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  • Brazil Gains International Economic Status

    2010 - 08.30

    A potent sign of Brazil’s new economic status is the $14 billion loan it made to the International Monetary Fund, during the global financial crisis last year. This represented an amazing reversal of fortune as Brazil was facing its own financial crisis just eleven years prior. Brazil was forced to devalue its currency and ask the IMF for a $42 billion loan, which was one of the biggest ever rescue packages given out by the lender.

    Now, while the developed world worries about stunted economic growth and excessive debt, Brazil is flying an abundance of the former and very little of the latter.

    “We were one of the last countries to go into the global crisis,” Luiz Inácio Lula da Silva, Brazil’s president, told the Financial Times shortly after his country lent the money to the IMF. “And we have been one of the first to come out.”

    This year alone the Brazilian economy is expected to grow by 8% and in some areas it is expanding by as much as 10%. Unemployment is at a record low and the country’s net debt at 42% of GDP is at a level which would make much of the developed world green with envy.

    A result of all this good fortune is the flood of foreign capital flowing into Brazil, just last year the central bank imposed a 2% tax on short term capital inflows to attempt to stem the boom. This proved largely ineffective as the real continued to strengthen.

    Compared to the rest of the developed world Brazil seems to be the only silver lining in a sky of thunder clouds. Emphasising this is the fact that on the same day that the EU agreed to a rescue package totalling $1,000 billion to save the crisis in Greece from affecting the rest of Europe, Brazil’s finance minister Guido Mantega dismissed Europe’s problems.

    “Europe was asleep,” he told a group of investors at an FT conference held at the neo-classical splendour of the Copacabana Palace Hotel in Rio de Janeiro. “But its crisis is not going to hurt Brazil’s economy. There may be some turbulence in financial markets. But it will pass.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Brazil please click here.

    One Response to “Brazil Gains International Economic Status”

    1. […] began to pick up steam Brazil was one of the first nations to rebound. The country has acquired an international standing among the world’s economic powers. Towards the end of the financial crisis Brazil issued […]

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