New Brazilian fairness leaves behind bitterness of past era
By Zhou Zhiwei | Illustration: Liu Rui | June 07 2010
The new emerging countries, such as Brazil, Russia, India and China, are often lumped together as a group. But what they have in common is their status as rapidly developing nations, not a shared developmental model. Brazil's development model, for instance, is very different from China's and India's, and has produced different outcomes.
Unlike its economic miracles of the past century, the current economic growth of Brazil, based on macroeconomic stability, is a form of coordinated and balanced social development. The sustainable growth targets reflect Brazil's pursuit of the quality of economic development. These concepts are a very good reference point for other emerging countries.
Since the return of democracy in 1985, democratic institutions in Brazil have been effectively promoted and consolidated. After three election failures, current president Luiz Inácio Lula da Silva (usually known as Lula), then a left-wing radical, became more pragmatic. He took office and established an extensive government alliance including central and right-wing parties, which created a favorable environment for political stability, democratic consolidation and economic development. This is why Lula is defined as a "moderate leftist," in contrast to radicals like other Latin American leaders.
According to a number of economic and social indicators, Brazil is experiencing its best development period ever. Prudent fiscal and monetary policies have helped Brazil enter a long period of rapid economic growth. The annual growth rate of Brazil reached 4 percent from 2003 to 2008, making it among the top 10 fastest growing nations in the world.
Lula once promised three meals a day for the poor, and an important characteristic of the current Brazilian model is balanced economic and social development. Through the implementation of zero hunger and family assistance fund policies, the Brazilian social development indicator index has been enhanced significantly.
The Gini coefficient, which measures inequality, has been declining for the past decade, while the human development index has risen to more than 0.8. The percentage of the population living in absolute poverty has sharply decreased, while the middle class now makes up 52 percent of the Brazilian population.
While achieving coordinated economic and social development, Brazil has also increased its involvement in international affairs, aiming at becoming a permanent member of the UN Security Council.
Brazil hopes to enhance its international influence and achieve greater participation in international configuration changes by working together with emerging powers. In dealing with international peacekeeping operations, the Middle East peace problem and the Iranian nuclear issue, Brazil is looking to upgrade from a regional power to a world power. It is attempting to improve its soft power through backing international campaigns.
Although the active and assertive international strategy of Brazil doesn't have sufficient national strength behind it, the daring diplomatic style of seeking equality, justice and multilateral principles has widened Brazil's diplomatic territory and enhanced its influence.
Brazil has changed from the aggressive approach of simply pursuing economic growth. Although the Brazilian economic growth rate is behind China's and India's, its methodology of coordinated and simultaneous development of all areas is a very good model for other developing countries.
More importantly, although Brazil and other emerging countries face similar development chal-lenges, their level of development is actually different.
After more than half a century's development, Brazil has completed the process of industrialization. Its industrial structure is much closer to developed countries, which means the current problems in Brazil might also be future bottlenecks of other emerging countries, such as polarization between the rich and the poor, overloaded urbanization, a widening urban-rural disparity and regional economic imbalances.
Brazil is trying to overcome the remaining problems of its aggressive development model. The transformation of Brazil's development model can not only serve as an early warning for emerging countries, but also provide guidelines for sustainable development.
For emerging countries, blindly pursuing high economic growth and ignoring the balance between efficiency and justice will lead to impeded social development and an imbalanced economic structure. It could even destroy current economic achievements and endanger the stability of the regime.
This is the bitter fruit that Brazil tasted after the rapid economic growth of the 1970s. It took Brazil a detour of 20 years of slow development to treat these complications, and the conse-quences are still being felt.
The author is secretary-general of the Center for Brazilian Studies, the Chinese Academy of Social Sciences. forum@globaltimes. com.cn
2010-06-07 07:58
Will the BRIC countries' coordinated mechanisms bring international cooperation into action? How seriously should analysts take the term BRIC? Two experts express their views.
Global cooperation thick as BRIC
Gina Caballero
An ingenious idea takes on a life of its own. Thinking globalization was not going nor is supposed to be Americanization, Jim O'Neill envisioned the BRIC (Brazil, Russia, India and China). These four non-Western countries' economic prowess and keenness to embrace global markets buttressed his belief that their future economic weight would reorganize world policymaking forums. So after the BRIC nations began trading in the banking sector, the four countries decided to bolster the label by grouping together.
This not only reflects their understanding of globalization, albeit a socio-economic process enriched by different civilizations' philosophical traditions, but also their initiative to lead that process into the creation of a new multilateral, equitable and democratic world order. The tenets of such a world order are no other than the principles under which the four countries have held their meetings: mutual respect, equality and shared benefits.
