Finance minister envisages new global economic cycle

Finance Minister Guido Mantega said Tuesday (Feb. 18) that the world is experiencing “a painful moment, like the birth of a new global economic cycle,” but noted that Brazil is well positioned to transition from the 2008 global crisis into economic recovery.

He forecast a world GDP growth close to 2% despite lower levels shown by European countries on their path of recovery.

Mantega sees the US picking up steadily, but China seems to be giving opposite signs – it is expected to maintain its growth rate at 7% or less, with consequences for its emerging trade partners who export basic goods.

Another challenge for countries like Brazil that export large amounts of raw materials is the tapering of quantitative easing measures put in place by some countries to provide economic stimulus during the global crisis. “The Fed started doing this in December – it cut QE down by $10 billion, and did it again in January this year by an equal amount,” said the minister.

According to the minister, economies are experiencing a transition from a crisis to a post-crisis setting, which creates volatility and instability across markets. Although the turbulence has been felt in all countries, he believes “Brazil is well positioned to make the transition. The economy is healthy and ready to transition into the global economy. The notion that it is vulnerable is a mistake.”

Mantega noted that Brazil's international reserves of US$376 billion can see the country through international volatility. “It's the fifth largest reserve in the world. Brazil has small short term foreign debts, which gives it room to cope well. In case businesses, or the country itself, were to borrow from foreign markets, we would be ok.”

He reiterated that investors still see the country as attractive, with strong foundations to rely on, inflation under control and trending down, and a sound fiscal policy. “In recent years – second only to Saudi Arabia – Brazil was the country with the largest primary surplus in the G20 [a group of the twenty largest global economies]. We have successfully lowered both net and gross debts.”

The minister went on to point out that investments last year have grown above agriculture and manufacturing figures, which he sees as a testament to the government's priority. He underscored investments as “the government's flagship” and cited concession biddings, which create jobs and drive growth.

Translated by Mayra Borges