Brazil Economy

Brazil's economy should contract less than expected this year, as moderate inflation and falling interest rates help the economy rebound from a currency devaluation, the International Monetary Fund said Monday. The economy should decline about 1% this year, better than the forecast of a 3.5% to 4% drop by the IMF and the Brazilian government in March. The economy should grow 4% in 2000. The inflation rate should also beat early estimates, rising 12% this year, not 17%.

Finding the discount on a new Renault hatchback irresistible, lawyer Roni Figueiro of Porto Alegre, Brazil, took the plunge, plunking down $22,200 last week for the first new car he has ever owned. Prodded by government incentives, consumers like Figueiro are not just keeping the Brazilian economy afloat amid the global crisis but propelling it toward a robust recovery next year, according to a survey of Brazilian economists made public by the central bank last week. The expected recovery is another example of how things seem to be breaking Brazil's way. Today, the nation will find out whether Rio de Janeiro will host the 2016 Summer Olympics.

Forceful anti-inflation action by President Fernando Collor de Mello has sharply reduced the Brazilian money supply, curtailing financial and commercial activity. After taking office last week, Collor froze 80% of all the money deposits in bank accounts and financial funds--an estimated $85 billion.

A group of leading international banks Monday vowed to sustain their general level of business in Brazil, a move that bolstered faith in the South American nation's markets ravaged by uncertainty ahead of the October presidential vote. The 16 banks, including Citigroup Inc., J.P. Morgan Chase and Deutsche Bank, said in a statement they were committed to Brazil and its economic program over the long term.

Facing the worst inflation in Brazil's history, President Jose Sarney announced an economic stabilization program Friday that includes a general price freeze, deep cuts in government spending and a currency devaluation. The measures are intended to ease an economic crisis that has created widespread discontent in Brazil and raised the threat of recession. The program is also part of an attempt to reorder Brazil's economy as a prelude to renegotiating its $110-billion foreign debt.

A few months ago, hyper-inflation was the feared black beast of Brazil's worst economic nightmare. The word evoked visions of unmanageable monetary chaos, with wheelbarrows full of nearly worthless currency and business transactions reduced to primitive barter. Now, as the cost of living rises by more than 70% a month, the reality is daunting indeed--but so far not as disastrous as feared. "People seem to believe that in hyper-inflation there is chaos.

Brazil's Economy Grew 4.2% in 1995: The growth was fueled by higher production at farms and service companies, a government research institute said. "From April 1995 onward, the government was able to rein in rapid growth with high interest rates and tight monetary policy," the Brazilian Institute of Geography and Statistics reported. Brazil's economy grew at a record annualized pace of 10.4% in the first four months of 1995. By the second trimester, growth had slowed to 3.

The final battle in the war of political nerves over Brazil's economy is slated to begin this week when the legislature gathers to decide the fate of the government's embattled stabilization plan. Finance Minister Fernando Henrique Cardoso says that righting the economy, racked by monthly inflation mounting 40%, hinges on approval of a sweeping reform package.

Despite its traumatic currency collapse last year, Brazil managed to beat doomsday scenarios of economic havoc in 1999 and instead post moderate growth. Brazil's gross domestic product grew 0.8% in 1999, the government said. The advance was more than 1998's 0.1% gain and a far cry from the 6% plunge some expected in the wake of the country's January 1999 currency devaluation.

Brazil's economy slipped into recession in the first quarter as power rationing and high interest rates curbed energy output, construction, manufacturing and retail sales. Marking the first recession in Brazil since early 1999, the economy shrank 0.73% in the first three months from a year earlier and followed a 0.7% decline in the fourth quarter. The economy grew 4.3% in the first quarter of 2001.

After a decade of false starts, optimism is running high that Brazil's economy may finally take off this year and enable the nation to get closer to its ambition of becoming a major global economic power. But there's a political caveat: the rising popularity of a far-left candidate in this November's presidential election who has said he would reverse some of the economic reforms of the last eight years if elected.

The International Monetary Fund said Friday that it was prepared to accelerate a $1.2-billion loan to Argentina and establish a $15-billion line of emergency credit for Brazil in an effort to keep economic troubles in the two South American nations from spreading. IMF Managing Director Horst Koehler said he will recommend the actions.

As Brazilians rushed to snap up power-saving light bulbs, candles and generators before the Friday start of energy rationing, government lawyers staffed the legal barricades Sunday in an effort to protect the plan. Latin America's largest country and biggest economy is in the grips of an acute electricity crisis and, under the government rationing plan, must reduce power consumption an average of 20% or face forced blackouts later this year.

New political and energy worries weighing on Argentina and Brazil sent both countries' stock markets reeling Monday as fears of renewed economic instability reverberated around the hemisphere. The effect of the U.S. economic slowdown also is taking an increasing toll. Brazil's main stock index, the Bovespa, fell 401.13 points, or 2.6%, and Argentina's fell 8.58 points, or 1.

Brazil's second-quarter economic growth beat expectations as Latin America's biggest economy continued its recovery from two years of economic stagnation and a deep currency devaluation in 1999. Gross domestic product--which measures the total output of goods and services and is the broadest gauge of an economy's health--grew by 3.9% from the year-earlier period, fueled by strong industrial and agricultural output, Brazil's National Statistics Institute said.

Miriam Costa was in no mood to talk economics as she waited in an unemployment line here this month, hoping to find work, as she has every week since losing her job with a construction company in March. The Brazilian government's latest efforts to tame the economy have produced just one effect she cares about: She's lost her job. So have 700,000 other Brazilians since austerity measures were imposed last October. Unemployment is now at a 14-year high.

Latin American stock markets got a lift Wednesday from a surprise interest rate cut by Brazil's central bank, but many experts say the next turn for the region's markets--and economies--is more likely to depend on what happens in the United States. The Brazilian central bank's decision Tuesday to lower its benchmark overnight bank rate by a full point to 17.5%--a move hailed by economists as an act of confidence and sign of increased economic stability--sparked a 2.

Brazil's central bank cut interest rates to their lowest level in at least five years, seizing on tame inflation to boost an economic recovery. The bank lowered its target overnight rate to 18.5% from 19%, its first cut since September. The rate is the lowest since Brazil launched its real currency in July 1994. The bank maintained the downward bias on future rate moves that it adopted last week at its policy meeting.