BRAZIL’S BLISTERING GROWTH RATE COULD HAVE ITS DOWNSIDE
By Antonio Guerrero
After enduring a 0.3% contraction in 2009, Brazil’s economy expanded by 7.5% in 2010, according to the country’s government.
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Enjoying the excesses |
The sharp reversal represents the fastest expansion in a quarter of a century and, with GDP reaching $2.1 trillion in 2010,Brazil became the world’s seventh largest economy. Finance minister Guido Mantega noted that, if prices and purchasing power are factored in along with pending IMF and World Bank framework agreements, total GDP would actually be $3.6 trillion, which would make it the world’s fifth-largest economy.Per capita income rose from $10,051 in 2009 to $11,185. GDP growth was driven by a 10.1% and 6.5% expansion, respectively, in manufacturing and agriculture.
The blistering pace of growth does have a downside,warns IMF managing director Dominique Strauss-Kahn, who visited Brazil in March and believes the country’s economy could overheat. Mantega has admitted that last year’s expansion was “excessive.”The central bank raised the benchmark Selic interest rate by 50 basis points, to 11.75% and is slashing spending by $30 billion in the 2011 budget to ease growth.
Despite rumors to the contrary, Brazil’s Petrobras state-controlled oil company,the world’s third largest oil producer by market value, is not eyeing a hike in domestic fuel prices,mines and energy minister Edison Lobao says.The company last tweaked prices in 2009, when it reacted to the economic recession. Analysts say shareholders may still pressure Petrobras, which produces most of its revenue at home, to boost domestic prices. Their efforts may be in vain, as finance minister Mantega chairs the company’s board and the government is likely to oppose fuel price rises.
Brazil’s finance ministry and central bank have joined forces to launch a property price index in response to growing investor interest in the country’s booming real estate market.The new index, will initially track residential and commercial real estate prices in five state capital cities.