In April, BRIC heads of state gathered again in Brasilia for their second summit to advocate cooperation, coordinated action and collective decision-making of all the states. As emerging economic engines expected to add most of the 2 billion people who are estimated to join the global middle class by 2030, BRIC move in tandem with the developing world in pursuit of common development and prosperity.
To enhance developing countries' growth potential and fight against poverty, BRIC countries, as declared in their joint statement "support technical and financial cooperation as a means to contribute to the achievement of sustainable social development, with social protection, full employment, and decent work policies and programs". Joint efforts and actions to improve the living conditions of people in the developing world are part of the BRIC nations' commitment to lift them into stable secured lives.
Bringing in more people into the growing global middle class will move forward the sense of shared ownership, distinctive of a multi-polar world order. Moreover, it will continue to clear out the via media for countries in the periphery to gradually root out inequality and social exclusion that result from the present world stratification system.
To do so, the four countries could innovate different frameworks with their appropriate platforms to promote the common interests of emerging market economies and developing countries. Within, the four countries already developing these types of engagement mechanisms, as the first BRIC think tank seminar held alongside the second BRIC summit testifies. The BRIC + IBSA (India, Brazil and South Africa) business forum, too, is a sign of the concerted efforts being made to reach out through dialogue and cooperation other important players in today's world.
It is therefore possible, to build a comprehensively strategic issue-by-issue network with the developing world. Based on experiences, the BRIC countries could extend the forums to invite other developing countries to discuss a wide range of issues. For example, the BRIC countries designed a platform for women of other developing countries, including China, to come together and, through South-South cooperation, formulate proposals for an integrated gender approach in macroeconomic policies. The platform was based on the IBSA Women's Forum, held before the fourth IBSA summit on April 15.
Furthermore, to pragmatically promote international cooperation on financial and trade issues, terrorism, food security, energy, climate change and sustainable development, the BRIC nations could draw more frameworks for building a bridge between developed and developing countries.
On the issue of sustainable development, a BRIC + 5 (Japan, Germany, Singapore, Canada and Australia) sustainable technologies platform would, through the sharing of environmentally sound technology and successful local experiences, address in concrete terms the challenges and constraints the BRIC countries still face in cultivating a green economy.
Continuing to build a far stretch bridge towards a truly mutually beneficial and multilateral world system, the BRIC countries could then meet with, for instance, Bangladesh, Indonesia, Mexico, Nigeria and Turkey under a BRIC + 5 sustainable development platform, to follow up on the relevant technologies and lessons learned from their previous BRIC + 5 sustainable technologies meeting. In this way - providing a participative mechanism for discussing and exchanging green development modes - the countries could adapt to their specific national characteristics and socio-economic conditions. Like economic spillovers do, these sustainable technologies and practices, too, could spill over into the regions of the five developing countries.
Hence, while the BRIC nations open up more round tables of specific issues for discussion, they could gradually start opening dialogues with other developing countries to share developmental practices and views on mutual interests and concerns.
With this political structure, the BRIC countries will advance the active participation of the developing world in global governance. And through exemplary South-South cooperation, they can set the guideline for developed countries to interact with them. Leading the developing world, the BRIC countries' strategic coordinated mechanisms could bring international cooperation into action. This can only herald the coming on of a multi-polar harmonious world system.
The author is the Beijing academic correspondent of Colombia-based research center Asia Pacific Observatory and runs LatinChina Network for Development, an NGO that promotes common understanding and active cooperation between China and Latin America.
Nothing to bind group together
Joseph S. Nye
Journalists continue to lavish attention on the so-called BRIC countries (Brazil, Russia, India and China), but I remain skeptical of the concept. Goldman Sachs coined the term in 2001 to draw attention to profitable opportunities in what it considered "emerging markets".
The BRIC countries' share of world GDP rose from 16 percent in 2000 to 22 percent in 2008. Collectively they did better than average in the subsequent global recession. Together, they account for 42 percent of world population and one-third of global economic growth in the past 10 years.
Obviously, that is good news for the world economy, but an economic term has taken on a political life of its own, despite the fact that Russia fits poorly in the category. In June 2009, the foreign ministers of the four countries met for the first time in Yekaterinburg, Russia, to transform a catchy acronym into an international political force.
The BRIC nations hold $2.8 trillion or 42 percent of global foreign reserves (though most of that is held by China.) So, in Yekaterinburg, Russian President Dmitri Medvedev declared: "There can be no successful global currency system if the financial instruments that are used are denominated in only one currency."
After China eclipsed the US as Brazil's largest trading partner, Beijing and Brasilia announced plans to settle trade in their national currencies rather than dollars. And although Russia accounts for only 5 percent of China's trade, the two countries announced a similar agreement.
