[R-G] Yet Another Celebration of Slow Growth in Brazil + A Booming Brazil? Just Another Myth Created by the Press

[Yoshie Furuhashi]

<http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=07&year=2008&base_name=yet_another_celebration_of_slo>
Yet Another Celebration of Slow Growth in Brazil

Brazil is a large country with a population of more than 190 million
people. For this reason it is a position to command attention in world
politics. It does not have an especially robust economy, in spite of
efforts by the media to tell us otherwise.

The NYT gives us another story
<http://www.nytimes.com/2008/07/31/world/americas/31brazil.html> today
touting the success of Brazil's economy. While its economy has been
performing better under the current administration than it did in the
80s or 90s, its economy has still not been growing rapidly in
comparison with successful developing countries.

Countries like China, India, and Russia, with whom Brazil is often
compared, have enjoyed per capita GDP growth of more than 7 percent
over the last 6 years. By comparison, Brazil's per capita GDP growth
has averaged just 2.5 percent over this period. This rate of growth is
weak for a developing country and makes Brazil one of the slower
growing countries in Latin America over this period. While its growth
rate exceeded that of Mexico (2.0 percent), it is well behind the
growth rate of Argentina (7.5 percent), Chile and Columbia (both 3.6
percent), and Peru (4.9 percent).

It would be helpful if the media would do a better job of putting
Brazil's growth rate in perspective.

--Dean Baker

<http://www.brazzil.com/articles/194-july-2008/10087-a-booming-brazil-just-another-myth-created-by-the-press.html>
A Booming Brazil? Just Another Myth Created by the Press   	
Written by Daniel Torres
Thursday, 24 July 2008 04:43

The international media is infatuated with the Brazilian economy.
Almost every week there is a new article adulating the Brazilian
economic 'miracle.' Although these newspapers make accurate claims
they also tend to frequently embellish the truth.

A good example is in a recent online article published by The Guardian
South American correspondent Rory Carrol, on Brazil, stating that,
"Fiscal prudence and market-friendly policies have delivered economic
stability and solid, if unspectacular growth (1)."

The assertion that Brazil's economy, under Lula, experienced "solid,
if unspectacular growth" lacks merit with no statistical evidence to
support such claims but such statements are frequently touted by most
mainstream newspapers.

Many articles are correct to note the improvements to the economy. A
growing number of Brazilians are purchasing goods on credit
stimulating economic activity in various sectors. The minimum wage is
growing and prices are relatively stable. Most of the economic
improvements have been relegated to the external economic sector.

Unfortunately, this sector is distant from the reality of average
Brazilians. The stock market and financial market have undergone
spectacular growth led by the rapid infusion of foreign investment.
The growth in the financial sector does not in correlate to the
increase experienced by the Brazilian economy.

Since 2003, the export-led economy produced very strong results. For
the first time in its history, Brazil holds slightly less than 200
billion dollars in its foreign reserves far surpassing its total
external debt (2). Brazil is a net creditor (3).

The Lula government made early repayments to both the IMF and to the
Paris Club. In 2007, Brazil had 64 Initial Public Offerings (IPOs)
raising US$ 42.8 billion with much of inflow originating from abroad.
Since 2002, the São Paulo stock exchange, Bovespa, grew by 1,250
percentage points (4). Recently, Bovespa surpassed the 70,000
benchmark for the first time ever. Even CNN's news ticker mentioned
this historic feat.

For the past five years the trade surplus has comfortably exceeded US$
35 billion helping to push the current account from deficit to
surplus. The risk of default on Brazil's external debt has dropped to
historically low levels (5). Last year, international investors sent
Brazil over US$ 35 billion in foreign investment.

The international debt agencies, of Fitch and Standard & Poor's,
raised Brazil to the safest "investment grade" level securing it a new
reputation as a low risk place for international investors (6).
Petrobras, Vale do Rio Doce, and Embraer are just three Brazilian
multinationals active in the global economy of today.

These achievements did not go unrecognized by the likes of the Los
Angeles Times. Like the Guardian article, it extols that, "After
several boom-and-bust cycles in recent decades, Brazil is in the midst
of its best sustained economic growth since the 1970s." Brazil's
economic growth rate in the 1970s averaged 7 to 8% per year, a number
almost three times the current economic growth rate. More importantly,
Brazil is not experiencing a sustained economic growth worth noting.

