Brazil’s Gross Debt and the Fiscal Stance

The accounting tricks and the exaggerated expansion of government-owned banks have turned the gross debt into an indispensable indicator of fiscal stance. Recently, two international rating agencies, Moody’s and S&P, have signaled that their evaluation of the Brazilian economy has worsened. One of its main reasons is the public indebtedness’ evolution. There are two main […]

Brazil: The Need For Fiscal Transparency

Minister Mantega’s suggestion to revise the concept of gross debt should be much broadened so that credibility on the Brazilian fiscal accounts could be regained.  Minister Mantega sent, last month, a letter to IMF`s managing director Christine Lagarde, requesting a methodological revision of the “…IMF measurement of the Brazilian Gross General Government Debt”. What seems […]

New Perspectives and Old Risks

The deterioration of the international scenario combined with larger fiscal deficits will probably jeopardize Brazilian economic policy until the 2014 elections. The international economic scenario has changed significantly. Last month, FED’s chairman, Ben Bernanke, has announced that QE3 will be gradually discontinued until 2015 (the famous, maybe now, infamous, “taper”), if the economy continues to […]

Brazil, Land of the Past?

Barring major corrections in economic policy, economic growth in Brazil is likely to remain low. Brazil has achieved, over the last years, a position of international prominence like never before. There were even those who were tempted to believe that Stefan Zweig’s prophecy – Brazil, land of the future [1] – had finally become true. But […]

Brazil: It’s Time to Raise the Selic Rate

The basic interest rate in Brazil, the Selic rate, has proven itself effective in controlling inflation, and the Central Bank should raise it soon. The first COPOM (the Brazilian monetary policy committee) meeting under a PT’s (Workers’ Party) administration, back in January 2003, raised the Selic rate by 50bps, from 25% to 25.5%. In the […]

Brazil’s Imprudence and Bad Economics

Brazil gave up structural microeconomic reforms and is progressively letting the macroeconomic policy deteriorate, thereby jeopardizing economic growth. The Workers’ Party (PT) has governed Brazil for one decade. Such political continuity has not been reproduced in economic policy. During the crisis of 2002, in order to warrant minimal governability conditions, President Lula was forced to […]

Brazil: Monetary Policy Dilemmas

When and if it occurs, the desirable recovery of the global economy will challenge the current combination of controlled exchange rate and low interest rates. With the 0.5% reduction of the base rate (Selic) last Wednesday, August 29, the current cycle of monetary easing reached the same amount that had been accumulated in the aftermath […]

BRAZIL: Risks and Opportunities of the International Crisis

Brazil has improved its relative position in the global economic ranking amid the international financial crisis, initiated in 2007 in the US, which still goes on today, with its epicenter now in Europe. The unusual 7.5% yearly growth rate in 2010, boosted by electorally motivated policies, also contributed to boost the Brazilian reputation as a […]

Brazil: Dangers of the ‘Good’ Inflation

In its next meeting, the CMN (National Monetary Council) should reduce the inflation target from 4.5% to 4%. That Brazil has a long history of tolerating inflation is a notorious fact. In the early sixties, the annual inflation, which could come near to 20%, was seen as a fundamental revenue generating element (seigniorage) for the […]

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