After the recent financial crisis, Goldman Sachs upped the ante and projected that the combined GDP of the BRIC countries might exceed that of the G7 countries by 2027, about 10 years sooner than initially believed. Such simple extrapolations of current economic growth rates often turn out to be mistaken because of unforeseen events. But, whatever the merits of this linear economic projection, the term BRIC still makes little sense for long-term assessments of global power relations.
While a BRIC meeting may be convenient for coordinating some short-term diplomatic tactics, the term lumps together disparate countries that have deep divisions. It makes little sense to include Russia, a former superpower, with three developing economies. Of the four members, Russia has the smallest and most literate population and a much higher per capita income, but, more importantly, many observers believe that Russia is declining while the other three are rising in power resources.
Russia today not only suffers more from the aftermath of the global recession, but also faces severe long-term liabilities: a lack of diversified exports, severe demographic and health problems, and, in Medvedev's own words, an urgent need for "modernization".
When one looks closely at the numbers, the heart of the BRIC acronym is the rise in China's resources. The role of Brazil is a pleasant surprise, though.
Since curbing inflation and introducing market reform in the 1990s, Brazil has shown an impressive rate of economic growth in the range of 5 percent. With a territory nearly three times the size of India's, 90 percent of its 200 million people literate, a $2-trillion GDP equivalent to Russia's and per capita income of $10,000 (three times India's and nearly twice China's), Brazil has impressive power resources. In 2007, the discovery of massive offshore oil reserves promised to make Brazil a significant power in the energy arena as well.
Brazil, like the other BRIC countries, also faces a serious number of problems. It ranks 75th out of 180 countries on Transparency International's corruption perceptions index (compared to 79th for China, 84th for India, and 146th for Russia). The World Economic Forum ranks Brazil 56th among 133 countries in terms of economic competitiveness (compared to 29th for China, 49th for India, and 63rd for Russia). Poverty and inequality remain serious problems. Brazil's Gini coefficient is 0.57 (1.0 is perfect inequality, with one person receiving all income), compared to 0.45 for the US, 0.46 for China, 0.37 for India and 0.42 for Russia.
So, how seriously should analysts take the term BRIC? As an indicator of economic opportunity, they should welcome it, though it would make more sense if Indonesia replaced Russia. In political terms, China, India, and Russia are competitors for power in Asia, and Brazil and India have been hurt by China's undervalued currency. Thus, BRIC is not likely to become a serious political organization of like-minded states.
Posted on June 5th, 2010
Terrible Twins: Turkey, Brazil and the Future of American Foreign Policy
These days, there's an unusual spectacle in world affairs. The United States has relatively good relations with the major powers: China, the EU states, India and even Russia are all more or less working together. But two middle powers, Turkey and Brazil, are not only asserting themselves more effectively than in the past; they have chosen to do this is ways that run counter to US policies. In particular their united and coordinated opposition to US policy on Iran has raised eyebrows and significantly complicated what was already a very difficult situation for American diplomacy. More recently, the strong reaction in Turkey to the Israeli interception of a convoy organized by Turkish groups with aid for Gaza underlines the possibility that Turkey is moving decisively away from its longtime partnership with the United States.
The new bout of activism by these middle powers is a harbinger of things to come, not only in Turkish and Brazilian foreign policy but it the policies of a number of other middle powers that can be expected to become more assertive going forward. They are going to enjoy tacit and sometimes overt support from some of the great powers who would also like to see us taken down a peg or two. The American establishment by and large was taken by surprise by the new and more difficult Brazilian and Turkish foreign policies; it's worth looking a little deeper to see what is behind this and see what lessons if any there are for the future.
Turkey and Brazil are very different places, but in some key ways their situation is very similar. First, they are ambitious powers who live in what, during the Cold War, was an American sphere of interest where the options of smaller powers were limited. In both cases, the post Cold War world has gradually opened up fresh avenues for foreign policy. For both Turkey and Brazil, the first step to recovering more independence and playing a wider role is to complete the liquidation of the Cold War order, which they both interpret as freeing themselves of their foreign policy dependence on Washington. For Turkey and Brazil to become the kind of powers they want to be, American power must be reduced.
Second, in both countries new forces are rising to political power. Formerly both Turkey and Brazil were formally democratic but in practice power was held by a relatively small and well connected elite: international businessmen, elite opinion leaders and a small military and civilian foreign policy elite. In both countries, that is changing. Brazil's Lula was long a radical and unacceptable figure to the Brazilian establishment; his entry into power meant that a new kind of Brazilian (poorer, less well educated, more internally focused, often darker skinned and left leaning) was coming on scene. In Turkey, the victory of the AK Party was also a kind of domestic revolution, overturning the old west-leaning, cosmopolitan and secular Kemalist establishment that had ruled the country ever since the 1920s. The new powers in Turkey are more religious, more inward-looking, more based in Anatolia than in cosmopolitan central Istanbul.