The author goes on to write that, "Economic growth will come in at 5.3
% this year, lower than the hemisphere's 5.7%, but quite a feat for a
country that over the previous 10 years averaged only 2.5% annual
expansion" (7). Although the figures cited are accurate, it provides a
distorted impression that an economic boom is taking place by using
the economic growth figure for only one year.

The article then recites how the financial-stock sector boom is
developing rapidly, which is true and positive, but it only furthers
the perception that a new Brazilian miracle is occurring. Surprisingly
absent is what percentage of Brazilians own stocks or how many
purchased IPOs last year? I wonder why these figures are missing?

By noting these improvements many journalists logically conclude that
Brazil's economy is entering a period of unprecedented growth. For the
financial sector, it is undeniable that there is growth bringing about
relative economic stability but there is another economy, arguably
more important, that is at best stagnant. A closer assessment of
Brazil's internal, or domestic, economy is seriously lacking. The
belief that economic growth is expanding rapidly is mistakenly absent.

The economic truth is more somber. Since 1996, economic growth has
been mired in a cycle of one year boom followed by years of
stagnation. The external accounts, frequently touted as success by
Western journalists, are beginning to show signs of fragility. Also,
the lack of serious investment in the future deters economic
development.

The economy stagnated throughout President Lula's first term in office
(2003-2006). Lula's first-term average growth rate is equal to
Fernando Henrique Cardoso's, his predecessor; a lethargic 2.6% (8).
During Lula' first term in office, the economy only grew more than 4%,
in 2004, reaching 4.9% (revised to 5.7%).

A more accurate growth measure is the per capita growth rate, which
factors in the growth of population. Under Lula's tenure per capita
grew by 1.2%, a slight improvement from Cardoso's overall average of
0.8% (9). In fact, over the past 10 years, per capita growth has
averaged 0.7% (10). In contrast, in the 1960s and 70s, average per
capita went up by 4.5% (11).

Last year, the economic statistics were revised under a new
methodology. Average economic growth for Lula's first term was revised
upward to 3.35% (12). Lula's overall average growth rate from 2003 to
2007 is 3.76%. Although this average economic rate is faster than
Cardoso's average growth rate of 2.3% over his 8 years in office (13).

Since 2003, growth in Brazil can only be described as lackluster when
compared globally. Since 2003, Brazil's average 3.8% economic growth
is dwarfed by the global average of 39 developing nations who recorded
a 5.6% growth rate during the same period according to Austing Rating
(14). In fact, since 1996, Brazil's growth rate has consistently
remained below the world's average until last year when Brazil finally
surpassed the world average (15).

Most experts agree that Brazil needs economic growth of at least 5 or
6% to create just enough jobs for those entering the labor market. The
consistent failure of inducing economic growth likely caused Lula's
administration to launch the PAC (the Program to Accelerate [Economic]
Growth) a major public works program to improve the country's
infrastructure and hopefully accelerate economic growth.

If the real economy was in fact booming the Brazilian people would not
be voicing their overwhelming discontent. A recent PEW poll indicated
that 59% of Brazilians said the economy was going badly for them. This
is an improvement from last year when 70% of Brazilians indicated such
feelings (16). The strong growth, achieved in 2007, must have improved
the economic outlook for a few Brazilians but the benefits of this
economic boom has not trickled-down to the majority of the population.

The once strong external economic sector is starting to show signs of
distress. As of April 2008, the trade balance dropped by 79% in
relation to last year (17). In the same month, the current account
registered a deficit of US$ 14 billion, larger than the US$ 12 billion
that the Central Bank predicted for all of 2008 (18). Although foreign
investment is covering the current account deficit Brazil's economy
for now, making Brazil more dependent on global inflows as the current
account deficit grows.

A prolonged global economic recession would likely be detrimental to
Brazil. International investors tend to punish third-world nations
that consistently run large current account deficits. The current
account deficit was a significant component of Brazil's economic
vulnerability, and instability, from 1997 to 2002 (19). A few years
ago Turkey experienced economy difficulties under the weight of its
current account deficits.

