Roaring again: the Latin giant bounces back.

Author:Ogier, Thierry


Most people are still passionate about Brazil. The talk about lost opportunities is widespread, and the contrast with investor friendly and reformist Mexico has become all the more striking in recent months. But the Brazilian economy has proved resilient and become stronger. In dollar terms, it will soon catch up with the United Kingdom again and become the world's sixth largest economy. This may happen as early as next year, and Brazil may become fifth when it overtakes France, an event that could happen in 2016, according to the Economist Intelligence Unit. "Brazil has lost much of its luster after the slowdown in 2011-12, and structural factors will keep medium-term growth outlook to only 3-3.5 percent. However, this performance is still stronger than in the UK and France. And, overtaking these economies will consolidate Brazil's status as an economic superpower," said Robert Wood, Latin America's senior analyst at the EIU in New York. "That said, India will, in turn, in the longer term, overtake Brazil."


There was once a popular comedy entitled No Sex Please, We're British that played for almost 20 years in London's West End. Now, little more than 10 years after the left came to power, local policymakers could easily stage their own play called No Orthodoxy Please, We're Brazilians. For the government that took office in 2003 following Lula's landmark victory, has grown increasingly more confident.

While shrugging off most market criticisms, President Dilma Rousseff has enjoyed record popularity ratings thanks to real income gains and low unemployment, despite high inflation. She looks determined to put Brazil back on the path to growth, following two disappointing years. Her government has made concessions to attract investors and unlock her flagship concession program in infrastructure. But do not expect any Mexican-style structural reform. More than ever, Brazil, which has surfed over the global financial crisis with a certain style, is determined to do things its own way.

First is the development agenda. In very plain words, Rousseff recently explained that boosting economic growth is more important than fighting inflation. "This recipe that seeks to kill the patient instead of curing the disease is kind of complicated," she said after the latest Brics meeting in South Africa. "Am I going to put an end to growth in the country? This is an outdated policy," she declared. To some, this was hardly surprising. "Dilma indeed says what she thinks," said David Beker, chief economist at Bank of America Merrill Lynch in Sao Paulo.

In her election victory speech in October 2011, Rousseff did mention the will to let Brazilian interest rates converge towards international standards, and she later launched a war on bank spreads, while the central bank slashed its benchmark Selic rate (until last March). Rousseff later went on TV to announce cuts in electricity rates, while her government cut taxes on payroll, basic foodstuff and some durable consumer foods. Most of all, officials say the priority is to eradicate poverty. "The target to eliminate misery was completed in March. Thirty-six million people were living in absolute poverty in 2011. But we consider that now they all earn more than 70 reais per month ($35)," said Miriam Belchior, Brazil's planning and budget minister, after the extension of social benefits that are part of the Bolsa Familia program. "To us, it is a matter of great pride, but as the president said, this is only the beginning."

Though financial investors have been taken aback by capital controls and state intervention, some bankers have acknowledged the progress. "The transformation of the past 10 years has been fantastic," said Andre Esteves, chief executive of BTG Pactual, during a recent investors' meeting. More than ever, scale matters. "Brazil's share of Latin America's GDP is equivalent to Mexico, Argentina, Chile, Colombia and Venezuela [together]," said...

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