Both Turkey and Brazil are now more democratic, but that democracy does not translate into pro-American or pro-globalization. In both cases, the democratization of national life means greater power for those who feel different from and alienated by the world order that the United States is trying to build. In both cases there is a kind of intersection between realpolitik, the interests of the state, and the politics of civilization. The old cosmopolitan elites were relatively westernized and globalized in their assumptions; the new, more broadly based ones are not. In Brazil they share the historic Latin suspicion of and hostility to 'Anglo-Saxon capitalism' and a world order based on it. In Turkey, the new powers are much more likely to see the West as a rival and even an oppressor rather than, as in the Kemalist days, a goal and a destination.
If you combine the geopolitical and cultural realities, you see two countries whose interests are diverging from those of the United States and are also increasingly shaped by cultural forces that oppose the historical American project of building a global liberal capitalist order. That is a powerful combination of forces, and no one should think that the recent foreign policy conflicts with the United States are small things. Something fundamental is changing here, and we, the Turks and the Brazilians will only slowly come to understand what has happened and what it means.
That is not all. Both Turkey and Brazil are at a point in time when both their external and internal situations favor anti-US foreign policy moves. In the Middle East, taking an anti-American line builds Turkish influence and opens doors across the region. Fading Russian and European power in the Middle East creates a vacuum which a newly ambitious Turkey can hope to fill; anti-American and anti-Israel policies win friends and supporters for Turkey as it flexes its regional muscles. (Fading Russian power also makes Turkey less afraid of its northern neighbor; Turkey feels increasingly confident that it can manage its relationship with Russia without an American big brother to protect it.) In Latin America, strategic neglect and strategic failure by three American administrations (Clinton, Bush, Obama) have left the United States with fewer friends, more enemies, and less leverage than at any time since World War Two. Argentina, Brazil's historical rival in South America, is confused and distracted with a weak political establishment and weak economy; alienated from the United States and concerned with internal economic issues, Argentina is in no position to undercut Brazil's latest attempt to establish itself as the leading power in South America. By playing an anti-American card, Lula builds support for his vision and his party in Brazil, even as he relegates Venezuela's Hugo Chavez to the second division in Latin America. In the short run, the Brazilian economy has managed the global downturn well; in the long term, the continuing rise of India and China mean that there will be more foreign consumers for Brazil's exports and investors in its enterprises. Add to that the impact of massive off-shore oil discoveries, and it is not surprising that Brazil is feeling feisty.
So we have two countries who increasingly want to defy the United States, are able to do so, and find at least in the short term that an anti-American stance enhances their political prospects. Under these circumstances, we ought not to be surprised by the new directions in Turkish and Brazilian foreign policy.
The first question for the United States is what this means; the start is to clean out some of the intellectual deadwood that prevents us from seeing the world as it is. Presidents Clinton, Bush and Obama all came into power with One Big Idea; it is President Obama's unhappy fate to be in office when all three Big Ideas that have shaped American foreign policy since 1993 came unglued. They are all forms of the persistent American faith in progress: the idea that social, political and economic development will lead to the establishment of a harmonious world system made up of peaceful democracies. Perhaps, in the very long run, this will turn out to be true, but it is certainly not the case today.
The Clinton administration's foreign policy centered on the idea that globalization would create a new and peaceful world. The Bush administration believed that advancing democracy would bring peace and stability. And President Obama appears to believe that the rest of the world is naturally disposed to cooperate with America's global project, and that America's job is to be something like the coach of Team World as we go about settling various problems on the basis of consensus.
The first message of Brazil and Turkey is that there is no team, there is no consensus, and a great many countries and peoples around the world do not like the kind of world that America is trying to make. President Obama can be polite and considerate (as when he made a speech in Istanbul to reach out to the Islamic world) or he can be abrasive and rude (as when he flew to Copenhagen in the failed attempt to deprive Lula of the honor of hosting South America's first Olympic games) but it doesn't make much difference. Brazil and Turkey believe they have interests and goals which require the frustration of President Obama's plans and they have no hesitation in acting to thwart him. It is actually an enormous form of American vanity to assume that what we want is so right, so good for everyone and so manifestly the best possible road forward that the world will willingly follow our lead.
But if Brazil and Turkey torpedo one of Obama's core ideas, they are also living contradictions of President Bush's belief that the advance of democracy in the developing world would advance America's foreign policy interests. In both countries it is forces newly empowered by democracy that are opposing the American attempt to stop the Iranian nuclear program. If the old elites were still securely in place, Turkey and Brazil would be less difficult and more predictable players on the international stage. As countries become more democratic, they become more responsive to cultural and economic interests that resent the world's power structure and seek ways to change it. It is possibly true that after a period of settling down and trial and error democratic publics will make shrewder choices, but this can take decades and generations. One must also note that democracies do not always side with democracies against dictators; democracy is not a magic bullet that will give the present generation of policymakers a quieter life.