The external conditions are likely to deteriorate further. Brazil's
currency, the real, will continue to gain, in the short-term, against
the dollar pushed upwards by higher domestic interest rates that
attract massive speculative inflows. This 'strong real' policy
cheapens imports, lowering inflation, while limiting Brazilian exports
and economic growth.

Also the costs of producing is growing rapidly causing industry to
depart from Brazilian shores. The Financial Times (FT) explored the
growing possibility of 'de-industrialization' taking hold in Brazil.
The chief executive of Marcopolo, an international bus company, told
the FT 'that it's too expensive to produce [in Brazil] that is why
industry is leaving' (20).

Domestic and international industry finds it profitable to relocate
production operations, thus potential jobs and income, to countries
with a more competitive exchange rate policy like Argentina. Former
Communication Minister, Luis Carlos Mendonça de Barros, under
Cardoso's administration (1995-2002), also warns of the increased risk
of de-industrialization especially as the ethanol industry increases
export earnings. More exports will bring in more dollars to Brazil
causing the currency to become even stronger than it is current high
levels (21).

China, on the other hand, is a competitive place to produce goods, in
part, because it artificially keeps its currency devaluated at roughly
8.23 yuan per dollar making its exports artificially cheap and its
imports expensive.

Higher interest rates will cause growth to fall to about 4% for this
year and growth for 2009, and probably for 2010, is already condemned
to its usual stagnant rate.

Growth is vitally important for any nation. Lula's administration
comes with many excuses for the lack of growth yet one likely culprit
is its own ultraconservative political economy. The Brazilian Central
Bank consistently implements abusive interest rates, which remains the
highest real interest rates in the world. There is no doubt that
higher interest rates were needed to halt inflation but it has become
a dangerous obsession within the government.

What journalists consistently overlook is that Lula's government, led
by the president himself, has sacrificed economic growth for lowest
possible rate of inflation. Lula even said that he would make "any
sacrifice" against the return of inflation (22). Somebody should tell
him that there is a difference between hyperinflation, which Brazil
suffered from in the past, and inflation.

Most international commentators assumed that it was Lula's former
finance minister, Antonio Palocci, who convinced President Lula of the
importance of keeping inflation very low. International investors
shuttered when Palocci resigned from his position under intense
scrutiny.

In actuality, it was Lula who taught Palocci that lower inflation was
needed. According to Palocci's latest book, Lula argued for an
inflation target of 4% while Palocci advocated a more manageable 5%.
They eventually settled on a compromise figure of 4.5%. Although this
figure kept inflation low it also inhibited economic expansion.

Palocci warned Lula that keeping the inflation target this low would
stunt economic growth. Lula understood this argument, but believed
that inflation was clearly the greatest evil, a lesson he learned from
his days as a union leader (23).

A few government officials opposed these interest rates. The Institute
of Research and Applied Economics (IPEA) economist, Marcio Pochmann,
said that "we want to step on the accelerator [of economic growth],
but the problem is the Central Bank" (24). The vice-president, José
Alencar, is one of the leading critics calling the interest rate
policy as 'fiscally irresponsible' because it drives up interest
payments costs thus Brazil runs a higher budget deficit (25).

Also the current governor of São Paulo, José Serra, has been another
vocal critic of the interest rate policy. The ex-Secretary of the
Political Economy of the Finance Ministry, Gomes de Almeida, left his
government position, when he criticized the hyper-valuation of the
currency, which he noted, was prejudicial to the country and a result
of the high interest rate policy (26).

The economic tools used to contain inflation, and keep interest rates
low, have largely failed. In 2004, the Brazilian economy finally
rebounded at a brisk 5.7% pace but the central bank wanted to reach
its targeted inflation rate (27). So interest rates began to rise in
September of 2004. Lula correctly worried that future growth would be
compromised. In response, Lula raised the primary budget surplus
(budget surplus that excludes interest payments on the debt) from
4.25% to 4.5% (28).

Lula was told by government officials that a higher primary budget
surplus would keep inflation low thus keeping interest rates lower. In
theory, further cuts to the budget, raises the primary surplus,
increasing the domestic savings rate by soaking up the excess money
within the economy, lowering inflation. Unfortunately, he
underestimated the central bank's commitment to low inflation
at-all-cost.

