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The global financial crisis is not expected to lead to a major economic downturn in Brazil, a new study has concluded. According to the Organisation for Economic Cooperation and Development (OECD), prospects for the South American country remain favourable in comparison with many other countries.

Indeed, the OECD’s composite leading indicators showed that the nation had experienced a decline of just 2.9 points in the last year. This compares with 7.6 points in the euro area and 8.7 points in the United States. The figures were based on various measures of economic activity, such as output in the industrial sector.

Meanwhile, the Brazilian central bank has polled 100 economists in an attempt to determine the likely rate of growth in 2009, Bloomberg reports. Respondents to the survey predicted on average that the economy would expand by two per cent this year.

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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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Still about the banking situation in Brazil, news come out everyday about new joint-ventures including heavy weights on the public sector – ie. Nossa Caixa and Banco do Brasil. The Financial Times gave a note about the consolidation process running at full throttle in the country.

Brazil’s banks are preparing for a wave of consolidation following this week’s merger of Itaú and Unibanco to create the biggest bank in South America. Brazil has about 150 banks, many of them small players concentrating on a single line of business such as car loans or payroll-linked loans, areas that have grown quickly in line with rising employment and wages.

“Smaller banks have been seeing growth of 30 or 40 per cent a year,” says Ceres Lisboa, banking sector analyst in São Paulo at Moody’s, the international credit rating agency. “That’s over. They’ll have to reinvent themselves.”

Dozens of these smaller banks will be snapped up or forced to retreat into niche markets. Banco do Brasil, the federally-owned bank that was Brazil’s biggest before the latest merger, and Bradesco, formerly the biggest private-sector bank, are expected to scurry for acquisitions as they try to regain their dominance.

Consolidation will be helped by recent government measures to inject liquidity into the banking system as the global financial crisis has unfolded. The process should also be orderly as Brazil’s banking system remains solid, thanks to relatively low levels of lending and the fact little credit is sourced overseas.

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Brazil is perhaps one of the few countries in the world that hasn’t been talking about recession. The R word is not being mentioned in any of the large newspapers in the country. Moreover, Brazil’s economic team will unveil new credit measures for exporters suffering the consequences of the liquidity crunch. “For now, activity levels haven’t come down,” said Finance Minister Guido Mantega. “I believe there will be a slowdown in consumption and in activity level in Brazil. But we will not have a recession.” The main news agencies in Brazil have also reported that the series of measures the central bank has taken to minimize the impact of the crisis in the South American giant and to ease the liquidity crunch started by  investors not willing to take too much risks at the moment. This latest move is aimed at Brazilian exporters.

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