And finally, these developments in Turkey and Brazil expose the flawed thinking behind the Clinton administration's belief that the promotion of globalization would unleash the kind of economic development that would consolidate a peaceful world under American leadership. Few countries have benefited more from globalization than these two dynamic economies, but that economic development has not led (and is unlikely to lead anytime soon) to the kind of foreign policy cooperation Washington wants. This is partly because success makes leaders feisty; they believe that their rapidly increasing economic clout should give them more political say in the way the world works. Development also empowers more voices in society to speak up: in Thailand as well as in Brazil and Turkey, rapid economic growth supports the rise of new groups of interests and actors in domestic politics with interests and outlooks very different from those of the old elites.
In other words, many of the core policies which Americans have pursued in the hope of achieving stability while consolidating American leadership are making American leadership increasingly difficult in an increasingly unstable world.
At the moment, Brazil and Turkey are more annoyance than threat (though geography and culture makes Turkey the more serious of the two for the moment). And the efforts the administration is making to improve relations with the really big powers will make it harder for the middleweights to have as much effect as they hope. But if the American foreign policy establishment can't liberate itself from some of the Whig fantasies that currently envelope liberals, neo-conservatives and realists alike, we are going to face much greater problems as reality stubbornly refuses to follow our script.
For President Obama, the hardest part may be to give up on the dream of global multilateral solutions to the world's big problems. Not everyone is going to go along with him on global warming and nuclear proliferation. There are powers out there who are consciously out to frustrate, block and if possible defeat the United States on important international issues — even when we are, in our own eyes at least, the 'good guys'. They don't oppose us because President Bush offended their moral sense and alienated their affections; they are serious adult people who believe that greater American power and success is a threat to their own security and well being and who are ready, willing and even eager to do business with dark forces in pursuit of a common agenda to frustrate the United States. They aren't terrorists and in most cases they don't sympathize with terrorists; they simply represent elements in the international system whose interests and in some cases vision is opposed to our own.
This means that President Obama is going to have to use power to get his way rather than relying on sweet reason and the power of his ideals. He's going to have to persuade countries that going along with the United States is better than defying us, and to do that he's going to have to think about how to make people pay when they make the wrong choice. Otherwise his great ideals will not come to fruition. He can kiss non-proliferation goodbye, for starters, if he can't stop Iran from getting the bomb.
None of this means that America is losing its power in the world, but it does mean the end of the dream that our immediate goal is the abolition of foreign policy and the society of states. We are not going to replace the Westphalian order with the Parliament of Man anytime soon. Instead, foreign policy is going to be about warding off threats, dealing with opponents, building coalitions and advancing our commercial interests where we can. Globalization and democracy aren't (thank goodness) going away, but neither will they make our problems disappear.
Hang onto your seats, friends. The world is getting more complicated — and more dangerous — all7 the time.
Lula's Candidate Surges in Brazil
08/06/2010
By ROGERIO JELMAYER and JOHN LYONS
SÃO PAULO—Brazilian President Luiz Inácio Lula da Silva's hand-picked successor has surged against her rival in a series of new polls, increasing the chances that the leftist Workers Party will remain in power after October elections.
Dilma Rousseff, Mr. da Silva's former chief of staff and the Workers' Party presidential candidate, rose five percentage points since a similar poll was taken in April. She is now tied at 37% with opposition politician José Serra, a former São Paulo governor, according to the Ibope research firm.
Mr. Serra's tally of likely voters fell by three percentage points in the poll released over the weekend. Other recent polls show similar results.
While presidential campaigns in this soccer-crazed nation don't kick into gear until after the World Cup concludes in July, Ms. Rousseff appears to have notched early momentum. One explanation may be an economic forecast of 6% growth this year, as well as expanded government aid for low-income families, some analysts say.
Another advantage Ms. Rousseff is exploiting is the popularity of President da Silva, who is ineligible to run after two terms. Mr. da Silva defeated Mr. Serra in 2002. Despite protests that such activities go against electoral rules, Mr. da Silva appears with Ms. Rousseff at public events.
A onetime Marxist guerrilla, Ms. Rousseff has worked to disarm critics who say she will steer the nation sharply to the left.
During a recent speech to investors in New York, for example Ms. Rousseff said she is committed to preserving a floating exchange rate, fighting inflation and maintaining the government's hands-off policy toward central-bank rate decisions.
Some Brazilian brokers say they doubt Ms. Rousseff's commitment to pro-market economics.
Her radical background appears unlikely to spook international investors, in part because similar warnings eight years ago about Mr. da Silva turned out to be unfounded.
