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Increased investment in Brazil 'required for growth'

Date added: 21st March, 2011 at 14:00
(view all articles from March, 2011)

Categories: Economy

Investment in Brazil must be stepped up if the country is to remain financially buoyant.

This is according to Dan Steinbock, who wrote in an article for the Globalist about the steps he believes should be taken to encourage expansion in the Latin American economy over the coming decade.

Brazil is now led by President Dilma Rousseff, who recently took power when her mentor Luiz Inacio Lula de Silva's term came to an end.

Lula, as he was commonly known, was popular among the people, as he pulled millions out of poverty while making moves to prompt growth.

His efforts to improve Brazil's financial health were successful and the economy expanded by 7.5 per cent last year, the fastest rate seen since 1986, according to the Brazilian Institute of Geography and Statistics.

Furthermore, the average annual rise of gross domestic product was recorded at 3.6 per cent between 2001 and 2010, compared with 2.6 per cent in the previous decade.

According to Mr Steinbock, these figures indicate that the country is now the seventh-largest economy in the world.

Ms Rousseff has said she will continue many of her predecessor's policies and she has kept finance minister Guido Mantega in his role.

However, the new president must also fight inflation, including "imported" inflation, as other nations introduce fiscal stimulus.

The leader would like to see the benchmark interest rate, known as the selic, drop to two per cent, Mr Steinbock noted, with new head of the Central Bank Alexandre Tombini in charge of meeting this target.

On March 2nd, the base rate was increased to 11.75 per cent following a unanimous vote from the country's monetary policy committee the Copom.

Mr Steinbock suggested that preventing the Brazilian economy from overheating during a time of rapid growth is one of the challenges that face Ms Rousseff, while the upkeep of US and Chinese demand for commodities could also be important to the financial health of the country.

"President Lula created the foundation for the new Brazil. President Rousseff must sustain the gains. It is a tall order, but no longer impossible," the writer stated.

The journalist believes there are several factors that must be addressed by Brazil if it is to "reach its Bric potential" and "engage in the Asian trajectory of growth".

Higher investments and savings, better public services, less bureaucracy, improved trade openness and a reduction in public and foreign debt were some of the things Mr Steinbock suggested the Latin American economy should work towards.

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