exports in Brazilian agribusiness totalled US$ 2.7 billion – an increase of 23.4% in relation to the same period in the previous year.

The trade balance registered a surplus of US$ 2.4 billion, since the country imported US$ 384 million. The 2004/05 crop is estimated in 110 million grains.

The positive performance, according to the Ministry of Agriculture, Livestock and Supply is due to, principally, the increase in beef, sugar and alcohol, paper and cellulose, coffee, tea, spices and fruit juices exports, which appear in the list of products the country exports the most.

As well as these, in the ranking of most exported products also are soy, cotton, leather, fruits, cereals, fishes and tobacco. The main destinations are Europe and the United States.

Another two positive factors for agribusiness are the country’s victories in the World Trade Organisation (WTO), which should contribute to increase sugar and cotton exports.

The first dispute was against the European Union (EU). With Australia and Thailand, Brazil beat the Europeans, proving their sugar was subsidised.

The victory comes in figures: refined sugar exports should jump from 3.2 million tons per year to 5.2 million, according to information from the São Paulo Sugar Cane Agroindustry Union (Unica).

With cotton, the story is similar. The fight was against the North Americans, since the producers were receiving subsidies. Brazilians lost about US$ 480 million per year with the advantages given by the United States government to the producers over there. Now, Brazilians may reduce these losses.

Independently from the disputes in the WTO, Brazilian beef exports have been conquering new markets, such as Egypt, which has been a frequent buyer. Brazil has the greatest bovine commercial herd in the world, with 195 million animals. Last year, external sales were of about US$ 2.6 billion.

This year, in April, exports beat a record. The Brazilian meats daily sales average was of US$ 31.841 million. When comparing with April 2004, when the daily average reached US$ 21.601 million, there was an increase in 47.4% in exports.

Losses in Grains

The agriculture sector, however, could have even more profits if it weren’t for the losses caused by infrastructure problems, specially the bad conditions of the roads. A study prepared by the IBGE showed that the grain losses in Brazil reach 10% of the harvest.

The research was made between 1996 and 2003 with the rice, beans, corn, soy and wheat cultures. In this period, the country lost 28 million tons of grains. The greatest loss happened in 2000, when 6.6 million tons were lost.

For these reasons, the infrastructure sector is trying to attract partners. This year, the government approved the Public-Private Partnerships (PPPs).

The law stipulates the general norms for the joint participation of the government and private companies in investments in the infrastructure areas (telecommunications, transports, energy, etc).

The first project should come out before the end of the year and will be in the transport sector.

Barriers

Another barrier to development is the high benchmark interest rate (Selic) of Brazilian economy and the instability of the American currency. This year the 2004 figures will not repeat themselves.

“I believe in an increase in 3%,” states Mori. The deceleration, according to the specialist, is in part because of the increase in the Selic that, currently, is of 19.5% per year.

“Last year, the rate was around 16% good part of the months,” he says.

The rate has been increasing every month since September last year. The government’s reasoning is that the measure helps contain inflation, since the aim this year is of 4.5% and, according to analysts, is currently at around 7%. “The government is pressing to close the year at 5.1%,” states Mori.

The exchange value has also contributed to the deceleration. The rise and fall of the dollar has been causing discomfort among exporters.

“The American currency below R$ 2.70 may destabilize the trade balance,” already say some businessmen in the country.

“The industries of consumer and capital goods, which had good performances in 2004, may suffer losses this year,” states Mori.

Anba

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