2008 Reports

Brazil, failing to turn the corner . . .

Sotelino, Fernando Barreira

By mid-2007 the world was experiencing its sixth year of solid economic growth, in good measure due to strong and continued demand for consumption in the U.S. and increased supply of consumer goods at relatively stable prices by developing economies (led by China and India). For Brazil, this meant significantly better prices for export commodities and consistently higher trade surpluses month after month, allowing for a solid path towards the zeroing of the country’s net foreign indebtedness. It also implied that 2007 could turn out to be the second year of GDP growth in excess of 4% for the country in this millennium and led to projections, by Wall Street and Brazilian banks, of sustained and robust economic growth with continued gradual reduction of interest rates in Reais. But net public sector indebtedness remained too high (over 40% of GDP) for its carrying cost (8% in real terms) and aggregate investment remained too low (20% of GDP).