Brazil’s economy ready for bigger jump in 2004

Brazil’s gross national product (GNP) will grow 3.5 percent next year, a couple of private institutions reportedly pointed out this week in the nation’s capital.

The new forecast was independently made by the National Industry Confederation (NIC) and the Brazilian Society of Studies on Transnational Companies and Economic Globalization (BSSTCEG) based on reckonings of direct foreign investment expected to reach $15 billion in 2004.

NIC experts issued a document on both economic development and perspectives brought about by this year’s recovery, lower interest rates and less inflation, three elements that will definitely push up industrial activity and make the country’s GNP leapfrog dramatically.

NIC chairman Armando Monteiro said investments are also likely to snap back in the course of 2004.

However, the three-pack alone won’t be enough to make it out of the woods. Regulatory and tariff reforms, a heftier welfare system, less banking deployment, as well as tax-exempt capital gains and imports are equally needed.

Mr. Monteiro explained a 1.5 percent cutback on basic interest rates will take down overall rates to 16 percent by the end of the year. NIC experts, though, expect that rate to be as low as 13 percent by late 2004.

For its part, BSSTCEG noted foreign investments could lift as much as 50 percent or higher this upcoming year, an indicator that took quite a beating in 2003 as part of the huge social uncertainty Brazil went through for most of 2002 when the country’s risk index ended up above 1,400 points. Today, it’s way below the 500-point mark.

In the same breath, BSSTCEG is considering a basic interest rate in the neighborhood of 14 percent next year –a percentage point higher than NIC’s estimate. Nevertheless –the entity’s report notes- that figure could go down to 8 percent once inflation is out of the big picture.