By Year’s End Brazil Should Become the World’s Sixth Economy, Surpassing the UK

    São Paulo's Avenida Paulista

    São Paulo's Avenida Paulista Reports from the International Monetary Fund and international private consultants show that at the end of the year Brazil’s GDP will rank sixth in the world and for the first time ahead of Britain’s GDP.  

    Although Brazil’s GDP is only expected to grow 3.5% in 2011, less than originally expected by the government last January, it will total US$ 2.44 trillion, enough to surpass the US$ 2.41 trillion from the United Kingdom.

    The report was published by daily Folha de S. Paulo based on IMF data and the EIU, Economist Intelligence Unit and BMI, Business Monitor International.

    “The fact that the Brazilian economy is overtaking that of the developed countries reflects the effects of the access of large segments of the poor population into the middle class and the consumer market,” said Robert Wood, a US analyst.

    If the growth tendency in Brazil is confirmed in the coming years it is possible that it can overtake all European countries, including Germany by 2020, adds the report published by Folha.

    With its advance in the global economic stage “Brazil tends to have a greater voice in international forums and it is equally important it prepares to adequately assume such a role,” said Rogelio Sobreira economist from the Brazilian Foundation and think tank Getúlio Vargas.

    Europe Crisis

    Brazil’s government says it’s encouraged by Europe’s announcement of a plan to resolve the nagging debt crisis, though more details are needed on the proposal to determine its viability, Brazilian Finance Minister Guido Mantega told reporters.
     
    “The EU meeting advanced an important proposal that now gives us something to work with,” he said.

    After an all-night meeting, last week, European Union leaders said they secured a deal with private banks to reduce Greece’s debt by 50%. They also announced an agreement to expand the size of the Euro zone’s bailout fund, the European Financial Stability Facility, by up to five-fold, suggesting it could provide guarantees for EU member sovereign debt of around one trillion euros.

    Mantega declined to comment at length on the proposals but said he believed they were an important first step toward resolving Europe’s debt woes.

    “The proposed measures are a good start, but it’s unclear if they will be sufficient,” he said.

    The Brazilian finance minister said questions remained about whether all participating creditors would sign on to the deal. However he declined to say whether Brazil would participate in backing for the deal.

    Brazil’s government would begin examining the proposal in depth on Friday, Mantega said, and would prepare to discuss it with counterparts at a meeting of Group of 20 nation leaders in Cannes, France, this week.

    Brazil all along has said it is willing to consider supporting the Euro zone but not directly to the financial stability fund but rather through the IMF.

    Interest Rates Cuts

    Brazil’s central bank said slowing global growth will have a large enough disinflation impact and allow policy makers to carry out “moderate” cuts to interest rates.
     
    The bank, in the minutes to its October 18-19 meeting, said it sees “declining risks” of missing its 4.5% inflation target next year. The inflation rate fell to 7.12% in mid-October, the first decline in 14 months, though it remains above the 6.5% upper limit of the government’s target range.

    “Even with a moderate adjustment in the basic rate, the inflation rate in the relevant horizon is positioned near the 2012 goal,” the bank said in minutes. The report was published hours after European leaders agreed to expand a bailout fund to stem the region’s debt crisis, easing concern that the global economy is heading for recession.

    Policy makers cut the benchmark interest rate a half point for a second straight meeting last week, to 11.5%, to protect Brazil from turmoil that has wiped more than US$ 6 trillion from world stock markets since the end of July.

    The central bank is betting that weaker growth in Europe, the U.S. and China will offset the stimulus provided by lower borrowing costs and curb the fastest inflation in six years.

    Traders are betting on an additional 1.25 percentage point of rate cuts by March and recent data show growth and inflation are slowing faster than expected, bolstering bank President Alexandre Tombini’s case for rate cuts.

    The central bank published a “base scenario,” which assumes that the world economic turmoil has an impact on Brazil a quarter as strong as the 2008 crisis, allowing inflation to slow to 4.5% next year.

    In the reference scenario, which assumes a benchmark interest rate of 12% and in the market scenario, which assumes that the central bank cuts its benchmark rate in line with economists’ forecasts, inflation will exceed the 4.5% goal next year, the minutes show.

    The central bank said that a “tight” labor market would continue to propel demand during the global economic slowdown. Wage increases incompatible with increases in productivity are a “very important risk” for inflation, the minutes said.

    Brazil’s jobless rate was unchanged in September at 6%, the national statistics agency reported Thursday. The economic activity index, a proxy for GDP contracted 0.53% in August from the month before its biggest monthly drop since the global financial crisis of 2008. August retail sales fell the most since March 2009, while industrial production registered its third decline in five months.

