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Posts Tagged ‘downturn’

The Brazilian govervenment has celebrated today as the country’s GDP has grown to 1.8 percent in the third quarter from the second. These are further signs that the South American country is resisting the global recession.

According to the official statistics agency, IBGE, the expansion of the gross domestic product was faster than the 1.6 percent expansion in the second quarter from the first.

The announcement comes against pessimistic forecasts that saw GDP growing 1.2 percent in the third quarter. Previous estimates were between 0.4 percent to 1.4 percent growth.

According to Forbes NY: “On an annual basis, GDP expanded a robust 6.8 percent in the third quarter compared with the same period in 2007 , after posting a revised year-on-year growth of 6.2 percent in the second quarter. The result was stronger than the the 5.6 percent year-on-year GDP median growth forecast in the Reuters poll. Estimates ranged from 4.2 percent to 6.0 percent.”

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“There are good reasons (…) to believe that Brazil’s economy is resilient to the global financial crisis”. This was the conclusion of Mauricio Cárdenas, Senior Fellow and Director of the Latin America Initiative at Brookings Institution, in an articled published on RGE Monitor. Holding a Ph.D. in economics from the University of California, the analyst has also expressed great optismism for the perspectives of the Brazilian re-industrialization strategy, much due to increasing investment in steel, petrochemicals and defense equipment.

Brazil’s foreign reserves are now $205 billion, four times higher than in 2004. Financial intermediation, though low for developed country standards, is conducted primarily by domestic institutions. Only 30 percent of bank assets are foreign-owned, compared to over 80 percent in Mexico. To the extent that Brazilian banks also have very low foreign liabilities, the economy is somewhat protected from a major credit contraction in international financial markets.

The article is concluded by the assurance that the Brazilian government has learned from mistakes committed in the past.

In fact, the government is launching a re-industrialization strategy, with high investment in steel, petrochemicals, and defense equipment (including construction of its first atomic submarine). Is this going to revive the white elephants of the 1960s and 70s? Probably not. This time around the development strategy in Brazil is carried out by the private sector, with limited support from the government, and much better governance structures than in the past. If these fundamentals can remain strong, Brazil may yet dodge the current global economic bullet.

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