Brazil Confounds the Rich

Brazil Confounds the Rich

    From now on, the US and other big players of the international
    trade game will have to negotiate
    with the poorer nations,
    according to Brazil’s Planning Minister, Guido Mantega. He is
    talking about the
    G-22, a group of developing countries led by Brazil,
    which include other powerhouses like India
    and China.



    Brazilian Minister of Planning, Guido Mantega, described as "a normal move by big international market players,"
    the eventual reactions of rich countries to Brazil’s leadership in the G-22 (the group formed by developing countries just
    prior to the V Ministerial Meeting of the World Trade Organization (WTO), in Cancún, Mexico, to defend an end to
    protectionism and subsidies provided to agriculture by the rich countries). "Each country looks out for its own interests, and you have
    to join in blocs, because, if you work alone, you may become weak," the Minister affirmed.

    In his view it was a great idea to create a bloc composed of medium and large countries with great potential, such as
    India, China, and Brazil, to fight on behalf of common interests in world trade. "These are continental-size countries that have
    a great capacity to absorb investments and engage in foreign trade, and this must have been disturbing," the Minister said.
    For him, evidently, the "big" players are attempting to react, but they will have to continue to negotiate.

    Mantega also believes that the Brazilian position, both during and after the encounter in Mexico, will not provoke
    reprisals or a diminution in business transactions in multilateral or bilateral negotiations. "I don’t see any problem. It is a
    normal reaction and will remain confined to the verbal arena."

    The Minister, who gave an address to British businesspeople at the Embassy of the United Kingdom, insisted on
    making it clear that there are two kinds of investors nowadays. One, which he criticized, is very concerned about competition
    from a "Brazil which is gaining markets," while the other considers the country attractive in terms of business prospects,
    offering good chances to make money.

    "(The latter) is an investor who is beginning to realize that here his/her business activities can prosper to a greater
    extent than in the United States and the European Union, where rates of return are lower," Mantega said.

    For the Minister, this is an excellent situation, because investors, when they perceive that Brazil is currently more
    productive in various sectors and should become the world’s largest producer of food goods in the next three to four years,
    will come here in search of profits.

    Slow Growth

    A weekly survey of 100 financial institutions conducted by the Central Bank (BC) projects growth of 0.83 percent in
    the Gross Domestic Product (GDP) in 2003. The estimates in last week’s survey were for 0.94 percent. This is the
    seventh consecutive week in which these estimates were lowered. For 2004, the survey continues to bet on 3 percent growth in
    the GDP, as it has for 39 weeks.

    Projections for the Broad Consumer Price Index (IPCA), on which the government’s inflation targets are based,
    also registered a decline, from 9.61 percent last week to 9.59 percent in this week’s survey, with respect to 2003. For 2004,
    market forecasts were reduced from 6.20 percent to 6.10 percent. The official inflation target for this year is 8.5 percent, and,
    for 2004, 5.5 percent.

    In the opinion of the five financial institutions with the greatest predictive success among those polled for the
    survey, the IPCA forecast for 2003 fell from 9.63 percent to 9.59 percent from last week to this. For next year, these institutions
    continue to predict an index of 6 percent.

    The estimate for the annual prime interest rate (Selic) at year’s end was lowered from 18 percent last week to 17.83
    percent this week. The current rate stands at 20 percent. For 2004, the survey forecasts a 15 percent Selic, for the third
    consecutive week.

    For the third week in a row, as well, there was an increase in the predicted ratio between net government debt and
    the GDP for this year. Since last week, the predicted ratio rose from 55.50 percent to 55.90 percent. According to the BC’s
    last monthly report, issued in July, the debt/GDP ratio stood at 57 percent. For 2004 the market expects this ratio to amount
    to 54 percent. As for foreign direct investments this year, the survey continues to forecast a volume of US$ 8.5 billion, for
    the second week in a row.

    With respect to this year’s trade balance surplus, the market is betting on a figure of US$ 20.40 billion, compared
    with last week’s US$ 20 billion.


    The material for this article was supplied by Agência Brasil (AB), the official press agency of the Brazilian
    government. Comments are welcome at

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