Brazil Economists Cut 2014 Growth Call for Ninth Straight Week

Matthew Malinowski – Bloomberg, 7/28/2014

Brazil economists reduced their 2014 growth forecast for the ninth consecutive week, as policy makers seek to spur demand without further stoking above-target inflation.

Brazil’s gross domestic product will expand 0.90 percent this year, compared with the previous week’s forecast of 0.97 percent, according to the July 25 central bank survey of about 100 analysts published today. The economists’ growth forecast has dropped by nearly half since their 1.63 percent estimate from May 23.

President Dilma Rousseff is torn between the fastest annual inflation in 13 months and weakening growth as she campaigns for re-election. The central bank said on July 24 its strategy does not contemplate a lower key rate as above-target consumer prices will remain resistant. The next day, policy makers announced they would loosen deposit requirements to free up 45 billion reais ($20.2 billion) in consumer credit.

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What’s holding back Brazil?

Otaviano Canuto – Project Syndicate, 2/21/2014

One often hears that Brazil’s economy is stuck in the “middle-income trap.” Since the debt crisis of the 1980’s, Brazil has failed to revive the structural transformation and per capita income growth that had characterized the previous three decades. But, with the right mix of policies, it could finally change its fortunes.

The prevailing explanation for Brazil’s failure to achieve high-income status lumps the country together with other middle-income economies, all of which transferred unskilled workers from labor-intensive occupations to more modern manufacturing or service industries. While these new jobs did not require significant upgrading of skills, they employed higher levels of embedded technology, imported from wealthier countries and adapted to local conditions. Together with urbanization, this boosted total factor productivity (TFP), leading to GDP growth far beyond what could be explained by the expansion of labor, capital, and other physical factors of production, thereby lifting the economy to the middle-income bracket.

Progressing to the next stage of economic development is more difficult, reflected in the fact that only 13 of 101 middle-income economies in 1960 reached high-income status by 2008. According to the dominant view, success hinges on an economy’s ability to continue raising TFP by moving up the manufacturing, service, or agriculture value chain toward higher-value-added activities that require more sophisticated technologies, higher-quality human capital, and intangible assets like design and organizational capabilities.

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J.P. Morgan radically cuts Brazil’s 3Q growth forecast

Kenneth Rapoza – Forbes, 08/19/2013

Brazil cannot cut a break.

It’s hard to find believers out there.

On Friday, J.P. Morgan joined the chorus of banks cutting their outlook on the country’s GDP growth. They reduced their forecast for third quarter GDP from 1.5% to 0.3%. Economists said they were revising their call lower due to a slower than expected economic recovery in the second quarter. Economists Fabio Akira and Cassiana Fernandez said third quarter growth had fallen into an “abyss.”

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Brazil prepares measures to fuel 5% GDP growth, Estado says

Jessica Brice – Bloomberg, 11/27/2011

Brazil’s government is putting together an investment package for 2012 as part of a plan to fuel gross domestic product growth of 5 percent, Estado de S. Paulo reported, without saying where it got the information.

As part of the package, the government may cut taxes on investments in telecommunications infrastructure equipment, the Sao Paulo-based newspaper said. The Ministry of Communications estimates the tax exemption would boost investments by 20 billion reais ($10.6 billion) from 2012 to 2016, Estado said.

The package also includes plans to auction new road and airport concessions, Estado said.

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