Why Beer Can Shortage Means Meirelles Will Boost Brazilian Rate
June 08, 2010, 12:43 AM EDT
By Carla Simoes and Iuri Dantas
June 8 (Bloomberg) -- Brazil is running out of beer cans and farmers are leaving crops in the field as surging demand and Chinese-like growth leads to shortages in Latin America's biggest economy. Cia de Bebidas das Americas, the region's largest brewer, had to import beer cans for the first time in its 125-year history after local supplies were exhausted. Acucar Guarani SA, the country's third-biggest sugar producer by market value, left 10 percent of its crop sitting in the fields an extra 40 days because of a shortage of tires for its harvesters, even after the commodity hit a 29-year high in February.
"We had some machines standing by just waiting for tires," said Jaime Stupiello, agricultural director for Acucar Guarani, in a June 1 phone interview from Sao Paulo. "We tried to buy directly from China, but they didn't have tires for delivery either." The shortages are one result of economic growth forecast to quicken to 6.6 percent this year, the fastest pace in two decades. That expansion, in excess of the economy's potential of 4.5 percent, is forcing central bank President Henrique Meirelles to raise interest rates to control inflation above the government's target since January, said Elson Teles, chief economist at Maxima Asset Management SA in Rio de Janeiro.
'Chinese Pace'
"National demand is growing at a Chinese pace," said Teles in a telephone interview. "That's why the central bank will keep raising the Selic and the Finance Ministry is trying to reduce pressure on the bank by cutting spending." Brazil's gross domestic product may have expanded 8.5 percent on an annual basis in the first quarter, according to the median estimate in a Bloomberg survey of 41 analysts. Brazil reports first quarter GDP at 8 a.m. New York time. China's GDP climbed 11.9 percent in the first quarter, the most in almost three years.
Inflation quickened to a 12-month high of 5.26 percent last month and may reach 5.64 percent this year, according to a central bank survey of about 100 economists published June 7. The government targets inflation of 4.5 percent. Brazilian policy makers became the first in Latin America to raise borrowing costs when they increased the benchmark interest rate to 9.5 percent in April from a record low of 8.75 percent. The bank will raise the rate another 0.75 percentage point June 9, according to 40 of 44 analysts surveyed by Bloomberg. Two analysts forecast a full percentage point increase while two see the bank raising by half a point.
'Tightening Mood'
Brazil's economy is "overheating" and policy makers are in a "tightening mood," Meirelles, 64, said in a June 4 interview with Bloomberg Television in Busan, South Korea. The government is cutting spending by 10 billion reais ($5.3 billion) to cool the economy before the interest rate increases take hold, Finance Minister Guido Mantega said May 13. Across the nation, companies are struggling to keep up with demand that's been rising as unemployment hovers near a record low 6.8 percent, salaries rise and the 30 million Brazilians who have left poverty since President Luiz Inacio Lula da Silva took office in 2003 increase spending. Retail sales rose 15.7 percent in March from a year earlier, the highest on record.
Ambev, the maker of Antarctica and Brahma beers, has so far resisted passing on to consumers higher costs for freight and a tightening job market because of competitive pressures, said Nelson Jamel, the company's financial director. The company began importing cans after first quarter profit rose 3.9 percent to 1.65 billion reais, more than the 1.48 billion reais forecast in a Bloomberg survey. The company plans to double its annual investments to 2 billion reais to expand production, Jamel said.
Good Problems
"To keep growing we have to confront some good problems now," Jamel, 38, said in a June 2 phone interview. "There are some cost pressures that come with meeting this demand." Delivery of heavy trucks is being delayed by up to 60 days, said Ricardo Pamplona, president of Gotemburgo Veiculos Ltda, a Volvo retailer with nine stores in northeastern Brazil, traditionally Brazil's poorest region. Sales are up 40 percent so far this year and the company expects to sell 1,200 trucks by the end of December, 66 percent more than in 2009, he said, thanks to demand from civil construction, retail and agricultural users.
The truck shortage is pushing up the costs of shipping goods from the industrial heartland in Brazil's southeast to other parts of the country, Sussumu Honda, head of the national supermarkets association, said in an interview. In response to the shortages, Brazil reduced import tariffs on 16 products, including sardines, palm oil, beer cans and beer labels, over the past year, according to Trade Ministry figures.
Roubini Speech
Even with a financial crisis in Europe that will depress exports, the outlook for Brazil's economy is "very positive," Nouriel Roubini, the New York University professor who predicted the global financial crisis, said in a May 31 speech in Sao Paulo. Roubini, 52, recommended that Brazilian policy makers take steps to limit the appreciation of the real, including the "judicious" use of capital controls. The currency has gained 4.4 percent against the dollar over the past 12 months.