In fact in 2004, the government's official primary budget surplus
ended at 4.6% but the domestic interest rates did not stop rising
until later into the following year (29). They went from 16% in
September 2004 to 19.75 a year later when the central bank ceased
hiking interest rates.

The effect of this policy stymied economic growth. In 2005, growth
fell to 2.3 (revised to 2.9%), the second lowest rate among Latin
American economies, beating only war-torn Haiti (30). Government
officials, like ex-finance minister Palocci, blamed the political
scandals that erupted that year for the anemic growth rates.

In 2006, the official rate of economic growth was marginally better,
at 2.9% (revised to 3.7) once again only surpassing Haiti (31). It is
obvious that Brazil's economic growth is shackled. Although 2007 was
another boom year, like 2004, the economy of 2008 and 2009 are likely
to disappoint many foreign observers.

Once again in April 2008, domestic interest rates are on the rise.
They will continue to increase as Brazil experiences higher bouts of
inflation. The government, once again, repeated its previous act by
swiftly boosting the primary budget surplus from 3.8 to 4.3% of the
GDP (32). Lula once again believes that this will somehow stop the
central bank from raising interest rates.

Clearly, he did not learn his lesson from 2004. Back then, even the
central bank president openly declared that the hike in the primary
surplus would not stop interest rates from going up (33). Inflation is
growing in Brazil, above the excessively low official target of 4.5%,
but this inflationary burst is arising from outside global forces not
an overheating Brazilian economy.

Brazil's growth alone never caused inflation to grow uncontrollably.
Oil, commodity and energy prices are escalating everywhere. Interest
rates will now be going up to contain the current global spike in
inflation. Inflation will stay above its target for the foreseeable
but it is not raging out of control as in the past.

The Central Bank's ultraconservative policy is used against increasing
inflation. It is what PhD economics programs all around the world
teach their pupils: "the only role of the central bank is to keep
inflation as low as possible". Any other intervention in the economy
breeds horrendous inefficiencies and, is at worst, "Marxism". If it
proven in the classical theoretical world of economics, then you know
it must be true in the real world!

The central bank's policy is also hypocritical. It easily moves up
interest rates when inflation grows but refuses to lower it when
inflation is very low. For example, in 2006, Brazil's yearly inflation
rate (IPCA) accumulated to a mere 3.14%, below its 4.5% target, and
was the 3rd lowest in all of Latin America (34). Although an important
achievement, interest rates trickled down in an excessively cautious
manner. Brazil still had the highest interest rates in the world.

Why did not the Central Bank drastically slash interest rates in 2006
for inflation to reach 4.5%? Growth could have been faster than
pathetic 2.9% and thousands of new jobs could have been created. In
2007, interest rates could have been even lower than they were because
inflation ended at 4.14% once again below the 4.5% target.

Nobel Prize winning economist, Joseph Stiglitz, has repeatedly
reiterated that Brazil's economy could grow by lowering interest rates
without fear of inflation (35). Obviously, his frank advice is ignored
in the halls of Brasília. Not to mention that many mainstream
economists now accept that an inflation rate below 10% has no negative
impact on economic growth. Two World Bank economists even found that
there is no consistent correlation between a country's inflation rate
and growth rate when inflation stays below 40% (36).

Conditions for many workers remain difficult. Average real income has
been static throughout the past six years although unemployment has
been slowly falling. According to the IBGE (Brazilian Institute of
Geography and Statistics) as of April 2008, real average income was
1,208.10 reais, its highest point since October 2002, when it stood at
1,224.48 reais. This demonstrates that the average worker is, in real
terms, still earning less than it did back in 2002 (37)!

So who are the biggest beneficiaries of the Brazilian economy? The
clear winner is the financial-agriculture complex.

Each year, the Brazilian government pays billions in interest on its
internal debt. Each year, well over 100 billion reais, is transferred
to public, domestic and international banks who own a majority of
government debt. Yet, interest payments only display a part of the
picture. Billions are paid on the principal of the country's debt.

In 2002, the last year of the Cardoso administration, the government
dispensed 349.6 billion on the amortization of its debt. This was
equal to 46% of the budget. On the other hand, in 2003, Lula spent
over 412.9 billion reais, 54.61% of the total budget. The consequence
of this increased spending on the debt is a collapse in public
investment in an infrastructure or public education.