    Growth in the world’s seventh-biggest economy will slow to 3.3% this year from 7.5% in 2010, according to the median forecast in the most recent central bank survey.

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    • Show Comments (11)

    • Geraldo Mellone

      Size is not everything
      Brazil is a big economy, but its people is poor. According to IBGE, the average wage in Brazil is only USD 12.500 (see http://migre.me/77zAI). There still a long, but too long way to Brazilian people have a life style and consumption standard as most european countries.

      http://www.brazil-monitor.com

      .

    • Moacir Braga do Nascimento

      Brazil is super power
      Brazil is a new world power. The sixth economy in the world, in [b]NOMINAL[/b] GDP, that is what matters (PPP only has some meaning when talking about per capita income, [b]not[/b] about Total GDP). There are only five economies larger than the Brazilian economy now: USA, China, Japan, Germany and France. In 2012, Brazil will surely overtake France. To overtake Germany, it will take a little more time, but by 2017 I believe Brazil will be the fourth economy in the world, only behind USA, China and Japan. We are a super power. An economic super power. We don’t need to be a MILITARY super power. Japan is an economic super power too, and it is not a military super power. Just like Japan, Brazil will be a great PEACEFUL super power.

    • costinha da costa

      Tony … Up Yours American Excrement
      …………………..

    • costinha da costa

      US Obsessed – The Only Thing this Peckerwood believes in …
      To be a proud banjo-strumming specimen of junkyard genetics.

      [b]Good chimp; have a banana![/b]

      Costinha

      PS: Don’t forget to take the trash on your way out!

    • Luiz Andrade da Silva

      Answer to Tory
      If Brazil’s GDP means nothing, U.S GDP means even less so. It is based mostly on consumption, which is largely based on commercial deficits and borrowed money. Once the US loses its credibility and the rest of the world decides not to prop it up any longer, you will assess what the real position of the USA in the world looks like. By the way, who told you that the commodities bubble will burst? It is not very likely that the Chinese will stop eating. The prices of commodities are here to stay.

    • Tory

      Brazil’s GDP means nothing
      It’s only a number, and one astonishingly tortured by Mantega and his minions. It grows with government “spending” (one should read “wasting”). Has absolutely nothing to do with reality, with actual production. Once the commodities bubble bursts Brazil will be able to assess it’s real position in the world, and it won’t be a nice one.

    • Mikey

      Interesting, could you please elaborate
      There are several ways to measure GDP, could you please elaborate on which was used in this article?

      If you mean GDP as measured by PPP then I can well believe the figures, however if you mean in terms of GDP absolute then I find the figures a little harder to believe. You would be claiming that by mean average Brazilian workers are more than 4 times as efficient as Indian workers. You would also be claiming that UK workers are only 4 times as efficient as Brazilian workers despite our economy being significantly more advanced. It would be nice if you could provide more sources.

    • Luiz Andrade da Silva

      Sorry for my mistake
      I messed it up. I commented on US Observer’s first statement about not believing the numbers of the IMF, but I also commented on India Boy’s assertion that the list doesn’t mention India. I should have made a comment on US Observer’s remark on Latin America becoming belligerant towards the west. So, here it goes: you people tend to say that Latin America is not part of the West. Nothing could be more absurd. Geographically speaking it is more western thant Europe is, since it is part of the Western Hemisphere. Culturally and historically it is as western as the United States, since its history and culture is very similar and analogous to that of the U.S. You may say its culture is not 100% European. To that, I would answer that neither the U.S culture is totally European. Or do you think that rock and roll, for example, which is the quintessence of American Culture, was invented in Europe and not in America by African Americans

    • Luiz Andrade da Silva

      Answer to US Observer
      Stop being ridiculous! Why don’t you believe in numbers released by the IMF just because they make Brazil look good, when you probably believe anything, even if it comes from much less respectful sources, that is detrimental to Brazil. Facts are undeniable and you will have to live with the rise of the country you seem to hate so much. As far as India is concerned, it’s GDP, in nominal dollars, is smaller than Brazil’s. On the other hand, if the PPP (Purchasing Power Parity) method is used, India advances some positions, but other countries lose some positions, which results in more or less the same.

    • india boy

      crap!!!fake list 😛
      this list neither show’s the accurate data nor mentions india in the top 6…….absolutely rubbish….
      even imf will feel ashamed @this list!!!

    • us observer

      bull sh*t
      i don,t beleive this crap about brazil surpassing britain in anything …incidentally venezuela just took over a 700 thousand acre property from a british company by force ….the usa and britain and france and germany will not like this very much …latin america is becoming very belligerent towards the west .

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