Stronger Real
To be sure, the stronger real has made exports more expensive in dollar terms, and the economy could be hit by a fall in commodity prices, which are likely to decline over the next 6 months to 12 months because of a possible double-dip recession in Europe and a U.S. slowdown, Roubini said. Exports account for 10 percent of Brazil's GDP compared with about 33 percent for Chile and 17 percent for Argentina, meaning that any slowdown in Europe is unlikely to significantly impact growth, Bank of America said in a May 28 report.
"What makes Brazil unique is the strength of domestic demand," said Neil Shearing, an emerging markets economist at Capital Economics Ltd., in a phone interview from London. "If this isn't a V-shaped recovery, I don't know what is."
Latam Watch: Market Expects High Brazil Growth & Inflation, 75 bps Rate Hike
June 07, 2010
Brazil's Central Bank Monetary Policy Committee (Copom) will see two big releases before its decision Wednesday: first quarter GDP Tuesday, and May IPCA inflation Wednesday morning.
Estimates for first quarter GDP growth vary, but nearly all analysts expect a number far above what is considered Brazil's 4-5% limit for sustainable growth.
Finance Minister Guido Mantega has said the economy may be growing at a 10% annualized rate, while Brazil's largest private sector bank, Banco Itau, is forecasting 3% quarter over quarter growth, for a 12.6% annualized rate.
Although this spurt is expected to slow as the year goes on -- Banco Itau expects a 4.5% average growth rate for the next three quarters -- monetary policy will have to help cool off the economy.
On Sao Paulo futures markets, the overwhelming majority of bets are that policymakers will raise the Selic overnight rate 75 basis points to 10.25% this week.
The Central Bank's "Focus" survey of local financial institutions shows the same expectation among economists and analysts, who also project May inflation of 0.45% -- a rate above policymakers' 4.5% annual target -- though June inflation is expected to fall to 0.28%.
How much of recent inflation has been seasonal -- driven especially by food prices -- is a matter for debate among analysts, who also disagree as to how much the economy will cool on its own.
Still, with fiscal policy continuing expansionary, and Central Bank President Henrique Meirelles eager to leave office with his legacy of price stability intact, the majority bet is for Copom to keep hiking the Selic in 75 bps increments until the overnight rate reaches 11.75%.
For the market to change this consensus expectation, analysts say, policymakers will have to hint at a changed scenario either in their statement Wednesday, or their minutes the week after.
Possible reasons for a more benign inflation scenario in Brazil come from the international scenario, which makes a spike in commodity prices -- cited as a risk in past Copom minutes -- less likely, while Brazil's currency has remained strong.
Source: LatamWatch
La gran brecha económica, telón de fondo de las pujas con Brasil
08/06/10 | PorAlcadio Oña
Cuanto menos muy ambiciosos, son algunos de los objetivos que la ministra de Industria se plantea alcanzar en la relación con Brasil. Según sus palabras, "reequilibrar el desarrollo industrial y equiparar la balanza comercial" .
En esos términos Débora Giorgi presentó las conversaciones que ella y Amado Boudou mantendrán, esta semana, con los ministros brasileños de Economía, Guido Mantega, y de Industria, Miguel Jorge. El encuentro fue convenido por Cristina Kirchner y Lula da Silva después del cruce por las trabas al ingreso de alimentos y, como se advierte, no participará Guillermo Moreno.
Ya significará todo un trabajo achicar el déficit comercial, y uno bastante mayor equiparar la balanza. En cambio, suena a casi imposible reequilibrar el desarrollo industrial. Simplemente, porque cosas semejantes no se logran con diálogos bilaterales, sino, en gran medida, a través de políticas y estrategias propias de mediano y largo plazo.
En los cinco primeros meses de este año, según cifras oficiales de Brasil, la Argentina acusó un déficit de 919 millones de dólares en el comercio bilateral. Y es un dato nada menor que haya sido consecuencia de un aumento de las importaciones del 62 %, contra una suba de las exportaciones del 37 %.
La Argentina tuvo épocas de superávit, antes y en el pasado reciente, como entre 2000 y 2003: algunas veces porque le vendía mucho trigo; otras, porque importaba desde otros lugares del mundo. Pero en los últimos cinco años registró un desequilibrio de US$ 17.000 millones , según el INDEC.
Una primera lectura que surge de esas cuentas es que cuando la economía argentina crece, aumentan las compras a Brasil. Y otra, ya más estructural, revela que la industria local es muy dependiente de los bienes brasileños: el grueso son vehículos, autopartes, electrónicos, maquinarias y productos para la siderurgia.
Está claro que si vienen de allí es porque aquí no se lo fabrica. Dicho de otra manera, falta producción nacional capaz de sustituir aquellas u otras importaciones. Y así es, aun cuando la disparidad relativa de los tipos de cambio favorezca a la Argentina, tal cual sucedió en los últimos cinco años.