Cardoso, in 2002, made 11.6 billion reais in public investment, or
1.5% of the budget, while Lula, in 2003, invested 1.8 billion reais, a
mere pitiful .24% of the budget for the year (38). Brazil's internal
debt is approaching 1.3 trillion reais with 30% of it due in less than
one year (39). The need to extend the maturity of the internal debt
and limit its growth is real, all of which requires lower interest
rates.

The United Nations Conference on Trade and Development (UNCTAD) chief
economist Heiner Flassbeck warns Brazil that it is a victim of
"international casino". The financial markets are making billions in
the short-term by taking loans in Japan, with almost no interest, and
placing it in Brazil's financial markets. They are making billions of
this process as Brazil rewards them with the highest interest rates in
the world (40).

So it is not surprising that Brazil's financial market has grown
astronomically. But when US interest rates begin to tick-up again
foreign investors will return their short-term fortunes to safer US
securities. Brazil continues to be a place where investors make
immediate profits and then flee towards safer investments.
Unfortunately, there continues to be minimal investment in actual
long-term production in the Brazilian economy that could generate new
employment, transfer technology and usher internal development.

Industrial organizations, led by the powerful São Paulo Industrial
Federation (FIESP), rightfully lashes out against the current interest
rate policy of the central bank which frequently unites government
allies and the opposition camp in the Brazilian Congress. In fact,
most industry-led organizations, that produces millions of jobs,
consistently plea with the government to be more flexible in enacting
interest rate policy.

In many respects, Brazil's economy is as a rent-seeking economy, one
where the rich see their money grow at astronomical rates without
lifting a finger. Little is actually invested in a productive manner
that could spur innovative industries that could improve the lives of
Brazilians. Loans to small businesses and average Brazilians can range
from 30 to 100%.

How can any business invest in the future and generate jobs in such an
environment? Most interest rates are charged on a monthly basis. It is
not surprising then that credit remains a small component of the
economy although a growing one.

Lula's administration has also regularly pursued direct support of big
agriculture. In May 2008, President Lula held a meeting with his
ministers defining future plans to consolidate its unique role as a
world leader in agriculture production (41). Back in 2006, the
government destined 50 billion reais for commercial agriculture while
only giving 10 billion for family agriculture (42).

In the growing season of 2007-2008 the government released 58 billion
reais in aid and reduced interest rates for agriculture loans from
8.75% to 6.75% per year (43). Once again, in May of this year, Lula
signed a provisional measure (MP) renegotiating 75 billion reais of
debt accumulated by large-scale rural producers (44).

With this type of government intervention, it is not surprising that
big agriculture has performed so well in the past five years.
Agriculture is thriving in part because the special interest rates are
significantly lower than those in the rest of the economy.

Lula's administration actively pursues trade negotiations with
developed nations. The goal of the administration is to force rich
countries to end agriculture subsidies. Many experts predict that
Brazil would widely benefit from this move. Except that, in exchange
reducing agriculture subsidies, first-world nations would demand that
Brazil, and others, drop their stiff tariffs on industrialized goods.
This would likely decimate domestic industry and small businesses.
According to one study the net impact of a WTO deal would be a loss of
160 million dollars for Brazil (45).

Specializing in ethanol, oranges, beef, poultry and soy beans will not
be conducive in developing a dynamic economy that serves the need of
nearly 200 million people. Large-scale agriculture depends on heavily
mechanized equipment generating little employment. Numerous countries
around the world produce similar agriculture goods causing agriculture
exports, which is roughly half of exports, to fall.

Brazil is repeating its historic failures of being the world's
efficient supplier of sugarcane, soy beans, coffee, rubber and raw
materials. These agriculture interests promote the knocking down of
the Amazon Rainforest as a model of economic development which the
former environment minister, Marina Silva, labeled "an archaic
development model" which will obviously not expedite industrialization
(46).

The mere fact the US and Europe obliterated their forests hundreds
years ago did not induce industrialization. Industrialization requires
a set of cohesive policies that are absent from the current political
agenda.

Some journalists will reiterate that there is no alternative to the
current economic model. Why I will not purport to decide what kind of
economy Brazilians need or want, there are alternatives to the current
economic policy. History is not over.

