Foreign Confidence in Brazilian Economy Accrues

Brazilian holdings overseas increased 14,6 percent in 2004, totaling $94,7 billion, according to the latest report from the Brazilian Central Bank, which attributes the expansion to the greater internationalization of the country´s economy.

The Central Bank also revealed that total foreign investment in Brazil, according to the latest available data from September 2004, reached $412 billion, while Brazil´s assets overseas tabbed $143.4 billion, a negative balance of $268.7 billion. This means Brazil is a net recipient of foreign investment.

Meantime and in spite of the political commotion over alleged corruption actions by President Lula da Silva´s administration, the Brazilian government announced this week it had successfully fulfilled its capital needs for 2005 totaling $6 billion with the floating of $600 million in sovereign Global 2015 bonds at 7.732 percent, a few points below the previous operation last February at 7.9 percent.

Apparently some positive indicators had a greater influence than expected. Brazil´s international risk rate currently stands at 409 points; inflation seems to be soft-landing, with growing chances of reaching the 5.1 percent government target for 2005.

Trade surplus, for its part, is forecasted in $35 billion and last week the Central Bank, after nine months of consecutive increases, left the basic SELIC interest rate unchanged at 19.75 percent, with prospects of an easing of the tight money policy.