A look at the data

Overall, analysts expect Brazilian GDP growth to be lower in 2005 (around 3.7-3.8 percent) in part because of expectations for a deceleration of the global economy, which will translate into less external demand for Brazilian exports. Bernal noted that the size of the Brazilian GDP is estimated to be worth around $669 billion at the end of 2005, which would be about 33 percent of Latin American’s total GDP.

Economy.com’s Coutino notes that inflation has been decreasing. In 2004, consumer prices saw inflation around the 6.2 percent level, but he is forecasting inflation around 5.7 percent this year. The January industrial production figures, released in early March, revealed a 0.5 percent pullback from December. The data, however, was 6.0 percent higher on a year-over-year basis. Analysts at Credit Suisse First Boston (CSFB) noted the industrial production trend had decelerated by less than originally expected as the median market forecasts had actually called for a 1.0 percent month over month decline in January and a year over year gain of 5.0 percent.

The CSFB Brazilian economic team states: “In our view, industrial production has slowed to a rate we believe is sustainable over the medium term without exerting significant pressure on inflation.”

Inventory building was seen in certain sectors in the early months of 2005, which sparked CSFB analysts to upwardly revise their 2005 forecasts for the trade surplus to $U.S. 30 billion from $U.S. 26 billion.

Expansion in the export sector has been a key driver behind economic growth in Brazil. The country exports agricultural products, including cattle and soybeans, some minerals and electricity and oil.

“Brazil used to have trade deficits, but currently the country is running a $2-3 billion monthly trade surplus,” says de la Fuente.

“High energy prices have been good for the development of the Brazilian economy,” adds Coutino.