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Brazil Grows a Paltry 2.4% in 2005, the Lowest in LatAm

The total wealth produced in Brazil during 2005 expanded 2.40%, as revealed in the Focus bulletin issued today by the Brazilian Central Bank (BC).

Brazil’s Gross Domestic Product (GDP) grew less than anywhere else in Latin America, and the growth rate came to about half the 4.90% registered in Brazil in 2004. It also fell short of the 3.50% forecast made at the outset of 2005.

The disappointing showing is due in part to the decline in last year’s expected growth in industrial production, down from 4.50% to 3.15%, together with weak performances by agribusiness and commerce in general.

Nevertheless, estimates of the ratio between net government debt and the GDP remain unchanged at 51.60%, as they have been for the past ten weeks.

The BC survey, based on interviews conducted last Friday, December 30, with a hundred market analysts and representatives of financial institutions, is betting on a 3.50% increase in the GDP in 2006, as a result of the recovery in industrial production, which is expected to grow 4.05% and help lower the debt/GDP ratio to 50.70%.

When today’s bulletin is compared with the one based on interviews conducted on December 30, 2004, one perceives a generalized dashing of the predictions made at that time.

For a starter, the annualized benchmark interest rate (Selic), which everybody supposed would end 2005 at 16% but turned out to be 18%, with prospects for declining to 15% only at the end of 2006.

The forecasts indicated that the exchange rate of the US dollar would end 2005 at R$ 2.95, but the market drove the quotation down to the level of R$ 2.20, and it was only thanks to the intervention of the BC itself, which entered the market buying dollars, that the US currency was able to rebound to R$ 2.33 at the end of the financial exercise. Today’s prediction for the exchange rate at the end of 2006 goes no higher than R$ 2.40.

Foreign trade was an exception. Both the government and entrepreneurs began last year expecting that the trade surplus (exports minus imports) would not surpass US$ 26.4 billion in 2005, below the US$ 33.66 billion registered in 2004.

But the performance of the sector took everyone by surprise, with the surplus exceeding US$ 44 billion. The market projects a US$ 36.98 billion surplus in 2006.

Agência Brasil

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  • Guest

    But 2.5 % growth is good !
    Just lessen to Lula and his government and how they self acclaim and self congratulate their fantastic achievements.

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