Brazil SA
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Economic Overview:
Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets. Having weathered 2001-03 financial turmoil, capital inflows regained strength and the currency resumed appreciating. The appreciation slowed export volume growth, but since 2004, Brazil's growth has yielded increases in employment and real wages. The resilience in the economy stemed from commodity-driven current account surpluses and sound macroeconomic policies that bolstered international reserves to historically high levels, reduced public debt, and allowed a significant decline in real interest rates, which nevertheless remain high by world standards. A floating exchange rate, an inflation-targeting regime, and a tight fiscal policy are the three pillars of the economic program. From 2003 to 2007, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains coupled with high commodity prices contributed to the surge in exports. Brazil improved its debt profile in 2006 by shifting its debt burden toward real denominated and domestically held instruments. "LULA" DA SILVA restated his commitment to fiscal responsibility by maintaining the country's primary surplus during the 2006 election. Following his second inauguration in October of that year, "LULA" DA SILVA announced a package of further economic reforms to reduce taxes and increase investment in infrastructure. Brazil's debt achieved investment grade status early in 2008, but the government's attempt to achieve strong growth while reducing the debt burden created inflationary pressures. For most of 2008, the Central Bank embarked on a restrictive monetary policy to stem these pressures. Since the onset of the global financial crisis in September, Brazil's currency and its stock market - Bovespa - have significantly lost value, -41% for Bovespa for the year ending 30 December 2008. Brazil incurred another current account deficit in 2008, as world demand and prices for commodities dropped in the second-half of the year.
— CIA World Factbook
Energy Deal With Brazil Gives Boost to Paraguay
By ALEXEI BARRIONUEVO | The New York Times
Brazil has agreed to triple its payments to Paraguay for energy from a massive hydro-electric dam on their border, ending a long-running dispute.
For decades Paraguayans have protested the raw deal they got when their dictatorship-era government decided to build the world's largest hydroelectric power plant with Brazil along their shared border. While Brazil used the Itaipú dam to help develop its cities and industries, Paraguay was forced to sell its excess capacity to Brazil at preferential rates. Fernando Lugo, a former Roman Catholic bishop who was elected president of Paraguay last year, vowed to change that, making a renegotiation of Itaipú one of his chief campaign pledges.
Brazil's president, Luiz Inácio Lula da Silva, agreed to triple Paraguay's income from Itaipú, and to allow Paraguay to sell its power to Brazil at market rates. The agreement is a huge deal for Paraguay, one of South America's poorest countries. And it is a much-needed boost for Mr. Lugo, who has struggled with declining support in Congress and accusations that he fathered several children when he was a priest. For Brazil, the approximately $240 million a year it agreed to give up is a small price to pay for Mr. da Silva's broader goals of calming tensions with its neighbors, asserting Brazil's leadership in the region and promoting regional integration. "Brazil is not interested in growing and developing if its partners don't grow and don't develop," Mr. da Silva said in a speech here.
Brazil had long rejected the possibility of renegotiating the original arrangements for selling electricity from Itaipú. But with Honduras in chaos and President Hugo Chávez of Venezuela continuing to spread his political influence, Mr. da Silva was seeking to manage Brazil’s desire to expand its economy while reining in the nationalist demands of its neighbors, political and risk analysts said. "The whole hemisphere is in play," said Riordan Roett, chairman of the Latin American studies program at Johns Hopkins University. "The Brazilians are going to do anything they can to shore up the moderate or democratic left in Latin America. They are quite clearly hoping that Lugo will move in the direction of staying with the Brazilians." >>> Go to Full Story >>>
Latin America poised for quick exit from crisis: IDB
VINA DEL MAR, Chile (AFP)
Latin America and the Caribbean are well placed to emerge from the storm buffeting much of the global economy, multilateral lenders said here Friday while meeting with regional ministers.
The finance ministers gathered at Vina del Mar in Chile agreed to seek "a more active role from multilateral lending institutions" for the crisis but also for after the crisis, said Chilean Minister Andres Velasco. Velasco cited a World Bank report that estimated a financing shortfall of 350 to 635 billion dollars per year for emerging countries, of which Latin America accounted for 115 to 180 billion.
The Inter-American Development Bank (IDB) meanwhile said it would increase its capital base by 6 billion dollars to help Latin America and the Caribbean tackle the global financial crisis. The funds came from Canada's offer to increase to 4 billion dollars its contribution to the regional lender, the bank said in a statement. Two more billion dollars would come from a change in an internal norm at the bank that had limited the amount of the loans depending on contributing countries.
Another priority identified by the ministers meeting in Chile was better integrating the continent, its infrastructure and its transportation, Velasco said. >>>>Go to Full Story >>>