Es cierto que si la economía brasileña crece, como ahora, también crecen las exportaciones argentinas. Justamente, esa demanda alimenta parte de la actual reactivación. En el trasfondo de la brecha comercial y de las pujas constantes anida una muy desigual estructura productiva. Para empezar, el Producto Bruto brasileño, el tamaño de su economía, es entre 3,5 y 4 veces más grande que el argentino . Y el PBI industrial, 4,3 veces mayor : esto da una idea de lo que aquí pretenden reequilibrar.
Algunos datos si se quiere micro, extraídos de un trabajo de la consultora abeceb.com, son parte de lo mismo: En un buen número de sectores industriales la producción brasileña es más de 10 veces la argentina. Entre otros: químicos; maquinaria para oficinas; componentes eléctricos; bebidas gaseosas, cerveza, jugos; motores; productos de caucho y juguetes.
En un grupo también importante, la diferencia a favor de Brasil está entre 5 y 10 veces . Allí entran: motocicletas, bicicletas; fabricación de calzado; autopartes, piezas y accesorios para automotores y motores; fabricación de autos; muebles y ropa de vestir. Y en otro, la brecha va de 2 a 5 veces . En este lote hay: maquinarias; receptores de radio y tevé; cocinas, calefones y artefactos eléctricos y carrocerías, remolques y semirremolques.
Algunos de estos bienes son considerados "sensibles" por las autoridades argentinas, como juguetes, calzado, muebles o ropa. Representan fuente de controversias recurrentes y son controlados a través de cupos de importación. La lista sacude, pero aún así resulta incompleta. Revela desarrollo productivo y a la vez inversión tecnológica. Brasil no es una potencia exportadora de bienes industriales: el punto está en la relación de fuerzas .
Y eso se nota, bien claro, en el balance comercial de productos industrializados: Brasil tiene un superávit anual con la Argentina de alrededor de US$ 3.000 millones. Precisamente, en una actividad que ocupa mucha mano de obra y mide, como pocas, el despliegue relativo alcanzado por uno y otro país. El acceso al crédito de largo plazo y el costo del financiamiento son otros factores que hacen una diferencia enorme . En Brasil, eso se llama BNDES.
Entre marzo de 2009 y el mismo mes de este año, el Banco de Desarrollo brasileño desembolsó préstamos a tasas de interés subsidiadas por el equivalente a US$ 78.000 millones . Un 45 % fueron para planes de inversión industriales: químicos, petroquímicos, en alimentos y bebidas y material de transporte, entre otros. Y un 35 % para proyectos de infraestructura.
Para acercar esos 78.000 millones, vale un ejemplo. Todas las reservas del Banco Central suman US$ 48.800 millones . Según se ve, parece imposible reequilibrar el desarrollo industrial, más cuando la brecha en vez de achicarse va en aumento . Y sería inútil intentar equiparar la balanza comercial con el arbitrio de trabar compras de bienes industriales brasileños: habría que traerlos de otros países, porque aquí no se fabrican.
Está demasiado claro que nada de todo esto se resuelve con conversaciones, aunque sean útiles.
Ministros de Argentina y Brasil avanzarán en ampliación del comercio
Buenos Aires 07 Jun ABN.- Los ministros de Economía y de Industria de Argentina, Amado Boudou y Débora Giorgi, se reunirán esta semana en Buenos Aires con sus pares de Brasil, Guido Mantega y Miguel Jorge (Desarrollo) para discutir medidas que amplien el comercio, informó el gobierno argentino.
"Nuestro objetivo es trabajar en medidas que nos permitan reequilibrar el desarrollo industrial de ambos países y equiparar la balanza comercial, que por ahora resulta desfavorable para Argentina", dijo Giorgi en un comunicado, reseñó la agencia AFP.
La reunión fue acordada durante el encuentro que mantuvieron en Rio de Janeiro, la presidenta argentina, Cristina Kirchner y su par de Brasil, Luiz Inacio Lula da Silva el pasado 28 de mayo durante el Encuentro Mundial de Civilizaciones celebrado en Brasil.
En su visita a Rio, Kirchner remarcó que no habrá restricciones y sí una produndización de las relaciones comerciales, un aumento del intercambio con Brasil.
En 2009, el intercambio comercial entre Brasil y Argentina fue de 24 mil 066 millones de dólares, sensiblemente menor que en 2008 cuando se elevó a 30 mil 864 millones.
La agenda de la reunión ministerial abordará la profundización del sistema de pago en monedas locales, la integración de cadenas productivas, el financiamiento de las exportaciones con fondos del Banco Nacional de Desarrollo de Brasil (BNDES) y eliminación de las barreras de acceso al mercado brasileño.