Lower interests and faster growth is a requisite to inducing any
sustainable development strategy. Economic growth is necessary but
insufficient to transform Brazil. Arguably economic justice is more,
or as, important as economic growth.

Several countries, like Peru and Kenya, have experienced economic
growth above 6% in the past few years but remain mired in poverty,
joblessness and trapped within perverse inequality. Thus collective
action by social movements and civil society must exert pressure on
their democratically elected officials to enact measures that
encourage job creation, promote a decent livable wage, affordable
housing, public education and even a substantial land reform that
offers credit and technical assistance to millions of landless
peasants.

Only by pursuing economic justice can Brazilian society be more
inclusive, reduce poverty and tackle the perverse inequality that
scars the basic fabric of society. Real positive change of any
economic or social policy must come from the bottom-up not from the
top-down.

Year   GDP growth (old methodology) GDP growth (new methodology)

1996   2.7    2.2
1997   3.3    3.4
1998   0.1     0
1999   0.8    0.3
2000   4.4    4.3
2001   1.3    1.3
2002   1.9    2.7
2003   0.5    1.1
2004   4.9    5.7
2005   2.3    2.9
2006*   2.9    3.7

Source: "Revisão do PIB melhora posição do Brasil em ranking mundial,
diz consultoria, Folha Online, 21.03.2007, accessed 3/25/2007
http://www1.folha.uol.com.br/folha/dinheiro/ult91u115388.shtml
*-figures for this year were found in another article

(1) Carrol, Rory. "The accidental hero?," Guardian.co.uk March 14,
2008. accessed 3/15/2008.
http://www.guardian.co.uk/news/2008/mar/14/rorycarroll.insidebrazil...

(2) Cucolo, Eduardo. "Reservas internacionais sobem para US$ 195,8
bilhões até abril," Folha Online 26.05.2008. accessed 6/13/2008.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u405469.shtml

(3) Carrol, Rory. "Land of contrasts," Guardian.co.uk March 14, 2008.
accessed 3/15/2008. http://www.guardian.co.uk/news/2008/mar/14
/rorycarroll.insidebrail/....

(4) "Open for business", Guardian.co.uk March 14, 2008. accessed
3/15/2008. http://www.guardian.co.uk/news/2008/mar/14/davidteather.feature/print

(5) "Risco-país cai para menor nível histórico; dólar recua e Bovespa
tem queda," Folha
Online 09.08.2006. accessed 6/9/2008.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u110067.shtml

(6) Philips, Tom. "The country of the future finally arrives",
Guardian.co.uk May 10, 2008. accessed 5/11/2008.
http://www.guardian.co.uk/world/2008/may/10/brazil.oil/print

(7) Kraul, Chris. "Brazil's now a hot commodity", Los Angeles Times
December 31, 2007. accessed 12/31/2007.
http://www.latimes.com/business/la-fi-brazilecon31dec31,1,907266.story?....

(8) Spitz, Clarice. "PIB tem mesmo crescimento nos primeiros mandatos
de Lula e FHC", Folha Online 28.02.2007. accessed 2/28/2007.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u114800.shtml

(9) IBID

(10) Spitz, Clarice. "Economia cresceu à média de 2,6% durante
primeiro mandato de Lula," Folha Online 28.02.208. accessed 3/5/2008.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u114805.shtml

(11)Chang, Ha-Joon. "Bad Samaritans" Bloomsbury Press: New-York, 2008. pg. 149

(12)"Revisão do PIB melhora posição do Brasil em ranking mundial, diz
consultoria," Folha Online 21.03.2007. accessed 3/25/2007.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u115388.shtml, I
calculated average using data in article,

(13) Spitz, Clarice. "PIB tem mesmo crescimento nos primeiros mandatos
de Lula e FHC," Folha Online 28/02/2007. accessed 2/28/2007.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u114800.shtml

(14) "PIB do Brasil fica entre os últimos dos países emergentes," G1
Globo, 13.03.2008, accessed 3/15/2008,
http://g1.globo.com/Noticias/Economia_Negocios/0,,MUL348961-9356,00.html

(15) Bacoccina, Denize. "Brasil cresce abaixo da média mundial desde
96," BBC Brasil.com 25.3.2007. accessed 3/25/2007.
http://www.bbc.co.uk/portuguese/reportbbc/sotry/2007/02/printable/070228_pibbd.shtml

(16) "Economia do país 'vai mal para 59% dos brasileiros'," BBC
12.06.2008. accessed 6/13/2008.
http://g1.globo.com/Noticias/Economia_Nogocios/0,,MUL599278-9356,00.html

(17) Casia, Rosana de. "Importação cresce e superávit commercial
dasaba quase 80%", Agência Estado 22.04.2008. accessed 5/19/2008.
http://int.estadao.com.br/Multimidia/ShowImpresSão.action?xmlPath...

