New S America fears as Brazil falters

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New S America fears as Brazil falters

By Geoff Dyer SAO PAULO - The Brazilian economy slowed sharply in the second quarter as the crisis in Argentina, higher interest rates and the start of energy rationing combined to puncture the confidence of the early part of the year.

The government announced on Wednesday that gross domestic product grew by only 0.79% from April to June compared with the same period last year, well below expectations and following year-on-year growth of 4.28% in the first quarter.

Compared with the previous quarter, GDP actually fell 0.99%, the first quarterly decline since the end of 1998 when Brazil was buffeted by the Russian debt default. The figures aggravated fears that Brazil would fall into recession in the second half of the year, just as Argentina struggled to fend off what would be a highly damaging debt default.

The potential fallout from Argentina has led Brazil to sign a new $15-billion loan from the International Monetary Fund.

"We are seeing a rapid deceleration in the Brazilian economy," said Walter Molano, economist at BCP Securities in Connecticut. "This will create political pressures on the government and make it harder to stay the course plotted with the IMF."

Molano on Wednesday lowered his 2001 GDP estimate from 2.7% to 1.6%. JP Morgan, which predicts a recession this year, slashed its four-year forecast from 1.7% to 0.7%.

The 0.79% figure for second-quarter growth was much lower than forecasts of about 2.5%, although analysts acknowledged that the quarterly figures could be erratic.

The main cause of the slowdown was the rise in interest rates by 3.75 percentage points. The central bank began the increases in March to stem inflationary pressures.

Energy rationing, which started in June, also contributed to the reduced demand, but early indications suggested that it was not damaging the economy as much as was initially forecast.

Economists said the slowdown would limit inflationary pressures in the medium term and could leave room for interest rate cuts, although the timing would depend on events in Argentina.

Speaking at a congressional hearing on Tuesday, Arminio Fraga, the central bank president, said that the current surge in inflation was "transitory" and that rates would fall when it had passed.

The announcement of the IMF deal earlier this month failed to boost the currency that on Wednesday hovered around the R$2.50 to the dollar level and that has fallen by more than 20% this year.

Financial Times

http://www.bday.co.za/bday/content/direct/1,3523,908821-6078-0,00.html

-- Martin Thompson (mthom1927@aol.com), August 17, 2001

Answers

Well why not? I mean what is another 15 bill or so? Nothing, when its really a shell game. But the results are always the same. Some one else owns the whole damn country. The people are improvished. Those state functionaries who sell the countries soul and assests to the devil have their palms greased so as to not feel the pain. The IMF and BIS and World Bank are the Anti-christ in the realm of finace. Every nation in the world has bought into the shell game. Just like playing cards and the house takes a substantial anty (sp?) sooner or later, if the players stick around long enough, the house will have everyones money. Is it really that hard to see?

-- Donald Z Park (dpark@magick.net), August 18, 2001.

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