Thanks to a high global demand for agricultural products, ethanol and iron ore and a booming domestic market, the Brazilian economy grew more than 5% in 2007, Brazil's Finance Minister Guido Mantega said Friday, March 8, during a press conference.
President Luiz Inácio Lula da Silva administration reported expansion of 5.7% in the third quarter of 2007, largely because of big gains in the agricultural and industrial sectors. Brazil's IBGE Census Bureau is scheduled to release GDP figures for 2007 next week but Mantega said GDP growth could be estimated between 5.2% and 5.3%.
The Finance minister said that the target for 2008 was 5%. Brazil in 2006 expanded 3.7%. "We already know that it will be more than 5%" he indicated at a meeting of the Institute of International Finance in Rio de Janeiro.
Mantega said the country's industrial output is expected to grow more than the 6% posted in 2007, given the country's increased production of capital goods and rising imports of equipment and machinery.
A domestic spending boom has been fed by higher salaries, easier credit and falling interest rates. Brazil's benchmark Selic interest rate now stands at 11.25%, down from a high of 19.75% in mid-2005. Inflation remains in the range of 4.5% to 5.5%.
Mantega was optimistic about the future and said Brazil is well-prepared if the US economy goes into recession. "The subprime crisis has not reached Copacabana beach yet," he told the meeting at a hotel near Rio's famous beach.
Treasury Secretary Arno Augustin said that Brazil's strong fiscal performance has been supporting the country's economic fundamentals even as international markets deteriorate.
"There is a strong declining tendency in debt to GDP ratios, which has been confirmed even during the current period of international turbulence," Augustin said during a phone conference with investors.
Brazil has a history of frequent boom-bust economic cycles, but many experts believe those trends have been smoothed with orthodox monetary police implemented by the Lula administration.
The Brazilian central bank, relatively autonomous from political influence, has been under the wheel of Henrique Meirelles former Bank of Boston CEO.
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