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Focus on Brazil | 19
has remained stable as a result of prudent macro-
economic management, firm fiscal and monetary
policies and good debt management.
The Brazilian government has over the last few
years successfully adopted effective macroeco-
nomic policies that resulted in controlled infla-
tion, improved productivity, positive balance of
trade, large international reserves, stable currency
and impressive export performance. It has also
implemented programmes that improved fiscal
control, significantly encouraged investment and
enabled a steady reduction in the prime interest
rate over the last few years to a level that sup-
ports a sustainable economic growth.
The rate cuts of the past five years brought
down the policy interest rate (SELIC rate) from
over 20% to just over 11%. Last year, Brazil’s
Central Bank gained further confidence when it
decided to temporarily pause the series of con-
secutive rate cuts in its last meeting to assess the
impact of passed rate cuts and other macro-eco-
nomic stimuli. The growth in the economy has
also resulted in reduced unemployment and an
increase in average earnings. This growth is
expected to continue, according to the OECD
(Organisation of Economic Cooperation and
Development), which predicts a Brazilian GDP
growth rates above 4 % during the next three
years. This is well above the ten year average of
2.5%.
Gross Domestic Product
There has been a steady reduction in the prime
interest rate over the last few years to a level that
supports a sustainable economic growth.
The Central Bank of Brazil has reported that
conditions were favourable for continuing
growth and stable interest rates with no apparent
threat of inflation because of supportive
exchange rate trajectory and as the various eco-
nomic indicators are below inflationary levels.
With strong economic expansion, stable cur-
rency and nominal interest rates falling to record
lows, the consensus is for continued growth.
Deutsche Bank predicts that the Brazilian finan-
cial and economic outlook remains strong due to
the improved economic stability and declining
interest rates.
The Brazilian government efforts have been
applauded internationally with the OECD
reporting that considerable progress has been
made in recent years in achieving macroeconom-
ic stability and restructuring of the Brazilian
economy. Productivity has risen and the imple-
mentation of a series of structural reforms has
been successful. In 2007, Standard and Poor’s
rating services raised its Brazil long-term sover-
eign credit rating and long-term local currency
credit rating. Confidence of foreign investors has
increased considerably as the economy has
shown strong, stable and sustained growth over
the last few years which resulted in FDI (Foreign
Direct Investment) pouring into the Brazilian
economy at unprecedented rates and is expected
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November 2009 Investment International
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