Focus on Brazil
29.05.2010
It's not only on the football pitch that the South American country outperforms its peers. According to a recent report from Goldman Sachs, along with Mexico and Chile, Brazil boasts one of the best performing global stock markets of any of this year's competitors, since the last World Cup tournament in 2006.
Brazil is now the largest national economy in Latin America, the world's tenth largest economy at market exchange rates and the ninth largest in purchasing power parity (PPP), according to the World Bank. Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors as well as a large labour pool, Brazil's economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets.
The country has been expanding its presence in international financial and commodities markets and is regarded as one of the four emerging economies commonly referred to, collectively, as 'BRIC' (Brazil, Russia, India and China). Major export products include aircraft, coffee, automobiles, soybean, iron ore, orange juice, steel, ethanol, textiles, footwear, corned beef and electrical equipment.
In 2007, Brazil launched a four-year plan to spend USD300bn to modernise its road network, power plants and ports. Brazil's booming economy is shifting into overdrive, with bio fuels and deep-water oil providing energy independence and the government collecting enough cash to irrigate the desert and pave highways across the Amazon Rainforest.
Since 2003, Brazil has steadily improved macroeconomic stability, building up foreign reserves, reducing its debt profile by shifting its debt burden toward Real denominated and domestically held instruments, adhering to an inflation target, and committing to fiscal responsibility. In 2008, Brazil became a net external creditor, Brazil's external debt totalled less than its foreign reserve holdings, and two ratings agencies awarded investment grade status to its debt.
After record growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in September 2008. Brazil's currency and its stock market - Bovespa - saw huge swings as foreign investors pulled out of Brazil. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up.
However, Brazil was one of the first emerging markets to begin a recovery. In Brazil, GDP fell by 0.5percent in 2009 in the first two quarters of the crisis period, but rebounded in the second and third quarter of 2009. A robust fiscal policy package, including support for the automotive sector and a reversal of the inventory cycle, boosted industrial production, which was strong at a 22.2percent annualized pace in October 2009. At the same time, lower policy interest rates and a decline in interest rate spreads helped prompt a recovery in private credit that has bolstered domestic demand. The Central Bank expects a GDP growth of 3.5percent for 2010.
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