(18) "Déficit em conta corrente já supera projeção do BC para 2008,"
Agencia Estado e Reuters 26.05.2008. accessed 6/1/2008.
http://int.estadao.com.br/Multimidia/ShowImpresSão.action?xmlPath...

(19) Cucolo, Eduardo. "Déficit pode ameaçar seguro do Brasil contra
crise internacional," G1 Globo 5.2.2008. accessed 2/8/2008.
http://g1.globo.com/Noticias/0,,PIO282178-9356,00.html

(20) Albuquerque, Vinicius. "Real forte gera temor de
'des-industrialização'," diz "Financial Times," Folha Online
16.12.2005. accessed 2/8/2008.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u103478.shtml

(21) Bacoccina, Deniza. "Ethanol vai prejudicar indústria brasileira,
diz economista, BBC Brasil.com 29 Janeiro 2007. accessed 3/25/2007.
http://www.bbc.co.uk/portuguese/reporterbbc/story/2007/01/070126_ethanlmendoncab.sh...

(22) "Lula diz que fará "qualquer sacrifício" contra inflação," Folha
Online com Agência Brasil 30.05.2008. accessed 6/4/2008.
http://www1.folha.uol.com.br/folha/dinheiro/ult91u407206.shtml

(23) Palocci, Antonio. Sobre formigas e cigarras. Rio de Janeiro:
Objectiva, 2007, pg 112-114.

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Daniel Torres is a political science and economics major at the
University of Massachusetts. Comments welcome at dftorres at gmail.com.

<http://www.reuters.com/article/bondsNews/idUSN2847607620080728>
UPDATE 2-Brazil posts June current acct gap on remittances
Mon Jul 28, 2008 11:15am EDT

(Adds central bank forecasts for July)

BRASILIA, July 28 (Reuters) - Brazil posted a wider-than-expected
current account deficit in June as companies nearly doubled profit
remittances abroad because of a strong domestic currency, central bank
data showed on Monday.

The deficit reached $2.6 billion in June, compared with a $539 million
surplus in the same month of 2007.

The country had been expected to post a deficit of $1.1 billion,
according to the median forecast of 13 analysts surveyed by Reuters.
The forecasts for the deficit ranged from $2.1 billion to $850
million.

In May, Brazil posted a current account deficit of $649 million,
according to previously reported central bank data.

The deficit should widen to $2.8 billion in July, said Altamir Lopes,
head of the central bank's economics department.

Multinational companies in the country sent $3.4 billion in profit and
dividends abroad, compared with $1.75 billion in June 2007, as gains
in Brazil's currency made it cheaper to buy dollars.

Brazil's currency, the real BRBY, has gained nearly 13 percent against
the dollar so far this year after surging more than 20 percent last
year. The strong real has fueled a surge in imports, cutting the
country's trade surplus and affecting Brazil's external accounts.

In the 12 months through June, the deficit was equal to 1.32 percent
of gross domestic product compared with a deficit of 1.1 percent of
GDP in the 12 months through May.

Foreign direct investment in Brazil, Latin America's largest economy,
fell to $2.72 billion in June from $10.3 billion in the same month in
2007, when the figures were unusually high because of ArcelorMittal's
buyout of minority shareholders in its local unit.

FDI is forecast to reach $3.2 billion in July, Lopes said.

The current account balance tracks a country's net flow of external
transactions, including foreign trade, interest payments and services
such as tourism. It is used to gauge a country's dependence on foreign
capital. (For central bank details on Brazil's current account
figures, see: www.bcb.gov.br/?ECOIMPEXT) (Reporting by Isabel
Versiani; Writing by Elzio Barreto; Editing by James Dalgleish)